**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-KSB**

**(Mark      One)**

**[      x ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE**

**ACT      OF 1934 for the fiscal year ended December 31, 2005**

**OR**

**[      ] 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      PHARMACEUTICALS, INC.**

| **Delaware**(State                of incorporation)                                                                                                                      | **36-3463683**(I.R.S.                employer identification no.) |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|
|    **37                Loring Drive** **Framingham,                Massachusetts**** **                (Address of principal executive offices) |  **01702**(Zip                Code)                          |

**(508)      620-7676**

**None**

**Class      A Common Stock, $.001 par value per share**

** **

**DOCUMENTS      INCORPORATED BY REFERENCE**

----

**Special      Note Regarding Forward Looking Statements**

**PART      I**

**Item      1. Description of Business**

**General      Background**

**The      Company's Technology**

----

**Bovine        Teat Sanitizer Product**

| *Year                ended December 31,* | **2005**                                                                                                                    | 2004                                                                                                         |
|------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                        |                                                                                                         |
| United                States             | **                    $** **49,627**                                                               | $ 120,010                                                                                               |
| United                Kingdom            | **                                 -** |                     39,500                                                               |
|                                     |                                                                                                                        |                                                                                                         |
|                                     | **$** **49,627**                                                                                                       |                              $ 159,510 |

**Product      Development**

**3**

----

----

**Manufacturing      and Supplies**

**Marketing      and Distribution**

**Government      Regulation**

----

----

**7**

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**Patents      and Proprietary Rights**

| **Listing                of United States Patents** |
|-----------------------------------------------------|
|                                                |   |   |
| **Patent****Number**                                |   **Title** |  **Issue                Date** |
| 4,816,255                                           | “Treatment                of Iodine Deficiency Breast Syndrome”  | March                28, 1989 |
| 4,937,072                                           | “In                Situ Sporicidal Disinfectant” | June                26, 1990 |
|                                                |   |   |
| 4,996,146                                           | “Rapid                Sterilization Enzymatic Process with Persistence” | February                26, 1991 |
|                                                |   |   |
| 5,055,287                                           | “Methods                to Control Color During Disinfecting Peroxidase Reactions”  | October                8, 1991 |
| 5,171,582                                           | “Treatment                of Iodine Deficiency Diseases”  | December                15, 1992 |
| 5,227,161                                           | “Method                to Clean and Disinfect Pathogens on the Epidermis by Applying a                Composition Containing Peroxidase, Iodide Compound and                Surfactant”  | July                13, 1993  |
| 5,250,304                                           | “Treatment                of Iodine Deficiency Diseases”  | October                5, 1993 |
| 5,370,815                                           | “Viscous                Epidermal Cleaner and Disinfectant”  | December                6, 1994 |
| 5,389,385                                           | “Treatment                of Iodine Deficiency Diseases”  | February                14, 1995 |
| 5,419,902                                           | “Method                for Inactivating Pathogens”  | May                30, 1995 |
| 5,589,198                                           | “Treatment                of Iodine Deficiency Diseases”  | December                31, 1996 |
| 5,629,024                                           | “Method                of Forming an Iodine Based Germicide Composition” | May                13, 1997 |
|                                                |   |   |
| 5,639,481                                           | “Method                for the Therapeutic Treatment of a Mammalian Eye” | June                17, 1997 |
|                                                |   |   |
| 5,648,075                                           | “Iodine                Based Germicidal Composition” | July                15, 1997 |
|                                                |   |   |
| 5,772,971                                           | “Iodine-Based                Microbial Decontamination System” | June                30, 1998 |
|                                                |   |   |
| 5,849,291                                           | “Ophthalmic                Non-Irritating Iodine Medicament” | December                15, 1998 |
|                                                |   |   |
| 5,885,592                                           | “Method                & Pharmaceutical Compositions for Oral Administration of Molecular                Iodine” | March                23, 1999  |
| 5,910,318                                           | “Treatment                of Iodine Deficiency Diseases”  | June                8, 1999 |
| 5,955,101                                           | “Dry                Starch-Iodine Pharmaceutical Formulations”  | September                21, 1999 |
| 5,962,029                                           | “Iodine                Germicides that Continuously Generate Free Molecular Iodine”  | November                5, 1999 |
| 6,019,970                                           | “Treatment                of Iodine Deficiency Diseases”  | February                1, 2000 |
| Re                36,605                            | “Reissue                of 08/963,900 Method to Clean and Disinfect Pathogens”  | March                7, 2000 |
| 6,248,335                                           | “Stabilized                Oral Pharmaceutical Composition Containing Iodide and Iodate”  | June                19, 2001 |
| 6,261,577                                           | “Non-Staining                Topical Iodine Composition”  | July                17, 2001 |
| 6,432,426                                           | “Non-Staining                Topical Iodine Composition and Method” | August                13, 2002 |

----

**Competition**

**Employees**

----

**Executive      Officers**

| Name                             | Age    | Position                with the Company           |
|---------------------------------------|--------|----------------------------------------------------|
|                                  |   |                                               |
| Paul                C. Desjourdy      | 44     | President,                Chief Executive Officer, |
|                                  |   | Chief                Financial Officer, General    |
|                                  |   | Counsel,                Treasurer and Director     |
|                                  |   |                                               |
| Jack                H. Kessler, Ph.D. | 55     | Executive                Vice President, Chief     |
|                                  |   | Scientific                Officer, Secretary and   |
|                                  |   | Chairman                of the Board of Directors  |

**Risk      Factors**

----

**RISKS      ABOUT OUR BUSINESS**

**Our      ability to continue as a “going concern” is uncertain**

**We      expect to incur additional losses in the future that will require us to raise      funding**

**Sales      from our only product will cease as our marketing partner has decided to      discontinue offering it for sale**

**We      could go out of business and you may lose your investment if we are unable      to      commercialize a new product**

**12**

----

**If      our corporate partner, Bioaccelerate, continues to have financial difficulty      and      we are not able to enter into a new corporate licensing relationship covering      IoGen, it will be difficult to commercialize IoGen**

**We      have limited data that IoGen will effectively treat fibrocystic breast      disease**

**If      Bioaccelerate cannot meet its financial obligations or we cannot raise      additional funds, then we will have to limit or cease our future      activities**

----

**We      lack the resources to conduct the necessary clinical trials required prior      to      commercial sales of our potential drugs**

**We      may lose control over development and commercialization of drugs after we      license them**

| ·   | conducting                preclinical and clinical trials;  |
|--------------------|------------------------------------------------------------------|

| ·   | obtaining                required regulatory approvals of drug candidates;  |
|--------------------|----------------------------------------------------------------------------------|

| ·   | manufacturing                any resulting products; and  |
|--------------------|----------------------------------------------------------------|

| ·   | commercializing                any resulting products. |
|--------------------|--------------------------------------------------------|

----

**If      a competitive drug is marketed to treat fibrocystic breast disease prior to      IoGen, then the potential market opportunity for IoGen will be adversely      affected**

**If      the FDA does not allow us to use the Mimetix patient data, then the cost of      the      IoGen clinical development will increase significantly**

**We      may be sued for product liability in the future and our liability insurance      may      not be adequate to cover the situation**

**Teat      dips could become subject to FDA marketing clearance that could affect our      ability to market IodoZyme or any other teat dip product**

**We      have no marketing experience within our company**

**15**

----

**We      depend on two of our employees for our future success; the loss of either of      them could adversely effect our ability to succeed**

**Because      our iodine-based products may stain or corrode some surfaces, potential      applications for our products may not be possible**

**Our      use of hazardous materials in our development and commercial efforts exposes      us      to material potential liability**

**We      may never receive a benefit from our net operating losses**

**16**

----

**RISKS      RELATED TO OUR STOCK**

**"Penny      Stock" rules may make buying or selling our securities      difficult**

**Our      securities have been thinly traded on the over-the-counter bulletin board,      which      may not provide liquidity for our investors**

**Investors      must contact a broker-dealer to trade over-the-counter bulletin board      securities. As a result, you may not be able to buy or sell our securities      at      the times that you may wish**

**17**

----

**We      do not intend to pay dividends in the foreseeable future, therefore, you may      never see a return on your investment**

**We      may sell additional shares in the future, which could cause the price of our      securities to decline**

**We      may sell additional shares in the future, which may cause existing stockholders      significant dilution**

**Resales      of our shares could adversely affect the market price for our      stock**

**18**

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**Item      2. Description of Property**

**Item      3. Legal Proceedings**

**Item      4. Submission of Matters to a Vote of Security Holders**

**PART      II**

**Item      5. Market for Common Equity, Related Stockholder Matters and Small Business      Issuer Purchases of Equity Securities**

