SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   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, 2000
                                       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 CORPORATION
                 (Name of small business issuer in its charter)

          Delaware                                36-3463683
  (State of incorporation)           (I.R.S. employer identification no.)

       37 Loring Drive
   Framingham, Massachusetts                         01702
(Address of principal executive offices)          (Zip Code)

Issuer's telephone number  (508) 620-7676

Securities registered under Section 12(b) of the Exchange Act:

                                      None
                                (Title of class)

Securities registered under Section 12(g) of the Exchange Act:

                Class A Common Stock, $.001 par value per share
                                (Title of class)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.
Yes X  No __

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The issuer's  revenues for its most recent fiscal year (year ended  December 31,
2000) were $750,805.

As of March 16,  2001,  the  aggregate  market  value of the voting stock of the
issuer held by non-affiliates of the issuer was approximately  $15,022,841 based
upon the closing price of such stock on that date.

As of March 16, 2001, 4,264,538 shares of Class A Common Stock of the issuer
were outstanding.  See "Market for Common Equity and Related Stockholder
Matters."

    Transitional Small Business Disclosure Format (check one): Yes ___ No _X_

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrant's  definitive  Proxy  Statement  to be  delivered to
stockholders in connection with the Annual Meeting of Stockholders to be held on
May 23,  2001 are  incorporated  by  reference  into Part III  hereof.  With the
exception of the portions of such Proxy Statement  expressly  incorporated  into
this Annual Report on Form 10-KSB by reference,  such Proxy  Statement shall not
be deemed filed as part of this Annual Report on Form 10-KSB.

<PAGE>

Special Note Regarding Forward Looking Statements

         In addition to the historical information contained herein, this Annual
Report on Form 10-KSB contains  "forward-looking  statements" within the meaning
of the Private  Securities  Litigation  Reform Act of 1995,  including,  but not
limited  to  statements  concerning  plans,   objectives,   goals,   strategies,
prospects,   financial   needs,   future   performance   and  future  costs  and
expenditures.   Such   statements  may  be  identified  or  qualified,   without
limitation,  by words such as  "likely",  "will",  "suggests",  "may",  "would",
"could", "should", "expects",  "anticipates",  "estimates", "plans", "projects",
"believes",  or similar expressions (and variants of such words or expressions).
Investors  are  cautioned   that   forward-looking   statements  are  inherently
uncertain.  Actual  performance,  achievements and results may differ materially
from those expressed,  projected or suggested in the forward-looking  statements
due to certain risks and uncertainties, including, but not limited to, the risks
and  uncertainties  described or discussed in the section "Risk Factors" in this
Annual Report on Form 10-KSB. The  forward-looking  statements  contained herein
represent  the  Company's  judgment as of the date of this Annual Report on Form
10-KSB,  and the Company  cautions  readers not to place undue  reliance on such
statements.

                                     PART I

Item 1.  Description of Business

General Background

         Symbollon  Corporation  (the  "Company" or  "Symbollon")  is engaged in
development and  commercialization  of proprietary  iodine-based  pharmaceutical
agents and  antimicrobials  (collectively  referred to as  "applications").  The
Company  is a  Delaware  corporation  incorporated  in  August  1993  and is the
successor by merger to a Massachusetts corporation of the same name incorporated
in May 1991, which was the successor by merger to an Illinois corporation, which
was incorporated in July 1986.

The Company's Technology

         Iodine   has  been   shown  to  be  a  rapid   acting,   broad-spectrum
antimicrobial   and  an  effective   therapeutic   for  certain   pharmaceutical
applications.  The Company has developed  proprietary iodine technology that the
Company believes  maximizes the "therapeutic  index" of iodine. The "therapeutic
index" of a drug is the ratio of the largest safe dose to the smallest effective
dose. The Company's  technology  accomplishes  this by controlling  the ratio of
molecular iodine (I2), to the other inactive species of iodine typically present
in  solution.  The  Company  believes  that  this  will  enable  it  to  produce
iodine-based applications having advantages over currently available products.

         The Company believes that its iodine-based technology has potential use
in a number of product application areas. These applications can be grouped into
women's healthcare and infection control.

         When used for infection control applications, the Company believes that
the major strengths of its patented  technology are the minimization of staining
and color  associated  with  traditional  iodine  products,  broad  spectrum  of
antimicrobial  activity,  rapidity of cidal  activity,  safe residues,  no known
resistance and no environmental disposal concerns. The primary weaknesses of the
Company's  technologies are the inconvenience and cost of a multi-part  delivery
system and the potential for staining and corrosivity.


<PAGE>

         Concerning women's  healthcare,  Symbollon believes that a relationship
exists between iodine  deficiency and the increased  incidence of certain female
health  problems.  These  include some types of  pre-menopausal  breast  cancer,
fibrocystic  breast  disease and  endometriosis.  The Company  believes that the
underlying  causation of these problems relates to the monthly ovarian cycle and
the proper functioning of the gonadotropic hormones.  Certain supporting medical
research   conducted  over  the  last  twenty-five   years  has  suggested  that
therapeutically    administered    molecular    iodine   may    normalize    the
estrogen/progesterone hormone levels.

Bovine Teat Sanitizer Product

         During 1994, the Company co-developed a bovine teat sanitizer, marketed
as  "IodoZyme(R)",  with West Agro,  Inc. of Kansas City,  MO ("West  Agro"),  a
subsidiary of the Tetra Laval Group and a leading  manufacturer  and distributor
of iodophor-based  products for dairy use. In January 1995, the Company and West
Agro signed a marketing and supply agreement covering IodoZyme,  and the Company
began shipping IodoZyme to West Agro in early 1995.  Pursuant to this agreement,
West Agro was  granted  the  exclusive  worldwide  right to market,  distribute,
promote and sell IodoZyme.  Under the agreement,  the Company  manufactures  and
supplies West Agro with IodoZyme in finished product form.

         Total product sales for 2000 and 1999 from IodoZyme are as follows:


                                             Year Ended December 31,
                                        ------------------------------------
                                          2000                         1999
                                          ----                         ----

        United States                   $250,805                     $283,758
        Rest of World                         --                      141,451
                                         -------                      -------

        Total Product Sales             $250,805                     $425,209
                                        ========                     ========

         The Company's  invoice terms are net 30 days. The Company had no orders
for future delivery of IodoZyme at year-end.

Product Development

         During 2000 the Company  concentrated  its product  development work on
proposed product applications for a treatment for fibrocystic breast disease and
various dermatological diseases.

         The Company spent approximately $734,000 and $1,643,000 on research and
development  during the years ended  December  31, 2000 and 1999,  respectively.
Since inception,  the Company has spent approximately $7,659,000 on research and
development. Under certain collaborative relationships, the Company has received
payments which are reflected in the Company's  financial  statements as contract
and license fee revenues.

         Given the Company's limited financial resources, the uncertainty of the
development  effort and the necessity for regulatory  approval,  there can be no
assurance of ultimate success with respect to any product development program or
that resulting products, if any, will be commercially successful.  Additionally,
the  Company's  limited  resources  will  require  substantial  support  for new
business  initiatives from corporate partners who would ultimately introduce the
products into the marketplace.


<PAGE>

         Material  developments in the Company's  ongoing programs during fiscal
2000 are described below.

         Women's Healthcare

         The Company has developed an oral dosage form of its  technology  which
generates  molecular  iodine in situ in the stomach of the patient.  The Company
refers  to  this  tablet  as  IoGen(TM).   Based  on  the  available  scientific
literature,  the Company  believes that IoGen may be effective in the prevention
and  treatment  of  certain  female  health  problems,  including  some types of
pre-menopausal   breast  cancer,   fibrocystic   breast   disease   ("FBD")  and
endometriosis.

         We  chose to  initially  pursue  FBD  based  on the  published  results
covering previous independent third party testing conducted for this indication.
Collectively,  more  than  1,500  women  afflicted  with  FBD have  been  orally
administered  various forms of iodine with reported clinical improvement in this
breast  condition  occurring in 60% or greater of those  women.  FBD is a benign
breast  condition  affecting  approximately  thirty  percent  of  the  women  of
childbearing  age, which represents in the United States about 24 million women.
However,  estimates  indicate  that only 3.3  million  of those  women have been
formally diagnosed with the disease.  FBD is characterized by lumpiness,  breast
pain and tenderness.

         In 1995,  Symbollon  discovered  a  proprietary  method for  generating
molecular iodine in situ in a person's  stomach.  IoGen is the first formulation
developed  utilizing this novel technique.  In 1998, we initiated human clinical
trials evaluating its effectiveness for the treatment of FBD. To date, Symbollon
has completed Phase I and Phase II trials.

         The  Phase I trial was  structured  as a  single-center,  open-labeled,
randomized crossover study. Eighteen healthy females participated. The trial was
designed to assess dose  proportionality  and relative  bioavailability of IoGen
tablets at three  concentrations,  1.5 mg, 3.0 mg and 6.0 mg. These tablets were
the same as used in the Phase II  trials.  In the Phase I study,  IoGen was well
tolerated at all dose levels. There were no drug-related adverse events.

         The results of the Phase I trial were based on blood and urine samples,
collected  over a 48-hour  period  following  dosing.  Pharmacokinetic  analysis
demonstrated  that IoGen is  dose-proportional  when evaluated by either peak or
mean iodine  concentration  in the blood  samples.  The results  also  indicated
relative  bioavailability  among  the  1.5,  3.0 and 6.0 mg  IoGen  tablets,  as
measured by the excreted iodine in urine samples and serum concentrations.

         The multi-center Phase II clinical trial treated over 100 patients with
moderate  to  severe  FBD in a  placebo-controlled,  double-blinded,  randomized
study.  Three drug  concentrations,  1.5 mg, 3.0 mg and 6.0 mg, were dosed daily
for six months, followed by a two-month observation period.