**(a)      Price Range of Securities**

|                          | **Fiscal                2005** |                  | **Fiscal                2004** |
|-------------------------------|--------------------------------|-----------------------|--------------------------------|
|                          | High                           | Low                   |                           | High | Low |
|                          |                           |                  |                           |   |   |
| First                quarter  | $                1.70          | $                0.95 |                           | $                5.00 | $                0.17 |
| Second                quarter | 1.95                           | 1.15                  |                           | 2.25 | 1.10 |
| Third                quarter  | 1.80                           | 0.80                  |                           | 2.45 | 1.01 |
| Fourth                quarter | 1.58                           | 0.65                  |                           | 2.00 | 1.10 |
|                          |                           |                  |                           |   |   |

**(b)      Approximate Number of Equity Security Holders**

**19**

----

**(c)      Dividends**

**(d)      Recent Sales of Unregistered Securities**

**Item      6. Management's Discussion and Analysis or Plan of      Operation**

**Overview**

**Going      Concern**

----

**Critical      Accounting Policies and Estimates**

*Estimates*

*Revenue      recognition*

*Research      and Development Expenses*

*Long-lived      assets*

**Results      of Operations**

**Fiscal      2005 versus Fiscal 2004**

----

**Financial      Condition, Liquidity and Capital Resources**

----

**Off      Balance Sheet Arrangements**

**23**

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**Item      7.**
**Financial      Statements**

**Report      of Independent Registered Public Accounting Firm**

**24**

----

**Symbollon              Pharmaceuticals, Inc.**

**Balance              Sheets**

|                                                                           |   |                                                       |
|--------------------------------------------------------------------------------|--------|------------------------------------------------------------|
|                                                                           |   | Year                EndedDecember                31,  |
|                                                                           |   |                                                       | **2005** |   |   | 2004 |   |
|                                                                           |   |                                                       |   |   |   |   |   |
| **Assets**                                                                     |   |                                                       |   |   |   |   |   |
|                                                                           |   |                                                       |   |   |   |   |   |
| **Current                assets:**                                             |   |                                                       |   |   |   |   |   |
|    Cash              and cash equivalents                       |   | **$**                                                      | **312,617** |   | $ | 427,124 |   |
| Accounts                receivable                                             |   |                                                       | **234,583** |   |   | - |   |
| Inventory                                                                      |   |                                                       | **39,833** |   |   | 72,783 |   |
| Prepaid                expenses                                                |   |                                                       | **95,446** |   |   | 188,469 |   |
|                                                                           |   |                                                       |   |   |   |   |   |
|                    Total current assets                         |   |                                                       | **682,479** |   |   | 688,376 |   |
|                                                                           |   |                                                       |   |   |   |   |   |
| **Equipment                and leasehold improvements**,                net of |   |                                                       |   |   |   |   |   |
|                   accumulated depreciation and amortization          |   |                                                       | **24,021** |   |   | 38,352 |   |
|                                                                           |   |                                                       |   |   |   |   |   |
| **Other                assets:**                                               |   |                                                       |   |   |   |   |   |
| Patent                and trademark costs, net of accumulated                  |   |                                                       |   |   |   |   |   |
| amortization                                                                   |   |                                                       | **365,068** |   |   | 385,726 |   |
| Deposit                                                                        |   |                                                       | **2,364** |   |   | 2,364 |   |
|                                                                           |   |                                                       |   |   |   |   |   |
|                                                                           |   | **$**                                                      | **1,073,932** |   | $ | 1,114,818 |   |

**25**

----

**Symbollon              Pharmaceuticals, Inc.**

**Balance              Sheets**

*(Continued)*

|                                                                                                   |   |                                                          |                 |   |   |        |   |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------------|--------|--------|-------------|--------|
|                                                                                                   |   | Year                Ended December                  31,  |
|                                                                                                   |   |                                                          | **2005**        |   |   | 2004        |   |
|                                                                                                   |   |                                                          |            |   |   |        |   |
|  **Liabilities              and Stockholders’ Equity**                                      |   |                                                          |            |
|                                                                                                   |   |                                                          |            |   |   |        |   |
| **Current                liabilities:**                                                                |   |                                                          |            |   |   |        |   |
| Accounts                payable                                                                        |   | **$**                                                         | **16,999**      |   | $      | 21,326      |   |
| Accrued                clinical development expenses                                                   |   |                                                          | **119,492**     |   |   | 125,327     |   |
| Deferred                research and development collaboration revenue                                 |   |                                                          | **84,583**      |   |   | -           |   |
| Other                current liabilities                                                               |   |                                                          | **24,455**      |   |   | 19,823      |   |
|                                                                                                   |   |                                                          |            |   |   |        |   |
|                    Total current liabilities                                            |   |                                                          | **245,529**     |   |   | 166,476     |   |
|                                                                                                   |   |                                                          |            |   |   |        |   |
| **Commitments**(Notes                6, 7 and 10)                                                      |   |                                                          |            |   |   |        |   |
|                                                                                                   |   |                                                          |            |   |   |        |   |
| **Stockholders’                equity**:                                                         |   |                                                          |            |   |   |        |   |
| Common                stock, Class A, par value $.001 per share, 93,750,000                shares      |   |                                                          |            |   |   |        |   |
|                  authorized, 7,323,661 and 6,114,761 shares issued and                outstanding |   |                                                          |            |   |   |        |   |
|                  as of December 31, 2005 and 2004, respectively                                   |   |                                                          | **7,324**       |   |   | 6,115       |   |
| Convertible                common stock, Class B, par value $.001                                      |   |                                                          |            |   |   |        |   |
|                  per share, 1,250,000 shares authorized and unissued                              |   |                                                          | -               |   |   | -           |   |
| Preferred                stock, par value $.001 per share, 5,000,000 shares                            |   |                                                          |            |   |   |        |   |
|                  authorized and unissued                                                          |   |                                                          | **-**           |   |   | -           |   |
| Additional                paid-in capital                                                              |   |                                                          | **13,632,830**  |   |   | 13,942,565  |   |
| Accumulated                deficit                                                                     |   |                                                          | **(12,811,751** | **)**  |   | (12,165,778 | )      |
|                                                                                                   |   |                                                          |            |   |   |        |   |
|                                                                                                   |   |                                                          | **828,403**     |   |   | 1,782,902   |   |
| Common                stock subscriptions receivable                                                   |   |                                                          | **-**           |   |   | (834,560    | )      |
|                                                                                                   |   |                                                          |            |   |   |        |   |
|                    Total stockholders' equity                                           |   |                                                          | **828,403**     |   |   | 948,342     |   |
|                                                                                                   |   |                                                          |            |   |   |        |   |
|                                                                                                   |   | **$**                                                         | **1,073,932**   |   | $      | 1,114,818   |   |

*See      accompanying notes to financial statements.*

**26**

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**Symbollon              Pharmaceuticals, Inc.**

**Statements              of Operations**

|                                                                                     |   |   |                                                           |   |   |       |   |
|-------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|------------|--------|
|                                                                                     |   |   | Year                  EndedDecember                  31,  |   |
|                                                                                |   |   | **2005**                                                       |   |   | 2004       |   |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Revenue**:                                                                        |   |   |                                                           |   |   |       |   |
| Net                  product sales                                                  |   | **$**  | **49,627**                                                     |   | $      | 159,510    |   |
| Research                  and development collaboration revenue                     |   |   | **400,000**                                                    |   |   | -          |   |
|                                                                                |   |   |                                                           |   |   |       |   |
|                    Total revenues                                              |   |   | **449,627**                                                    |   |   | 159,510    |   |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Operating                  expenses**:                                            |   |   |                                                           |   |   |       |   |
| Cost                  of goods sold                                                 |   | **$**  | **48,459**                                                     |   | $      | 142,110    |   |
| Research                  and development costs                                     |   |   | **716,238**                                                    |   |   | 1,470,046  |   |
| General                  and administrative expenses                                |   |   | **633,734**                                                    |   |   | 605,409    |   |
| Stock-based                  compensation from repriced options (1)                 |   |   | **(296,749**                                                   | **)**  |   | 593,749    |   |
|                                                                                |   |   |                                                           |   |   |       |   |
|                    Total operating expenses                                    |   |   | **1,101,682**                                                  |   |   | 2,811,314  |   |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Loss                  from operations**                                           |   |   | **(652,055**                                                   | **)**  |   | (2,651,804 | )      |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Interest                  income**                                                |   |   | **6,082**                                                      |   |   | 4,696      |   |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Net                  loss**                                                       |   | **$**  | **(645,973**                                                   | **)**  | $      | (2,647,108 | )      |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Basic                  and diluted net loss per share of**                        |   |   |                                                           |   |   |       |   |
| **                   common stock**                                            |   | **$**  | **(0.09**                                                      | **)**  | $      | (0.53      | )      |
|                                                                                |   |   |                                                           |   |   |       |   |
| **Weighted                  average number of common shares**                       |   |   |                                                           |   |   |       |   |
| **                   outstanding - basic and diluted**                         |   |   | **7,081,907**                                                  |   |   | 4,963,470  |   |
|                                                                                |   |   |                                                           |   |   |       |   |
| **(1)                  The following summarizes the allocation of**                 |   |   |                                                           |   |   |       |   |
| **                        stock-based compensation:** |   |   |                                                           |   |   |       |   |
|    Cost                  of goods sold                               |   | **$**  | **(125,513**                                                   | **)**  | $      | 220,285    |   |
|                     Research and development costs                        |   |   | **(58,173**                                                    | **)**  |   | 138,603    |   |
|                     General and administrative expenses                   |   |   | **(113,063**                                                   | **)**  |   | 234,861    |   |
|                                                                                |   |   |                                                           |   |   |       |   |
| Total                                                                               |   | **$**  | **(296,749**                                                   | **)**  | $      | 593,749    |   |