         In the Phase II trial, IoGen was well tolerated by the patients.  There
were also no drug-related  serious adverse  events.  The trial results  indicate
that there were no dose-related  increases in incidence,  severity and causality
of  treatment-emergent  adverse  events or  clinically  significant  changes  in
laboratory   parameters  or  vital  signs.  With  regard  to  treatment-emergent
headaches,  a  statistically  significant  decrease in  incidence  was  observed
between the placebo and the IoGen  groups.  Headaches  were  reported in 7 of 17
(41%)  patients in the placebo,  compared to 1 of 16 (6%) patients in the 1.5-mg
group, 10 of 38 (26%) patients in the 3.0-mg group and 5 of 40 (13%) patients in
the 6.0-mg group (p=.033).


<PAGE>

         We  evaluated   IoGen's  clinical   success   utilizing  two  validated
independent assessment tools. In the first tool, the physicians measured IoGen's
effectiveness  by analyzing  the three primary  endpoints of breast  nodularity,
pain and  tenderness.  As detailed  in Table 1 below,  the 6.0-mg  group  showed
improvement  in 21 of 27 (78%)  patients for pain, 19 of 26 (73%) for tenderness
and 10 of 27 (37%) for nodularity.  This compares favorably to the placebo group
which had observed improvement in 6 of 10 (60%) patients for pain, 3 of 10 (30%)
for tenderness and 3 of 15 (20%) for nodularity.

                                     TABLE 1

            Percentage of Patients Reporting Clinical Improvements *

     --------------------------------------------------------------------------
     Categories            Placebo        1.5-mg         3.0-mg         6.0-mg
     ----------            -------        ------         ------         ------
        Pain                 60%            60%           58%             78%
     Tenderness              30%            57%           61%             73%
     Nodularity              20%            11%           44%             37%
     --------------------------------------------------------------------------
     * Includes  only patients who completed the Phase II trial with
     moderate to severe symptoms at baseline.

         In the second  assessment  tool the patients  evaluated  their pain and
tenderness   by   completing  a  validated,   health-related   quality  of  life
questionnaire. The questionnaire was developed by the Lewin Group for women with
FBD,  who were  treated with  iodine.  Its results  show a  correlation  between
increased  dosing and  improved  quality of life  symptoms  for the women in the
study.  As  indicated in Table 2 below,  the  percentage  of patients  reporting
improvement of 10 pain units in their overall symptom scores  increased from 14%
in the placebo  group to 56% in the 6.0-mg  group.  Further  supporting  IoGen's
effectiveness was the decreased  percentage of patients whose condition worsened
by 10 pain units  during the trial  from 36% in the  placebo  group to 9% in the
6.0-mg group.  There was a  statistically  significant  correlation  between the
clinical  observations  and  quality  of life  findings  for five of the six FBD
symptom-related pain scales (p<0.05).

                                     TABLE 2

                      Results of the Overall Symptom Scores
             from the Health-related Quality of Life Questionnaire *

  ------------------------------------------------------------------------------
  Change in Condition          Placebo       1.5-mg        3.0-mg        6.0-mg
  -------------------          -------       ------        ------        ------
      Improvement                14%           43%          52%           56%
       No Change                 50%           29%          29%           34%
       Worsening                 36%           29%          19%            9%
  ------------------------------------------------------------------------------
  * Patients reporting change of 10 pain units or more from their baseline
  condition  (mean  baseline value for all patients was 38) were  reported as
  improving or  worsening,  as the case may be.

         During 2001,  the Company  anticipates  meeting with the United  States
Food and Drug Administration  ("FDA") for an end-of-phase II conference.  If the
FDA consents,  the Company plans to initiate the pivotal trials for IoGen in the
latter half of 2001. Based on FDA's guidance,  the Company also plans in 2001 to
initiate a  carcinogenicity  dose-ranging  study in rodents  for the  purpose of
determining  the  appropriate  dose to  conduct  a  two-year  bioassay  study in
rodents.  The Company  will need  additional  resources to continue the clinical
development  of IoGen.  Symbollon  is seeking a  corporate  relationship  with a
pharmaceutical  company to  commercialize  IoGen and help finance the  remaining
clinical  development  of  IoGen.  Clinical  investigation  of IoGen  for use in
certain of the other female health  indications may be investigated  during 2001
and beyond as resources allow.

<PAGE>


         Ophthalmology Applications

         No development activity occurred under the Company's  collaboration and
license  agreement with Bausch & Lomb  Pharmaceuticals,  Inc. ("B&L") to develop
ophthalmic products based on Symbollon's proprietary iodine technology. Pursuant
to the agreement, B&L exercised its right to terminate the agreement in November
2000. Upon termination,  all rights and title to Symbollon's  technology sold or
licensed to B&L under the  agreement  reverts back to the Company.  B&L was also
required to transfer  482,878 shares of the Company's  common stock to Symbollon
for no consideration. B&L purchased those shares for $500,000.

         During  2001,  the  Company  has no  plans  to  pursue  development  of
ophthalmic products based on its technology.

         Dermatology Applications

         During 2000, the Company developed formulations based on its technology
for the treatment of certain  dermatological  applications.  Resources allowing,
the Company's goal is to initiate human  clinical  trials in dermatology  during
the latter half of 2001.

         Other Potential Applications

         The Company believes that its technology has potential  applications in
the  development  of a variety of human  healthcare  and other  products such as
topical   anti-infectives,   oral  care  and   hygiene   products,   wound  care
applications,  and as a  preventive  for  urinary  tract  infection.  Given  the
Company's limited resources, although certain preliminary research,  development
and  regulatory  activities  may be  undertaken  by the Company in some of these
potential  product  areas,  the Company's  ability to fund the  development  and
commercialization  of such  applications  will  depend in large part on entering
into  product  development  and  commercialization   agreements  with  corporate
partners.

Manufacturing and Supplies

         The development  and manufacture of the Company's  products are subject
to good laboratory  practices ("GLP") and current good  manufacturing  practices
("cGMP") requirements prescribed by the FDA and to other standards prescribed by
the appropriate  regulatory  agency in the country of use. The Company currently
produces IodoZyme through a combination of internal manufacturing activities and
external  subcontractors.  See "Management's  Discussion and Analysis or Plan of
Operation." The Company currently has limited in-house  manufacturing  capacity,
and if the Company  continues  to perform  manufacturing  activities  related to
IodoZyme in-house, additional manufacturing space and equipment may be necessary
if product volumes increase. See "Description of Property."


<PAGE>

         The Company does not presently have FDA certified facilities capable of
producing  quantities  of human  pharmaceutical  products  required for clinical
trials or commercial production. The Company will need to rely on collaborators,
licensees or contract  manufacturers to produce such materials.  There can be no
assurance  that the  Company  will be able to obtain an  adequate  supply of its
product  from a third  party  manufacturer,  or that  if  such a  supply  can be
obtained, that it will comply with GLP and cGMP, as applicable.

         The  Company  believes  that  there  are  adequate  sources  of the raw
materials required for commercial  production and testing purposes.  Pursuant to
its  agreement  with West Agro,  all sodium  iodide  used by the  Company in the
manufacture  of the bovine teat sanitizer is to be purchased from West Agro at a
price not to exceed the price which West Agro charges its largest customers. The
Company  has been and  expects to  continue  to be able to obtain all  materials
needed for these purposes  without any significant  interruption or sudden price
increase, although there can be no assurance thereof.

Marketing and Distribution

         In accordance with the marketing and supply  agreement signed with West
Agro, West Agro is marketing and distributing IodoZyme, and has agreed to market
and distribute other potential cleaners, sanitizers and disinfectants covered by
the agreement to dairy farms and dairy processing  plants on an exclusive basis.
The principal market for IodoZyme is dairy farms.

         The Company  intends to market and  distribute  its potential  products
through  others  having  pre-established  marketing  and  distribution  networks
pursuant  to  contractual   arrangements  such  as  joint  venture,   licensing,
distribution or similar collaborative agreements.  The principal markets for the
potential  pharmaceutical  and healthcare  products include  hospitals,  medical
offices, dental offices, dialysis centers, outpatient clinics and nursing homes.

Government Regulation

         The Company's  research and  development  activities and the production
and  marketing of the  Company's  current and  proposed  products are subject to
regulation  by  numerous  governmental  authorities  in the  United  States  and
comparable  state agencies.  Foreign  governments also regulate the development,
production  and  marketing  of products  in their  countries.  The  development,
manufacturing and marketing of human  pharmaceuticals  are subject to regulation
in the United States for safety and efficacy by the FDA in  accordance  with the
Federal Food,  Drug and Cosmetic Act. There can be no assurances that regulatory
approvals or clearances  will be obtained for any  applications of the Company's
technology  once  developed,  that if granted they will not be withdrawn or that
other  regulatory  action  might not have an  adverse  impact on the  ability to
market the Company's proposed products.

         In the United States, human pharmaceuticals are subject to rigorous FDA
regulation including preclinical and clinical testing, The process of completing
clinical  trials and  obtaining FDA approvals for a new drug is likely to take a
number of years,  requires the expenditure of substantial resources and is often
subject to  unanticipated  delays.  There can be no assurance  that any proposed
product will receive such approval on a timely basis, if at all.

         The  steps  required  before  new  products  for use in  humans  may be
marketed in the United States include (i) preclinical trials, (ii) submission to
the FDA of an  Investigational  New  Drug  ("IND")  application,  which  must be
approved   before  human   clinical   trials   commence,   (iii)   adequate  and
well-controlled  human  clinical  trials to establish the safety and efficacy of
the product, (iv) submission of a New Drug Application ("NDA") for a new drug to
the FDA and (v) FDA approval of the NDA prior to any commercial sale or shipment
of the product.