*See      accompanying notes to financial statements.*

**27**

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**Symbollon              Pharmaceuticals, Inc.**

**Statements              of Stockholders’ Equity**

|                                                                            |   |   | Common                Stock     |   |   |       |   |   |        |   |   | Common        |   |   |       |   |
|---------------------------------------------------------------------------------|--------|--------|--------------------------------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|--------|--------|------------|--------|
|                                                                                 |   |   | $.001                Par Value  |   |   | Additional |   |   |        |   |   | Stock         |   |   |       |   |
|                                                                                 |   |   | Class                A          |   |   | Paid-in    |   |   | Accumulated |   |   | Subscriptions |   |   |       |   |
|                                                                                 |   |   | Shares                          |   |   | Amount     |   |   | Capital     |   |   | Deficit       |   |   | Receivable |   |   | Total |   |
|                                                                            |   |   |                                 |   |   |       |   |   |        |   |   |          |   |   |       |   |   |   |   |
| **Balance**,                December 31, 2003                                   |   |   | 4,196,204                            |   |   | 4,196      |   | $      | 11,435,193  |   | $      | (9,518,670    | )      | $      | (834,560   | )      | $ | 1,086,159 |   |
|                    Issuance of Shares – Acquired Research  |   |   | 550,000                              |   |   | 550        |   |   | 934,450     |   |   | -             |   |   | -          |   |   | 935,000 |   |
|                    Issuance of Shares – Equity Line        |   |   | 6,865                                |   |   | 7          |   |   | 9,918       |   |   | -             |   |   | -          |   |   | 9,925 |   |
|                    Issuance of Shares – Private Placement  |   |   | 1,261,692                            |   |   | 1,262      |   |   | 820,355     |   |   | -             |   |   | -          |   |   | 821,617 |   |
|                    Issuance of Shares – Consultants        |   |   | 100,000                              |   |   | 100        |   |   | 148,900     |   |   | -             |   |   | -          |   |   | 149,000 |   |
|                    Stock Based Compensation                      |   |   |                                 |   |   |       |   |   | 593,749     |   |   | -             |   |   | -          |   |   | 593,749 |   |
|                    Net loss for the year                         |   |   |                                      |   |   |            |   |   |             |   |   | (2,647,108    | )      |   | -          |   |   | (2,647,108 | ) |
|                                                                            |   |   |                                 |   |   |       |   |   |        |   |   |          |   |   |       |   |   |   |   |
| **Balance**,                December 31, 2004                                   |   |   | 6,114,761                            |   |   | 6,115      |   | $      | 13,942,565  |   | $      | (12,165,778   | )      | $      | (834,560   | )      | $ | 948,342 |   |
|                    Issuance of Shares – Warrant Exercise   |   |   | 4,000                                |   |   | 4          |   |   | 2,596       |   |   | -             |   |   | -          |   |   | 2,600 |   |
|                    Issuance of Shares – Foreign Stock Sale |   |   | 1,642,795                            |   |   | 1,643      |   |   | 798,942     |   |   | -             |   |   | -          |   |   | 800,585 |   |
|                    Issuance of Shares – Consultants        |   |   | 25,000                               |   |   | 25         |   |   | 19,573      |   |   | -             |   |   | -          |   |   | 19,598 |   |
|                    Return of Shares – Executives Loans     |   |   | (462,895                             | )      |   | (463       | )      |   | (834,097    | )      |   | -             |   |   | 834,560    |   |   | - |   |
|                    Stock Based Compensation                      |   |   |                                 |   |   |       |   |   | (296,749    | )      |   | -             |   |   | -          |   |   | (296,749 | ) |
|                    Net loss for the year                         |   |   |                                      |   |   |            |   |   |             |   |   | (645,973      | )      |   | -          |   |   | (645,973 | ) |
|                                                                            |   |   |                                 |   |   |       |   |   |        |   |   |          |   |   |       |   |   |   |   |
| **Balance**,                December 31, 2005                                   |   |   | 7,323,661                            |   |   | 7,324      |   | $      | 13,632,830  |   | $      | (12,811,751   | )      | $      | -          |   | $ | 828,403 |   |

*See      accompanying notes to financial statements.*

----

**Symbollon              Pharmaceuticals, Inc.**

**Statements              of Cash Flows**

|                                                                                                                   |   |   |                                                       |   |   |       |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|--------|------------|--------|
|                                                                                                                   |   |   | Year                EndedDecember                31,  |   |
|                                                                                                              |   |   | **2005**                                                   |   |   | 2004       |   |
| **Cash                flows from operating activities:**                                                          |   |   |                                                       |   |   |       |   |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| Net                loss                                                                                           |   | **$**  | **(645,973**                                               | **)**  | $      | (2,647,108 | )      |
| Adjustments                to reconcile net loss to net cash used in                                              |   |   |                                                       |   |   |       |   |
|                  operating activities:                                                                       |   |   |                                                       |   |   |       |   |
|                    Stock-based compensation                                                        |   |   | **(296,749**                                               | **)**  |   | 593,749    |   |
|                    Issuance of securities for services rendered                                    |   |   | **19,598**                                                 |   |   | 336,317    |   |
|                    Issuance of common stock for acquired research and                development   |   |   | **-**                                                      |   |   | 935,000    |   |
|                    Depreciation and amortization                                                   |   |   | **54,216**                                                 |   |   | 53,726     |   |
|                    Changes in operating assets and liabilities:                                    |   |   |                                                       |   |   |       |   |
|                      Accounts receivable                                                 |   |   | **(234,583**                                               | **)**  |   | 100,189    |   |
|                      Inventory                                                           |   |   | **32,950**                                                 |   |   | (48,887    | )      |
|                      Prepaid expenses                                                    |   |   | **93,023**                                                 |   |   | (160,875   | )      |
|                      Accounts payable and other current liabilities                      |   |   | **79,053**                                                 |   |   | 32,781     |   |
|                        Net cash used in operating activities                   |   |   | **(898,465**                                               | **)**  |   | (805,108   | )      |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| **Cash                flows from investing activities:**                                                          |   |   |                                                       |   |   |       |   |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| Purchase                of equipment and leasehold improvements                                                   |   |   | **(4,005**                                                 | **)**  |   | (1,442     | )      |
| Patent                and trademark cost additions                                                                |   |   | **(15,222**                                                | **)**  |   | (28,448    | )      |
|                       Net cash used in investing activities                         |   |   | **(19,227**                                                | **)**  |   | (29,890    | )      |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| **Cash                flows from financing activities:**                                                          |   |   |                                                       |   |   |       |   |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| Issuance                of common stock and warrants                                                              |   |   | **803,185**                                                |   |   | 644,225    |   |
|                       Net cash provided by (used in) financing activities           |   |   | **803,185**                                                |   |   | 644,225    |   |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| **Net                decrease in cash and cash equivalents**                                                      |   |   | **(114,507**                                               | **)**  |   | (190,773   | )      |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| **Cash                and cash equivalents**,                beginning of period                                  |   |   | **427,124**                                                |   |   | 617,897    |   |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| **Cash                and cash equivalents**,                end of period                                        |   | **$**  | **312,617**                                                |   | $      | 427,124    |   |
|                                                                                                              |   |   |                                                       |   |   |       |   |
| **Supplemental                information:**                                                                      |   |   |                                                       |   |   |       |   |
| There                were no payments made for interest or income taxes during 2005 or                2004.  |   |   |                                                       |   |   |       |   |