         Preclinical tests include laboratory evaluation of product formulation,
as well as animal  studies (if an  appropriate  animal  model is  available)  to
assess the potential  safety and efficacy of the product.  Formulations  must be
manufactured according to cGMP and preclinical safety tests must be conducted by
laboratories that comply with FDA regulations  regarding GLP. The results of the

<PAGE>

preclinical tests are submitted to the FDA as part of an IND application and are
reviewed by the FDA prior to the  commencement of human clinical  trials.  There
can be no assurance  that  submission of an IND  application  will result in FDA
authorization  to  commence   clinical  trials.   Clinical  trials  involve  the
administration  of the  investigational  new drug to healthy  volunteers  and to
patients under the supervision of a qualified principal investigator.

         Clinical  trials are typically  conducted in three  sequential  phases,
although  the  phases  may  overlap.  In Phase I, the  investigational  new drug
usually is  administered  to healthy  human  subjects  and is tested for safety,
dosage,  tolerance,   absorption,   distribution,   metabolism,   excretion  and
pharmacokinetics.  Phase II involves studies in a limited patient  population to
(i)  determine  the  efficacy  of the  investigational  new  drug  for  specific
indications,  (ii)  determine  dosage  tolerance  and  optimal  dosage and (iii)
identify possible adverse effects and safety risks. When an investigational  new
drug is found to be effective and to have an acceptable  safety profile in Phase
II  evaluation,  Phase III trials are  undertaken to further  evaluate  clinical
efficacy and to further test for safety within an expanded patient population at
geographically  dispersed  clinical study sites.  There can be no assurance that
Phase I, Phase II or Phase III testing will be completed successfully within any
specified time period, if at all, with respect to any of the Company's  proposed
products  subject  to such  testing.  Furthermore,  the  Company  or the FDA may
suspend  clinical trials at any time if the participants are being exposed to an
unacceptable  health  risk.  The FDA may  deny an NDA if  applicable  regulatory
criteria  are not  satisfied,  require  additional  testing or  information,  or
require  post-marketing  testing and  surveillance  to monitor the safety of the
Company's proposed products.

         All data obtained from development  programs are submitted as an NDA to
the FDA and the  corresponding  agencies  in  other  countries  for  review  and
approval.  FDA approval of the NDA is required before marketing may begin in the
United  States.  Although  the FDA's policy is to review  priority  applications
within 180 days of their filing,  in practice longer times may be required.  The
FDA frequently  requests that  additional  information  be submitted,  requiring
significant  additional review time.  Essentially,  all proposed products of the
Company will be subject to demanding and  time-consuming NDA or similar approval
procedures  in the  countries  where the Company  intends to market its proposed
products.  These  regulations  define  not  only the  form  and  content  of the
development of safety and efficacy data regarding the proposed product, but also
impose  specific  requirements  regarding  manufacture of the proposed  product,
quality  assurance,   packaging,  storage,  documentation  and  record  keeping,
labeling and advertising and marketing procedures.  Effective  commercialization
also requires inclusion of the Company's  proposed products in national,  state,
provincial or institutional formularies or cost reimbursement systems.

         In addition to  regulations  enforced by the FDA,  the Company  also is
subject  to  regulation  under the  Occupational  Safety  and  Health  Act,  the
Environmental  Protection  Act, the Toxic  Substances  Control Act, the Resource
Conservation  and Recovery Act and other present and potential  future  federal,
state or local regulations.  The Company's research and development involves the
controlled  use of  hazardous  materials  and  chemicals.  Although  the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations,  the risk
of accidental  contamination or injury from these materials cannot be completely
eliminated.  In the event of such an accident,  the Company could be held liable
for any damages that result,  and any such liability  could exceed the resources
of the Company.

         In both  domestic  and foreign  markets,  the ability of the Company to
commercialize  its proposed  product  candidates  will depend,  in part,  on the
availability of reimbursement from third-party payers, such as government health
administration  authorities,  private health  insurers and other  organizations.

<PAGE>

Third-party payers are increasingly challenging the price and cost-effectiveness
of medical products. There can be no assurance that Symbollon-developed products
will be considered  cost  effective.  Significant  uncertainty  exists as to the
reimbursement  status of newly-approved  medical products.  Government and other
third-party  payers are  increasingly  attempting  to contain  medical  costs by
limiting  both  coverage  and the  level of  reimbursement  for new  therapeutic
products  approved for marketing by the FDA and by refusing,  in some cases,  to
provide coverage for uses of approved products for disease indications for which
the FDA has not  granted  marketing  approval.  There can be no  assurance  that
adequate  third-party  insurance  coverage  will be available for the Company to
establish and maintain price levels sufficient for realization of an appropriate
return on its investment in developing new therapies.  If adequate  coverage and
reimbursement  levels are not provided by government and third-party  payers for
uses of the Company's proposed  therapeutic  products,  the market acceptance of
these products would be adversely affected.

         There have been a number of federal and state proposals during the last
few years to subject the pricing of pharmaceuticals to government control and to
make other  changes to the  medical  care  system of the  United  States.  It is
uncertain what  legislative  proposals will be adopted or what actions  federal,
state or private  payers for medical  goods and services may take in response to
any medical  reform  proposals or  legislation.  The Company  cannot predict the
effect medical  reforms may have on its business,  and no assurance can be given
that any such reforms will not have a material adverse effect on the Company.

         IodoZyme,  the bovine teat dip manufactured by the Company,  is subject
to regulation  by the FDA as an animal drug.  Although a lengthy new animal drug
application  ("NADA") approval process is generally  required prior to marketing
an animal drug, under regulatory discretion afforded by the FDA, the agency does
not currently  require  manufacturers  of bovine teat sanitizers to undergo this
process.  The  only  current  FDA  requirements  applicable  to  teat  treatment
manufacturers   are   compliance   with  the   FDA's   labeling,   establishment
registration, drug listing, and manufacturing requirements. The Company believes
that  it  and  its  subcontractors  are  in  compliance  with  the  current  FDA
requirements  applicable to teat treatment  manufacturers.  However, in February
1993, the FDA issued draft guidelines  setting forth the types of data necessary
to demonstrate that a teat treatment is safe for the cow, effective and fulfills
human food safety,  manufacturing  and  environmental  requirements.  Testing of
IodoZyme was not conducted in accordance with such  guidelines.  Future required
compliance with these guidelines or other FDA requirements which may be adopted,
the  probability  or scope of  which  cannot  currently  be  ascertained  by the
Company,  would have a significant  adverse  effect on the marketing of IodoZyme
and, consequently, on the Company's results of operations.



<PAGE>


Patents and Proprietary Rights

         The Company  considers patent protection of its iodine technology to be
critical to its business prospects.  The Company currently holds fifteen patents
and two additional  patent  applications  filed in the United States relating to
its technology. In addition, the Company holds patents and has filed a number of
patent applications relating to its technology in foreign countries.


                        Listing of United States Patents

Patent
Number          Title                                            Issue Date
------          -----                                            ----------
4,476,108 "Bactericidal Method"                                October 9, 1984

4,937,072 "In Situ Sporicidal Disinfectant"                    June 26, 1990

4,996,146 "Rapid Sterilization Enzymatic Process with          February 26, 1991
           Persistence"

5,055,287 "Methods to Control Color During Disinfecting        October 8, 1991
           Peroxidase Reactions"

5,227,161 "Method to Clean and Disinfect Pathogens on the      July 13, 1993
           Epidermis by Applying a Composition Containing
           Peroxidase, Iodide Compound and Surfactant"

5,370,815 "Viscous Epidermal Cleaner and Disinfectant"         December 6, 1994

5,419,902 "Method for Inactivating Pathogens"                  May 30, 1995

5,629,024 "Method of Forming an Iodine Based Germicide         May 13, 1997
           Composition"

5,639,481 "Method for the Therapeutic Treatment of a           June 17, 1997
           Mammalian Eye"

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       March 23, 1999
           Administration of Molecular Iodine"

5,962,029 "Iodine Germicides that Continuously Generate        November 5, 1999
           Free Molecular Iodine"

Re 36,605 "Reissue of 08/963,900 Method to Clean and          March 7, 2000
          Disinfect Pathogens"


<PAGE>

         Upon B&L's termination of its collaboration and sale/license  agreement
with  Symbollon,  the rights to the United States patent issued in 1997 relating
to a "Method for the Therapeutic  Treatment of a Mammalian Eye" reverted back to
Symbollon for no consideration.

         Much of the know-how of importance to the Company's technology and many
of its processes are dependent upon the knowledge,  experience and skills, which
are not patentable,  of key scientific and technical  personnel.  To protect its
rights to and to maintain the  confidentiality  of trade secrets and proprietary
information, the Company requires employees,  Scientific Advisory Board members,
consultants  and   collaborators  to  execute   confidentiality   and  invention
assignment  agreements  upon  commencement  of a relationship  with the Company.
These agreements  prohibit the disclosure of confidential  information to anyone
outside  the Company and require  disclosure  and  assignment  to the Company of
ideas,  developments,   discoveries  and  inventions  made  by  such  employees,
advisors,  consultants and  collaborators.  There can be no assurance,  however,
that these  agreements  will not be breached or that the Company's trade secrets
or  proprietary  information  will  not  otherwise  become  known  or  developed
independently  by others.  Also, to the extent that  consultants  or other third
parties apply technological  information  independently  developed by them or by
others to Company projects,  disputes may arise as to the proprietary  rights to
such information which may not be resolved in favor of the Company.  The Company
is required to pay royalties to a co-inventor on certain patents relating to the
Company's  technology  based on revenues  received by the Company  from sales of
products falling within the scope of such patents.