*See      accompanying notes to financial statements.*

**29**

----

**Symbollon              Pharmaceuticals, Inc.**

**Notes              to Financial Statements**

| **1.**   **Description                of****Business                and****Basis                of****Presentation** | Symbollon                Pharmaceuticals, Inc. (formerly Symbollon Corporation) was formed                to                develop and commercialize proprietary iodine-based products for infection                control and treatment in biomedical and bioagricultural                industries. The                success of future operations is subject to a number of risks similar                to                those of other companies in the same stage of development. Principal                among                these risks are the Company’s cumulative operating losses, no assurance of                profitable future operations, early state of market development,                competition from substitute products or larger companies, dependence                on                key personnel and the uncertainty of additional future financing                as                needed. 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 $645,973 and $2,647,108 and negative cash flows from                operations of $898,465 and $805,108 for the years ended December                31, 2005                and 2004, respectively. At December 31, 2005, we had an accumulated                deficit of $12,811,751 and working capital of $436,950. 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, external investors and IoGen commercialization                partner. The Company has sent a notice of default to the IoGen partner                regarding its failure to establish and fund the escrow as required                by the                licensing agreement. Unless the IoGen partner cures the existing                defaults,                the Company may terminate the licensing agreement at any time and                receive                back all rights to IoGen it licensed to the IoGen partner in the                agreement. (See Note 13) If the Company’s IoGen commercialization partner                continues to have financial difficulties, we may need to secure a                new                partner to help complete the development and commercialization of                IoGen.                These financial statements do not include any adjustments relating                to the                recoverability and classification of recorded asset amounts, or amounts                and classification of liabilities that might be necessary should                we be                unable to continue as a going concern and, therefore, be required                to                realize the Company’s assets and discharge the Company’s liabilities in                other than the normal course of operations. Management plans to obtain                equity and debt financing from external investors, and if necessary,                to                actively pursue a new partner to help complete the development and                commercialization of IoGen. Management                believes the plan described above will be sufficient to meet the                Company’s                liabilities and commitments as they become payable over the next                twelve                months. There can be no assurance that management's plan will be                successful. Failure to obtain the support of additional external                investors                to finance the Company’s operations will cause us to curtail operations                and impair the Company’s ability to continue as a going                concern. |
|-------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**30**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **2.**   **Summary                of****Significant****Accounting                Policies**  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Use                of Estimates*                                                                                | The                preparation of financial statements in conformity with generally                accepted                accounting principles requires management to make estimates and                assumptions that affect the reported amounts of assets and liabilities                and                disclosure of contingent assets and liabilities at the date of the                financial statements and the reported amounts of revenues and expenses                during the reporting period. Actual results could differ from those                estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| *Cash                and Cash**Equivalents*                                                                 | Cash                and cash equivalents include short-term, highly liquid investments                with                maturities of less than three months when acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| *Concentration                of**Credit                Risks*                                                   | The                Company has one customer for its product, IodoZyme. The customer’s                financial condition is reviewed on an ongoing basis, and collateral                is not                required. The Company believes a reserve for potential credit losses                is                not necessary as of December 31, 2005 and 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| *Accounts                Receivable**and                Allowance for**Doubtful                Accounts*         | Accounts                receivable are customer obligations due under normal trade terms.                The                Company performs continuing credit evaluations of its customer’s financial                condition and generally does not require collateral. Senior management                reviews accounts receivable on a periodic basis to determine if any                receivables will potentially be uncollectible. The Company includes                any                accounts receivable balances that are determined to be uncollectible,                if                any, in its overall allowance for doubtful accounts. After all attempts                to                collect a receivable have failed, the receivable is written off against                the allowance. Based on the information available to the Company,                it                believes an allowance for doubtful accounts is not necessary as of                December 31, 2005 and 2004. However, actual write-offs might exceed                the                Company’s estimates.   |
| *Inventory*                                                                                                      | Inventory                is stated at the lower of cost (determined on a first-in, first-out                basis)                or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| *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.                The                Company does not believe that any of its long-lived assets are impaired                at                December 31, 2005 or 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                        |

**31**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **2.**   **Summary                of****Significant****Accounting                Policies**(Continued)  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Depreciation                and**Amortization*                                                                             | Equipment                is stated at cost and is depreciated over its estimated useful life                (ranging from 5-7 years) using the straight-line method. Leasehold                improvements are stated at cost and are being amortized by the                straight-line method over the 10 year term of the lease which is                less than                their estimated useful lives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *Intangible                Assets*                                                                                          | Intangible                assets subject to amortization consist of patents and trademarks                that have                estimated useful lives ranging from 12-17 years and a weighted average                useful life of 9.9 years. Costs related to patent applications are                capitalized as incurred and are amortized once the patent application                is                accepted or are expensed if the application is rejected or there                are other                circumstances that indicate that the asset is impaired (as described                above).                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| *Income                Taxes*                                                                                               | The                Company follows the liability method of accounting for income taxes,                as                set forth in SFAS No. 109, “Accounting For Income Taxes.” Under this                method, deferred tax liabilities and assets are recognized for the                expected future tax consequences of temporary differences between                the                carrying amount and the tax basis of assets and liabilities. The                Company                records a valuation allowance against deferred tax assets unless                it is                more likely than not that such asset will be realized in future                periods.                                                                                                                                                                                                                                        |
| *Fair                value of**Financial**Instruments*                                                                 | The                carrying amounts of cash and cash equivalents, accounts receivable,                other                current assets and accounts payable approximate fair value based                on their                short-term maturities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| *Revenue**Recognition*                                                                                                      | The                Company recognizes revenue from its product sales and licensing                arrangements 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. Due to uncertainty concerning collectibility,                the                Company now recognizes revenue its licensing arrangement with                Bioaccelerate as cash is collected. As of December 31, 2005, the                Company                has incurred costs of $84,583 that are eligible for reimbursement,                for                which the Company has not recognized revenue. |
|                                                                                                                             |
| *Research                and**Development*                                                                                  | Research                and development costs are expensed as incurred. On May 28, 2004,                the                Company completed the acquisition of certain assets of Mimetix Inc.,                a                privately held company, and other related parties associated with                their                iodine drug development efforts in women’s healthcare for 550,000 shares                of Symbollon’s Class A common stock. The assets primarily consisted of                clinical trials results and data with no future alternative use to                the                Company.                                                                                                                                                                                                                                                                                                                  |

**32**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **2.**   **Summary                of****Significant****Accounting                Policies**(Continued)  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Research                and**Development**(Continued)*                                                                | Accordingly,                the cost of $935,000 is included as research and development costs                for the                year ended December 31, 2004 in the accompanying statement of                operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *Stock-Based**Compensation*                                                                                                 | The                Company accounts for its stock-based compensation plan using the                intrinsic                value method. The Company provides pro forma disclosures for compensation                expense under the fair value method of SFAS No. 123, “Accounting for                Stock-Based Compensation,” and SFAS No. 148, “Accounting for                Stock-Based Compensation-Transition and Disclosure.” If the Company had                elected to recognize compensation cost for the plans based on the                fair                value at the grant date for awards granted under the plans, consistent                with the method prescribed by SFAS No. 123, the effect on net loss                and earnings per share would have been as follows:  |

| *December                  31,*                     |   | **2005**                           | 2004                     |
|-----------------------------------------------------|--------|------------------------------------|--------------------------|
|                                                |   |                               |                     |
| Net                  loss                           |   | **$                  (645,973)**   | $(2,647,108)             |
|                                                |   |                               |                     |
| Adjustments:                                        |   |                               |                     |
| Stock-based                  employee compensation  |   |                               |                     |
| expense                  included in reported net   |   |                               |                     |
| income,                  net of related tax effects |   | **(296,749)**                      | 593,749                  |
|                                                |   |                               |                     |
| Total                  stock-based employee         |   |                               |                     |
| compensation                  determined under fair |   |                               |                     |
| value                  method of all awards, net of |   |                               |                     |
| related                  tax effects                |   | **(118,029)**                      | (79,379)                 |
|                                                |   |                               |                     |
| Proforma                  net loss                  |   | **$                  (1,060,751)** | $(2,132,738)             |
|                                                |   |                               |                     |
| Basic                  and diluted loss per share:  |   |                               |                     |
| As                  reported                        |   | **$                  (.09)**       | $                  (.53) |
| Pro                  forma                          |   | **$                  (.15)**       | $                  (.43) |

|   | The              fair value of the Company’s stock options used to compute the pro forma              net loss and net loss per share disclosures is the estimated fair value              at              grant date using the Black-Scholes option-pricing model with the following              weighted-average assumptions for 2005 and 2004, respectively: dividend              yield of 0% for both years; expected volatility between 220% and 236%              and              between 260% and 270%, respectively; a risk-free interest rate of between              3.93 and 4.30 and 4.00%, respectively, and an expected holding period              between 7 and 9 years and between 8 and 9 years,              respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**33**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

|                                                                                                                       |
|-----------------------------------------------------------------------------------------------------------------------|
| **2.**   **Summary                of****Significant****Accounting                Policies**(Continued) |   |
|                                                                                                                  |
| *Loss                Per Share*                                                                                       | The                Company follows SFAS No. 128, “Earnings per Share.” Under SFAS                No. 128, basic earnings per share excludes the effect of any dilutive                options, warrants or convertible securities and is computed by dividing                the net loss available to common shareholders by the weighted average                number of common shares outstanding for the period. Diluted earnings                per                share is computed by dividing the net loss available to common                shareholders by the sum of the weighted average number of common                shares                and common share equivalents computed using the average market price                for                the period under the treasury stock method. |
|                                                                                                                  |   |
| *Recent**Accounting**Standards*                                                                                       | In                December 2004, the FASB issued SFAS NO. 123(R), “Share Based Payment.”                This statement is a revision of SFAS No. 123, “Accounting for Stock-Based                Compensation” and supercedes APB Opinion No. 25, “Accounting for Stock                Issued to Employees” and related interpretations. This statement                establishes standards for the accounting for transactions in which                an                entity exchanges its equity instruments for goods and services or                incurs a                liability in exchange for goods and services that are based on the                fair                value of the entity’s equity instruments or that may be settled by the                issuance of those equity instruments. It requires an entity to measure                the                costs of employee services received in exchange for an award of equity                instruments based on the grant-date fair value of the award and recognize                that cost over the service period. This statement is effective for                small                business issuers for the first fiscal year beginning after December                15,                2005. Accordingly, the Company will adopt its provisions effective                January                1, 2006. The Company has not yet determined the impact that adoption                of                this statement will have on its financial position or results of                operations. |

| **3.**   **Inventory** | Inventory                  consists of the following: |
|---------------------------------------|-------------------------------------------------------|

| *December                  31,*      | **2005**                                                                                   | 2004          |
|--------------------------------------|--------------------------------------------------------------------------------------------|---------------|
|  Raw                  materials |  **$                            -** |  $72,092 |
| Finished                  goods      | **39,833**                                                                                 | 691           |
|                                 | **$39,833**                                                                                | $72,783       |

**34**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

|  **4.**   **Equipment              and****Leasehold****Improvements** |  Equipment              and leasehold improvements are stated at cost and consist of the              following: |
|-------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|

| *December                  31*,                       | **2005**                      | 2004                       |
|------------------------------------------------------------|-------------------------------|----------------------------|
|                                                       |                          |                       |
| Equipment                  and fixtures                    | **$195,465**                  | $                  191,460 |
| Leasehold                  improvements                    | **63,146**                    | 63,146                     |
|                                                       |                          |                       |
|                                                       | **258,611**                   | 254,606                    |
| Less                  accumulated depreciation and         |                          |                       |
|                    amortization                       | **234,590**                   | 216,254                    |
|                                                       |                          |                       |
| Equipment                  and leasehold improvements, net | **$                  24,021** | $                  38,352  |

|                                                                        | Depreciation                expense for the years ended December 31, 2005 and 2004 totaled $18,336                and                $19,576, respectively.  |
|-----------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **5.**   **Patent                and****Trademark****Costs** | Patent                and trademark costs consist of the following:                                                                                          |

| *December                  31,*                       | **2005**           | 2004           |
|-------------------------------------------------------|--------------------|----------------|
|                                                  |               |           |
| Patent                  costs                         | **$528,743**       | $513,521       |
| Trademark                  costs                      | **2,444**          | 2,444          |
|                                                  |  **531,187**  |  515,965  |
|  Less                  accumulated amortization  |  **166,119**  |  130,239  |
|  Patent                  and trademark cost, net |  **$365,068** |  $385,726 |

|   |                Amortization                expense related to these assets is estimated to be approximately                $36,350                per year in fiscal years 2005 through 2009. Amortization expense                for the                years ended December 31, 2005 and 2004 totaled $35,880 and $34,150,                respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**35**

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**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **6.**   **Stockholders’****Equity**                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Capital                Stock*                                                                                                                                                      | The                Company has authorized 93,750,000 shares of Class A common stock,                1,250,000 shares of Class B common stock and 5,000,000 shares of                preferred stock. The Class A and Class B common stock are                substantially identical except that holders of Class A common stock                have the right to cast one vote for each share held and the Class B                shareholders have the right to cast five votes for each share held.                As of                December 31, 2005 and 2004, there were no shares of Class B common                stock issued and outstanding. The preferred stock may be issued in                series,                and shares of each series will have such rights and preferences as                are                fixed by the Company’s Board of Directors. As of December 31, 2005                and 2004, there were no shares of preferred stock issued and                outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| *Issuance                of Common**Stock                and Common** *    *Stock                Purchase**     * *Warrants* | On                September 1, 2004, the Company sold in a private placement to accredited                investors 1,261,692 shares of Class A common stock and 630,846 redeemable                warrants for $634,300 in cash and $185,800 in prepaid services for                manufacturing, consulting and clinical trial expenses. Officers and                directors of the Company invested $127,000 of the cash raised as                part of                the private placement on the same terms and conditions as the third                party                investors. The                redeemable warrants entitle the holder thereof to purchase at any                time up                to February 28, 2006 (which was extended to March 31, 2006) a share                of                Class A common stock at a price of sixty-five cents ($0.65) per share.                As                of December 31, 2005, redeemable warrants covering 4,000 shares were                exercised, netting the Company $2,600 in cash. From January 2006                through                March 2006, redeemable warrants covering an additional 611,461 shares                were                exercised, netting the Company $330,175 in cash and $67,275 in prepaid                consulting services. In connection with the exercise of the redeemable                warrants, the Company issued 615,461 warrants entitling the holder                thereof                to purchase from September 1, 2006 to February 28, 2009 a share of                Class A                common stock at a price of sixty-five cents ($0.65) per share. The                new                warrants will only become exercisable if the holder thereof does                not sell                any of the shares acquired by the holder in the 2004 private placement                and                upon exercise of the holder’s redeemable warrants.  The                Company accounts for certain of the shares and warrants issued for                prepaid                services under Emerging Task Force Issue 96-18 “Accounting for Equity                Instruments That Are Issued to Other Than Employees for Acquiring,                or in                Conjunction with Selling, Goods or Services” (EITF 96-18). Accordingly,                the Company has recognized approximately $28,000 and $120,250 of                expense                related to these shares and warrants for the years ended December                31, 2005                and 2004, respectively, in the accompanying statement of                operations. |

**36**

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**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **6.**   **Stockholders’****Equity**(Continued)                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Issuance                of Common**Stock                and Common**     * *Stock                Purchase**     * *Warrants**(Continued)* | In                January, 2004 the Company issued options to purchase 50,000 shares                of                common stock at $0.25 per share to a consultant hired by the Company.                The                options vested 25,000 on June 30, 2004 and 25,000 on December 31,                2004.                Pursuant to the consulting agreement, the first traunche of 25,000                shares                was issued for no cash consideration, as the $6,250 exercise price                was                earned as a bonus for services rendered, because the Company’s average                closing price for the three months ended June 30, 2004 was greater                than                $0.50 per share. The second traunche of 25,000 shares was also exercised                for no cash consideration as the $6,250 exercise price was earned                as a                bonus for services rendered, because the Company’s average common stock                closing price for the three months ended December 31, 2004 was greater                than $0.75 per share. The Company accounts for these options under                EITF                96-18. Accordingly,                the Company has recognized approximately $78,750 of expense related                to                these options for the year ended December 31, 2004, included in general                and administrative expenses in the accompanying statement of                operations. On                December 1, 2004, we entered into a services agreement with a doctor.                In                accordance with the services agreement, and as consideration for                the                services to be provided by the doctor, we agreed to issue 5,000 shares                of                Class A common stock upon execution, and on each of the first and                second                anniversaries of the agreement. The Company accounts for these shares                under EITF 96-18. Accordingly, the Company has recognized approximately                $5,350 and $7,250 of expense related to these shares for the years                ended                December 31, 2005 and 2004, respectively, included in research and                development expenses in the accompanying statements of                operations. On                December 16, 2004, we entered into a services agreement with CEOcast,                Inc.                In accordance with the services agreement, and as partial consideration                for the services provided by CEOcast, Inc., we agreed to issue 45,000                shares of Class A common stock upon execution. The Company accounts                for                these shares under EITF 96-18. Accordingly, the Company has recognized                approximately $57,750 and $5,250 of expense related to these shares                for                the years ended December 31, 2005 and 2004, respectively, included                in                general and administrative expenses in the accompanying statements                of                operations. |