Competition

         The  Company's   proposed  products  and  products   incorporating  the
Company's proposed products would compete with many other applications currently
on the market.  In addition,  the Company is aware of other companies engaged in
research and  development of other novel  approaches to  applications in some or
all of the markets  identified by the Company as potential fields of application
for its products.  Many of the Company's present and potential  competitors have
substantially  greater  financial and other  resources  and larger  research and
development staffs than the Company. Many of these companies also have extensive
experience  in testing and  applying  for  regulatory  approvals.  In  addition,
colleges,  universities,  government  agencies,  and public and private research
organizations  conduct  research and are becoming more active in seeking  patent
protection  and  licensing  arrangements  to  collect  royalties  for the use of
technology that they have developed,  some of which may be directly  competitive
with that of the Company.

         The Company is aware of one company, Mimetix Inc., which was conducting
human clinical trials in the United States and Canada  utilizing an iodine-based
compound for the treatment of FBD. If Mimetix  receives  marketing  approval for
its drug compound prior to Symbollon,  it could  adversely  affect the Company's
ability to receive marketing approval, or if approved,  the Company's ability to
sell its product.

         The bovine teat  sanitizer  market is  currently  dominated by iodophor
products,  which  generally  compete  on the  basis  of price  and the  ratio of
microbial  killing  power to total  iodine.  The Company  believes that IodoZyme
competes  on the basis of its  superior  convenience  and high  ratio of killing
power to total iodine. Additionally,  IodoZyme,  manufactured by the Company and
sold by West Agro,  competes directly with products currently being manufactured
and sold by West Agro.

<PAGE>


Employees

         As of December 31, 2000,  the Company had four  employees,  all of whom
are full-time.  The Company has relationships with and from time to time engages
the services of university  professors and other qualified consultants to assist
it in  technological  research  and  development.  No employee of the Company is
currently  represented  by a labor  union.  Management  considers  its  employee
relations  to be good.  The  Company  believes  that the  future  success of the
Company is  dependent to a  significant  degree on its being able to continue to
attract and retain skilled personnel.

Executive Officers

         The Company's executive officers are:

                  Name             Age    Position with the Company
                  ----             ---    -------------------------
         Jack H. Kessler, Ph.D.     50    Chief Executive Officer, Chief
                                          Scientific Officer, Secretary and
                                          Chairman of the Board of Directors

         Paul C. Desjourdy          39    President, Chief Operating Officer,
                                          Chief Financial Officer, General
                                          Counsel, Treasurer and Director

         Certain  biographical  information  regarding each executive officer of
the Company is set forth below:

         Jack H. Kessler, Ph.D., is the founder of the Company and has served as
Chief  Executive  Officer  since  December  1999, as Chief  Scientific  Officer,
Secretary, and a director since the Company's move to Massachusetts in May 1991,
and as Chairman of the Board of Directors  since May 1996.  Dr. Kessler held the
title of Executive Vice-President of the Company from May 1991 to December 1999,
and from the  Company's  formation in Illinois in 1986 until 1991 Dr Kessler was
the Company's sole stockholder and served as its sole officer and director. From
January  1990  until May  1991,  he served as  principal  systems  engineer  for
Kollsman Manufacturing Company, a diagnostic instrument design and manufacturing
company.

         Paul C. Desjourdy has served as President,  Chief Operating Officer and
General Counsel since December 1999, as Chief Financial Officer since July 1996,
as Treasurer from May 1994,  and as a director since August 1996.  Prior to that
time, he held the titles of Executive  Vice President from July 1996 to December
1999,  and  Vice-President  - Finance and  Administration  of the  Company  from
September  1993  to June  1996.  From  September  1989 to  September  1993,  Mr.
Desjourdy,  a certified  public  accountant,  was an attorney at the law firm of
Choate Hall & Stewart.

         Officers are elected  annually and serve at the discretion of the Board
of Directors.

Risk Factors

         The  following  important  factors,   among  others,  could  cause  our
performance, achievements and results to differ materially from those we express
or suggest in  forward-looking  statements in this report or in other  materials

<PAGE>

from time to time.  Stockholders  and  prospective  investors  should  carefully
consider  these  risk  factors  when  deciding  whether to invest in or hold our
common stock.


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

         We have  incurred a cumulative  operating  loss of  $6,911,420  through
December 31, 2000. Our losses have resulted  principally  from costs incurred in
research and development  activities related to our efforts to develop IodoZyme,
IoGen  and  other  potential  product  formulations,  and  from  the  associated
administrative  and  patent  costs.  We expect to incur  additional  significant
operating  losses over the next several  years and expect  cumulative  losses to
increase   substantially  due  to  expanded   development   efforts,   including
preclinical  and clinical  testing.  In the next few years,  our revenues may be
limited  to sales  of  IodoZyme  and any  amounts  received  under  research  or
development collaborations that we may establish.

         Based on the current  status of our  development  efforts,  we will not
receive  revenues  or  royalties  from  commercial  sales  of  our  drugs  under
development for a significant  number of years, if at all. For at least the next
few  years,  we  expect  our  revenues  to be less  than our  expenses.  We will
therefore need to raise additional funding to sustain our operations. If we fail
to achieve profitable operations or raise additional funding to cover losses, we
will not be able to sustain operations.