**37**

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**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **6.**   **Stockholders’****Equity**(Continued)                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Issuance                of Common**Stock                and Common**     * *Stock                Purchase**     * *Warrants**(Continued)* | During                2005, Symbollon 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. On                September 15, 2005, we entered into a services agreement with Premier                Funding Services LLC. In accordance with the services agreement,                and as                partial consideration for the services provided by the vendor, we                agreed                to issue 20,000 shares of Class A common stock and warrants to purchase                40,000 shares of Class A common stock upon execution of the agreement.                The                Company accounts for these shares under EITF 96-18. Accordingly,                the                Company has determined the fair value of the shares and warrants                to be                $42,458 and has recognized $12,384 of expense related to these shares                and                warrants for the year ended December 31, 2005, included in general                and                administrative expenses in the accompanying statement of operations.                The                remaining fair value of the shares and warrants has been recorded                as a                prepaid expense at December 31, 2005 and will be amortized in 2006                over                the remaining service agreement term.                                                                                               |
| *Common                Stock**Subscriptions**Receivable*                                                                                                                                               | In                January 2001, certain officers of the Company entered into Promissory                Notes and Pledge Agreements (the “Notes”) with the Company totaling                $834,560 in exchange for 462,895 shares of Class A common stock acquired                through the exercise of vested stock options. The Notes bore interest                at a                fixed rate of 5.61% and were due in full on December 31, 2005. The                Notes were collateralized by the 462,895 shares of Class A common                stock                and the Company had full recourse to pursue collection in the event                of                default. The Company’s recourse was limited to the pledged stock in the                event that the officer is no longer employed with the Company and                if the                then market value of the pledged stock is less than the outstanding                principal and accrued but unpaid interest on the officer’s Note.                The                Company accounted for the Notes under FIN 44 “Accounting for Certain                Transactions Involving Stock Compensation (an interpretation of APB                Opinion No. 25)” (FIN 44) and Emerging Issues Task Force Issue No. 00-23                “Issues Related to the Accounting of Stock Compensation Under APB                Opinion                No. 25 and FASB Interpretation 44” as variable arrangements. Pursuant to                these pronouncements, no compensation cost was recognized in 2005                or                2004. |

**38**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **6.**   **Stockholders’****Equity**(Continued)   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Common                Stock**Subscriptions**Receivable**(Continued)*  | On                December 30, 2005, the officers resigned from their employment with                the                Company in order to avail themselves of their contractual rights                to limit                the Company’s recourse to collect the Notes to the pledged stock. On                December 30, 2005, the two officers returned their stock and the                Notes                were cancelled. The officers were subsequently rehired on January                3, 2006                under new employment agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| *Investment                Agreement*                                       | On                October 1, 2003, the Company entered into an Investment Agreement                with                Dutchess Private Equities Fund, L.P. (Dutchess). Pursuant to the                Investment Agreement, the Company may, at its discretion, periodically                put                to Dutchess shares of its Class A common stock at a price equal to                95% of                the average of the three lowest closing bid prices on the Over-the-Counter                Bulletin Board for the five days immediately following the date that                the                Company gives its notice to Dutchess of its intention to put such                stock. Subject                to a $1 million per put cap, the maximum amount of each put exercise                is                equal to, at the Company’s election (i) 200% of the average daily volume                of the Class A common stock for the 20 trading days prior to the                applicable put notice multiplied by the average of the three daily                closing                bid prices immediately preceding the date of the put, or (ii)                $10,000. The                Company may continue to put shares to Dutchess until October 17,                2006 or                Dutchess has paid a total of $10 million, whichever occurs first.                During                June 2004 the Company put 6,865 shares to Dutchess for proceeds of                $9,925.  |
| **7.**    **Stock                Plans**                | The                Company has adopted two stock plans: a stock option plan and a nonemployee                directors’ stock option plan. The                stock option plan provides for the grant of incentive stock options,                nonqualified stock options and stock appreciation rights. The Company                has                reserved 3,200,000 shares for issuance under this                plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

**39**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

|  **7.**   **Stock              Plans**(Continued) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  | On                May 17, 1995 the Company adopted a nonemployee directors’ stock                option plan that provides for the grant of nonstatutory stock options                automatically on January 1 of each calendar year commencing on                January 1, 1996. The Company has reserved 100,000 shares for issuance                under the plan. Each outside director shall be granted an option                to                purchase 2,500 shares of Class A common stock at fair market value,                vesting 50% on each of the first two anniversaries of the grant.                The                nonemployee directors’ stock option plan expires on January 2,                2006. Under                the above plans 1,983,855 shares are available for future grant or                purchase. The                Company had the following option activity under the stock option                plan and                the nonemployee directors’ stock option plan in 2005 and                2004: |

|                                            |    | Weighted-Average                |
|-------------------------------------------------|---------|---------------------------------|
|                                            |    | Exercise                  Price |
|                                            | Shares  | Per                  Share      |
|                                            |    |                            |
| **Balance**,                  December 31, 2003 | 665,000 | $0.44                           |
| Granted                                         | 82,500  | 1.65                            |
| Exercised                                       | -       | -                               |
| Cancelled                                       | -       | -                               |
|                                            |    |                            |
| **Balance**,                  December 31, 2004 | 747,500 | 0.56                            |
| Granted                                         | 37,500  | 1.11                            |
| Exercised                                       | -       | -                               |
| Cancelled                                       | -       | -                               |
|                                            |    |                            |
| **Balance**,                  December 31, 2005 | 785,000 | $0.58                           |

**40**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

|                **7.**   **Stock                Plans**(Continued) |                All                options outstanding at December 31, 2005 are categorized by the                following ranges in the table                below: |
|---------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    SharePrice                  Range |  Weighted-AverageExercisePrice | Weighted-AverageRemainingContractualLife                  (years) |    Number                  ofShares |
|-----------------------------------------------------|-------------------------------------|-------------------------------------------------------------------|----------------------------------------------------|
|  $0.28                  to $1.00               |  $0.32                         |  3.8                                                         |  652,500                                      |
| $1.00                  to $5.00                     | $1.85                               | 6.2                                                               | 132,500                                            |
|                                                |                                |                                                              |  785,000                                      |

|   |  All                  options exercisable at December 31, 2005 are categorized by the                  following ranges in the table                  below: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    SharePrice                  Range |  Weighted-AverageExercisePrice | Weighted-AverageRemainingContractualLife                  (years) |    Number                  ofShares |
|-----------------------------------------------------|-------------------------------------|-------------------------------------------------------------------|----------------------------------------------------|
|  $0.28                  to $1.00               |  $0.28                         |  3.0                                                         |  611,250                                      |
| $1.00                  to $5.00                     | $1.93                               | 5.3                                                               | 95,000                                             |
|                                                |                                |                                                              |  706,250                                      |

|   |                All                options exercisable at December 31, 2004 are categorized by the                following ranges in the table                below: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    SharePrice                  Range |  Weighted-AverageExercisePrice | Weighted-AverageRemainingContractualLife                  (years) |    Number                  ofShares |
|-----------------------------------------------------|-------------------------------------|-------------------------------------------------------------------|----------------------------------------------------|
|  $0.28                  to $1.00               |  $0.28                         |  3.9                                                         |  403,750                                      |
| $1.00                  to $5.00                     | $2.11                               | 4.3                                                               | 57,500                                             |
|                                                |                                |                                                              |  461,250                                      |

**41**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **7.**   **Stock                  Plans**(Continued) | The                  weighted-average fair value of options granted during the years                  ended                  December 31, 2005 and 2004 was $1.11 and $1.52 per share,                  respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                | In                  November 2003, the Company's Board of Directors authorized the                  repricing                  of employee options, canceling 690,000 options with exercise prices                  ranging from $1.94 to $9.06 and issuing options to purchase 600,000                  shares                  of common stock at $0.28 per share, which was above the market                  value on                  the date of the repricing. These options are subject to variable                  plan                  accounting, as required by FIN 44 and APB 25. As prescribed by                  the                  provisions of APB 25 the Company will remeasure the intrinsic value                  of the                  repriced options, through the earlier of the date of exercise,                  cancellation or expiration, at each reporting date. Accordingly,                  the                  Company has recognized credits of $296,749 and expenses of $593,749                  related to the repriced options for the years ended December 31,                  2005 and                  2004, respectively.  |
| **8.**   **Loss                  Per Share**         | The                  Company’s basic and diluted net loss per share of common stock for the                  years ended December 31, 2005 and 2004 is computed by dividing the                  net loss by the weighted average number of common shares outstanding                  during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                | The                  following table summarizes securities that were outstanding as                  of                  December 31, 2005 and 2004 but not included in the calculation of                  diluted net loss per share because such shares are                  antidilutive:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

| *December                  31,* | **2005**    | 2003    |
|---------------------------------|-------------|---------|
|                            |        |    |
| Stock                  options  | **785,000** | 747,500 |
| Stock                  warrants | **666,846** | 630,846 |

| **9.**   **Income                  Taxes** | The                  following table summarizes the significant differences between                  the benefit                  that would be recognized under the United States federal statutory                  tax                  rate and the Company’s effective tax rate for financial statement                  purposes: |
|-----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *December                  31,*                           | **2005**                 | 2004                     |
|----------------------------------------------------------------|--------------------------|--------------------------|
|                                                           |                     |                     |
| United                  States statutory tax rate              | **34%**                  | 34%                      |
| State                  taxes, net of United States             |                     |                     |
| federal                  tax benefit                           | **6%**                   | 6%                       |
|                                                           |                     |                     |
| Valuation                  allowance provided against net      |                     |                     |
| operating                  loss carry forwards and tax credits | **(40%)**                | (40%)                    |
|                                                           |                     |                     |
| Effective                  tax rate                            | **-                  %** | **-                  %** |

**42**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **9.**   **Income                  Taxes**(Continued) | Deferred                  income taxes reflect the impact of “temporary differences” between the                  amount of assets and liabilities for financial reporting purposes                  and such                  amounts as measured by tax laws and regulations. Deferred tax assets                  are                  comprised of the following: |
|----------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *December                31,*                   | **2005**                     | 2004                     |
|-------------------------------------------------|------------------------------|--------------------------|
|                                            |                         |                     |
| Tax                credit carryforwards         | **$                492,000** | $                458,000 |
| Net                operating loss carryforwards | **4,926,000**                | 4,783,000                |
|                                            |                         |                     |
| Gross                deferred tax asset         | **5,418,000**                | 5,241,000                |
|                                            |                         |                     |
| Deferred                tax assets valuation    |                         |                     |
| allowance                                       | **(5,418,000)**              | (5,241,000)              |
|                                            |                         |                     |
| Net                deferred tax assets          | **$                -**       | **$                -**   |

|   |  As                  of December 31, 2005 and 2004, the deferred tax assets have been                  fully offset by valuation allowances, since the realization of                  such                  amounts is uncertain. The change in the valuation allowance during                  2005                  and 2004 was $177,000 and $1,132,000, respectively. As                  of December 31, 2005, the Company has net operating loss                  carryforwards totaling approximately $12,315,000. The amount of                  the net                  operating loss carryforwards which may be utilized in any future                  period                  may be subject to certain limitations, based upon changes in the                  ownership                  of the Company’s common stock.   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The                  following is a breakdown of the net operating loss expiration                  period:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|                               | Amount                  of     |
|------------------------------------|--------------------------------|
| *Expiration                  Date* | Remaining                  NOL |
|                               |                           |
| 2008                               | $                  743,000     |
| 2009                               | 1,514,000                      |
| 2010                               | 1,374,000                      |
| 2011                               | 921,000                        |
| 2018                               | 897,000                        |
| 2019                               | 739,000                        |
| 2020                               | 476,000                        |
| 2021                               | 1,387,000                      |
| 2022                               | 612,000                        |
| 2023                               | 638,000                        |
| 2024                               | 2,061,000                      |
| 2025                               | 953,000                        |
|                               |                           |
|                               | $                  12,315,000  |

**43**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **9.**   **Income                  Taxes**(Continued) | In                  addition, the Company has available tax credit carryforwards (adjusted                  to                  reflect provisions of the Tax Reform Act of 1986) of approximately                  $492,000, which are available to offset future taxable income and                  income                  tax liabilities, when earned or incurred. These amounts expire                  in various                  years through 2025.                                                                              |
|----------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **10.**   **Commitments**                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| *Facilities                  Lease*                                  | The                  Company leases its research facilities under an operating lease                  that                  expires on August 31, 2007. The lease requires payment of real estate                  taxes and other common area maintenance expenses. Rent expense                  for the                  years ended December 31, 2005 and 2004 was approximately $38,000 and                  $37,000, respectively. Future                    minimum rental payments due are as                    follows: |

| *Year                ending December 31*, | Total                   |
|-------------------------------------------|-------------------------|
|                                      |                    |
| 2006                                      | 40,000                  |
| 2007                                      | 27,000                  |
|                                      |                    |
|                                      | $                67,000 |

| *Employment**Agreements*             | On                  January 3, 2006, the Company entered into employment agreements                  with its                  principal officers providing for minimum base compensation and                  severance                  pay which expire December 31, 2008. For the years ended                  December 31, 2005 and 2004, the aggregate amount paid under the prior                  employment agreements was $497,000 and $440,000, respectively.                  Minimum                  amounts to be paid under the new agreements total approximately                  $455,000                  per year.                                                                        |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Royalty                  Agreement* | A                  royalty agreement with one of the inventors who assigned certain                  patent                  rights to the Company provides for royalties based on a percentage                  of the                  licensing revenues received by the Company from products falling                  within                  the scope of the patent rights. The percentage varies from 1.5%                  to 5%                  depending on the gross revenues received, with maximum royalty                  payments                  under the agreement not to exceed $2,884,000. Through December 31,                  2005, no royalties have been earned under this agreement.  |
| *Consulting**Agreements*             | The                  Company has entered into various scientific advisory and consulting                  agreements to support its development activities. These agreements                  generally expire over several future years. Amounts charged to                  operations                  in connection with these agreements for the years ended December 31,                  2005 and 2004 amounted to approximately $30,000 and $90,000,                  respectively.                                                                                                                                                                                                                              |

**44**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **10.**   **Commitments**(Continued)      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Finder’s                  Fees*                        | The                  Company has entered into agreements to pay finders’ fees for agreements                  entered into with certain companies for investment or revenue purposes.                  The finders’ fees are based on a percentage of the investment or revenue.                  No amounts were paid or accrued pursuant to any of these agreements                  during                  2005 or 2004.                                                                                                                                                                                                               |
| *Employee                  Benefit**Plan*                     | Effective                  January 1, 1999, the Company established a Savings Incentive Match                  Plan for Employees of Small Employers (SIMPLE) IRA plan covering                  substantially all of its employees. The Company makes contributions                  to the                  plan at the discretion of the Board of Directors based upon a percentage                  of employee compensation as provided by the terms of the plan.                  The Company                  did not make any contributions to the plan for the year ended December                  31,                  2005 and 2004.  |
| **11.**   **Major                  Customers** | For                  the years ended December 31, 2005 and 2004, the Company generated its                  net product revenue from one customer, its exclusive marketing                  partner for                  its bovine teat sanitizer, and one partner for IoGen. Revenues                  from major                  customers were generated as follows:                                                                                                                                                                                                                                                                         |

| *Year                ended December 31,*      | **2005**                     | 2004                     |
|----------------------------------------------------|------------------------------|--------------------------|
|                                               |                         |                     |
| Customer                A - Net Product Revenues   | **$                49,627**  | $                159,510 |
| Customer                B - Collaboration Revenues | **400,000**                  | -                        |
|                                               |                         |                     |
|                                               | **$                449,627** | $                159,510 |

| **12.**   **Related                  Party****Transactions** | A                  member of the Board of Directors provides legal services to the                  Company.                  Amounts paid for legal services rendered by the director, either                  individually or through his firm, totaled approximately $21,157                  and $2,000                  for the years ended December 31, 2005 and 2004,                  respectively. The                  Company exchanges office space for services with a company owned                  by the                  spouse and in-law of one of the Company’s officers and directors. The                  officer and director is also a director in the other company. The                  estimated annual value for 2005 and 2004 of the relationship is                  $9,600 for                  each year.  |
|-----------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                        | A                  member of the Board of Directors provides consulting services to                  the                  Company. Amounts paid for consulting services rendered by the director                  totaled approximately $15,000 for the year ended December 31,                  2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

**45**

----

**Symbollon          Pharmaceuticals, Inc.**

**Notes          to Financial Statements**

| **13.**   **Licensing** **Agreement** | On                April 12, 2005, Symbollon entered into an exclusive worldwide licensing                and co-marketing agreement covering the use of IoGen for the treatment                of                cyclic pain and tenderness in humans with Bioaccelerate Holdings                Inc.                Under the terms of the agreement, Bioaccelerate will fund ongoing                Phase                III development of IoGen through its wholly owned subsidiary, Amilar                Pharmaceuticals. Bioaccelerate has the primary responsibility for                the                commercialization of IoGen, and Symbollon will oversee the future                clinical                development efforts necessary to seek marketing approval for IoGen.                The                parties will share in any net profits upon commercialization. Pursuant                to the agreement with Bioaccelerate, Bioaccelerate is required to                fund an                escrow account to cover the cost of the clinical development of IoGen.                As                of December 31, 2005, Bioaccelerate had not funded the escrow account                as                required by the agreement. Symbollon has sent a notice of default                to                Bioaccelerate regarding its failure to establish and fund the escrow                as                required by the agreement. Unless Bioaccelerate cures the existing                defaults, Symbollon may terminate the agreement at any time and receive                back all rights to IoGen it licensed to Bioaccelerate in the agreement.                (See Note 1). |
|-----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**46**

----

**Item      8. Changes in and Disagreements with Accountants on Accounting and Financial      Disclosure**

**Item      8A. Controls and Procedures**

**Item      8B. Other Information**

**PART      III**

**Item      9. Directors, Executive Officers, Promoters and Control Persons; Compliance      with      Section 16(a) of the Exchange Act**

**Item      10. Executive Compensation**

**Item      11. Security Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters**

----

**Item      12. Certain Relationships and Related Transactions**

**Item      13. Exhibits and Reports on Form 8-K**

|   | 1 | 1993                    Stock Option Plan, as amended.  |
|--------|---|--------------------------------------------------------------|

|   | 2 | Form                    of Stock Option Agreement to be entered into between the Company                    and each                    option holder.  |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3 | 1994 Employee Stock Purchase Plan.  |
|--------|---|------------------------------------------|

|   | 4 | 1995 Non-Employee Directors’ Stock Option                Plan. |
|--------|---|----------------------------------------------------------------------|

|   | 5 | Employment                Agreement, dated January 3, 2006, between the Company and Dr. Jack                H.                Kessler. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------|

|   | 6 | Employment                Agreement, dated January 3, 2006, between the Company and Paul C.                Desjourdy. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------|

**Item      14. Principal Accountant Fees and Services**

**48**

----

| **Signature**                         | **Title**                                          | ** ****Date**            |
|---------------------------------------|----------------------------------------------------|-------------------------------|
|                                  |                                               |                          |
| /s/                Paul C. Desjourdy  | President,                Chief Executive Officer, | March                31, 2006 |
| Paul                C. Desjourdy      | Treasurer,                General Counsel, Chief   |                          |
|                                  | Financial                Officer, and Director     |                          |
|                                  | (Principal                Executive, Financial     |                          |
|                                  | and                Accounting Officer)             |                          |
|                                  |                                               |                          |
|                                  |                                               |                          |
|                                  |                                               |                          |
| /s/                Jack H. Kessler    | Executive                Vice President,           | March                31, 2006 |
| Jack                H. Kessler        | Chief                Scientific Officer,           |                          |
|                                  | Secretary                and Chairman              |                          |
|                                  | of                the Board of Directors           |                          |
|                                  |                                               |                          |
| /s/                James C. Richards  | Director                                           | March                31, 2006 |
| James                C. Richards      |                                               |                          |
|                                  |                                               |                          |
| /s/                Richard F. Maradie | Director                                           | March                31, 2006 |
| Richard                F. Maradie     |                                               |                          |
|                                  |                                               |                          |
| /s/                Eugene Lieberstein | Director                                           | March                31, 2006 |
| Eugene                Lieberstein     |                                               |                          |
|                                  |                                               |                          |

**49**

----

**Symbollon      Pharmaceuticals, Inc.**

**Index      to Exhibits**

| 3.1 | Amended                Certificate of Incorporation of the                Company. |
|-----|------------------------------------------------------------------------------------|

| 3.2 | Amended                By-Laws of the Company. (previously filed as exhibit 3.2 to Form                10-QSB                for the quarter ended June 30, 1999 and incorporated by                reference) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.3 | Agreement                of Merger, dated as of August 4, 1993, between the Company and Symbollon                Corporation, a Massachusetts corporation (including Certificate of                Merger                and other state filings). (previously filed as exhibit number 3.3                of the                Registration Statement (the “Registration Statement”) on Form SB-2                (Registration No. 33-68828) filed on November 24, 1993 and declared                effective on December 7, 1993, and incorporated by                reference) |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1 | Form                of Specimen Class A Common Stock Certificate. (previously filed as                exhibit                number 4.2 of the Registration Statement and incorporated by                reference) |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | 1993                Stock Option Plan of the Company, as amended. (incorporated by reference                to Exhibit C to the Company’s 1995 Annual Stockholders Meeting Proxy                Statement filed under cover of Schedule 14A dated May 3,                1995) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Employment                Agreement, dated January 3, 2006, between the Company and Paul C.                Desjourdy. (previously filed as exhibit number 10.1 to Form 8-K filed                on                January 6, 2006 and incorporated by                reference) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3 | Employment                Agreement, dated January 3, 2006, between the Company and Dr. Jack                H.                Kessler. (previously filed as exhibit number 10.2 to Form 8-K filed                on                January 6, 2006 and incorporated by                reference) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 | Commercial                Lease, dated June 5, 1997, between Pine Street Realty Trust and the                Company. (previously filed as exhibit number 10.18 to Form 10-QSB                for the                quarter ended June 30, 1997 and incorporated by                reference) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5 | Form                of Indemnification Agreement between the Company and each officer                and                director of the Company. (previously filed as exhibit number 10.6                of the                Registration Statement and incorporated by                reference) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Marketing                and Supply Agreement, dated January 11, 1995, between the Company                and West                Agro. (previously filed as exhibit number 10.1 to Form 8-K of the                Registrant dated January 11, 1995 and incorporated by reference)                * |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | Agreement,                dated August 31, 1992, among the Company, Dr. Jack H. Kessler and                Dr.                Robert Rosenbaum. (previously filed as exhibit number 10.8 of the                Registration Statement and incorporated by                reference) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 | Form                of Stock Option Agreement to be entered into between the Company                and each                option holder. (previously filed as exhibit number 10.10 to Form                10-KSB                for the year ended December 31, 1993 and incorporated by                reference) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.9 | 1994                Employee Stock Purchase Plan of the Company. (incorporated by reference                to                Exhibit B to the Company’s 1994 Annual Stockholders Meeting Proxy                Statement filed under cover of Schedule 14A dated May 4,                1994) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.10 | 1995                Non-Employee Directors’ Stock Option Plan of the Company. (previously                filed as exhibit number 10.1 to Form 10-QSB for the quarter ended                June 30,                1995 and incorporated by reference) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.11 | Investment                Agreement, dated October 1, 2003, between the Company and Dutchess                Private                Equities Fund, L.P. (previously filed as exhibit 10.14 to the Registration                Statement on Form SB-2 (Registration No. 333-109772), filed on October                17,                2003 and declared effective on November 7, 2003 (the “2003 Registration                Statement”)) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Registration                Rights Agreement, dated October 1, 2003, between the Company and                Dutchess                Private Equities Fund, L.P (previously filed as exhibit 10.15 to                the 2003                Registration Statement) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.13 | Asset                Purchase Agreement, dated as of April 6, 2004, by and among the Company,                Mimetix Pharmaceuticals, Inc. and Mimetix Inc. (previously filed                as                exhibit number 10.1 to Form 10-QSB for the quarter ended June 30,                2004 and                incorporated by reference) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.14 | Form                of Subscription Agreement, dated as of September 1, 2004, between                the                Company and certain purchasers of the Company’s securities. (previously                filed as exhibit number 10.1 to Form 8-K on November 8, 2005 and                incorporated by reference) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.15 | Form                of Redeemable Warrant for the purchase of shares of Class A Common                Stock,                dated as of September 1, 2004, issued to certain purchasers of the                Company’s securities. (previously filed as exhibit number 10.2 to Form 8-K                on November 8, 2005 and incorporated by                reference) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.16 | Licensing                and Co-Marketing Agreement, effective on April 12, 2005, by and between                the Company and Bioaccelerate Holdings Inc. (previously filed as                exhibit                number 10.1 to Form 10-QSB for the quarter ended September 30, 2005                and                incorporated by reference) * |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.17 | Form                  of Warrant for the purchase of shares of Class A Common Stock,                  dated as of                  February 28, 2006, issued to certain purchasers of the Company’s                  securities (previously filed as an exhibit number 10.1 to Form                  8-K filed                  on March 7, 2006 and incorporated by                  reference) |
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| 23.1 | Consent                  of Vitale, Caturano & Company Ltd. relating to Forms S-8 and                  SB-2.  |
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| 31.1 | Certification                of the Chief Executive Officer and Chief Financial Officer required                by                Securities Exchange Act Rule 13a-14(a) as adopted pursuant to                Section 302 of the Sarbanes-Oxley Act of                2002. |
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| 32.1 | Certification                  of the Chief Executive Officer and Chief Financial Officer required                  by                  Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350, as                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002. |
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