As our corporate licensing relationships are terminated, our future revenues
significantly decrease

         We generate our revenues  from  corporate  licensing  arrangements.  In
1999, Oclassen  Pharmaceuticals  Inc., our development  partner,  terminated its
relationship  covering the use of our technology in  dermatology.  In 2000, B&L,
our development  partner,  terminated its  relationship  covering the use of our
technology in ophthalmology.  Our only remaining relationship is with West Agro,
Inc.  They  can  terminate  their  collaboration  with us at any  time.  If that
happens,  and we are not able to enter into new relationships,  our revenues for
2001 and beyond will significantly decrease.

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

         We did not  conduct  any  animal  or  human  studies  to  evaluate  the
potential  effectiveness of IoGen before launching the Phase II trial. The Phase
II clinical  trial that we completed in 2000  generated the first data regarding
the  effectiveness  of IoGen.  The primary  purpose of the Phase II trial was to
evaluate the safety of IoGen.  We believe that the Phase II data  concerning the
drug's effectiveness indicate that IoGen can successfully treat FBD, but we need
to establish IoGen's  effectiveness in two  well-controlled  clinical trials. We
estimate that our  investment  in the IoGen  development  program  exceeded $2.5
million.  We  expensed  these  development  costs as  incurred.  If the  further
clinical  trials are not  successful,  our  financial  situation may force us to
discontinue the IoGen development program.

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

         Any drug  candidates  we develop  will require  significant  additional
research and development efforts, including extensive preclinical (animal and in
vitro data) and clinical  testing and regulatory  approval,  prior to commercial
sale.  In addition to IoGen,  our other active drug  development  efforts are in
dermatology.  We have not initiated our clinical trials in dermatology.  We must
pay for any future clinical trials in women's  healthcare and  dermatology.  Our
ability to conduct the necessary  clinical  trials depends on our generating the
resources required to pay for this from future revenues, financings or licensing
relationships. We may not be able to generate the necessary financial resources.


<PAGE>

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

         A key  element  of our  strategy  has been to fund most of our  product
development programs through collaborative  agreements with major pharmaceutical
companies.  As part of these licensing relationships we may have to grant to the
other party control over the  development  and  commercialization  process.  For
example, a potential corporate partner may be responsible for:

           o        conducting preclinical and clinical trials;
           o        obtaining required regulatory approvals of drug candidates;
           o        manufacturing any resulting products; and
           o        commercializing any resulting products.

         The  potential  corporate  partner  may not  obligated  to  develop  or
commercialize  any  drug  candidates  under  the  collaboration.  The  potential
corporate  partner  alone  could  control  the amount  and  timing of  resources
dedicated by it to the program.  Accordingly,  the potential  corporate  partner
would control the development program. Moreover, the potential corporate partner
may view certain drug candidates developed utilizing  Symbollon's  technology as
competitive  with its own drugs or drug candidates.  Accordingly,  the potential
corporate  partner may  develop its  existing  or  alternative  technologies  in
preference to the drug  candidates  based on our  technology.  In addition,  the
potential  corporate partner may have the right to terminate the relationship at
any time. Without the involvement of a corporate partner,  our limited resources
would severely hamper our ability to develop a product.

         IodoZyme's future growth and profitability  will depend, in large part,
on the success of West Agro's personnel and others conducting  marketing efforts
on their behalf in fostering  acceptance of IodoZyme as an  alternative to other
available  products.  West Agro also  markets  and  distributes  products  which
compete directly with IodoZyme.

If we cannot raise additional funds, then we will have to limit our future
activities

         We have  adequate  cash  resources  to  initiate  the  IoGen  Phase III
clinical trials and continue our base operations through 2001.  However, we will
require substantial  additional funds if we are to continue the Phase III trials
beyond  2001 and  continue  the  clinical  development  of IoGen or  pursue  the
development of additional  products.  We cannot estimate the amount or timing of
our need for future  funding  since this is dependent on the scope and nature of
product development not yet known.

         We intend to seek additional funds for such future product  development
through public or private financing or collaborative or other  arrangements with
corporate  partners.  We have  not  been  able  to  enter  into a new  corporate
relationship  since  1997.  We  believe  that  before  we  can  enter  into  any
significant new relationships,  we will have to generate clinical results on our
potential drugs. Our limited  financial  resources may require us to finance the
cost of generating these results.  During 1999, we had difficulty  raising funds
by selling  equity.  We obtained  stockholder  approval to sell up to  1,250,000
shares, with a like number of warrants. We were only able to sell 836,685 shares
and warrants.

         Our common stock  remains  thinly  traded.  There is very little market
support  for our  common  stock.  So  long as  these  conditions  exist,  future
financings  will  continue to be  difficult.  Ultimately,  this could impact the
terms and conditions  upon which we are able to sell securities and raise funds.
If adequate funds are not available when needed, we would be forced to limit the
scope of our development or perhaps cease operations.


<PAGE>

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

         The  only  drug   approved   by  the  United   States   Food  and  Drug
Administration  (commonly  called FDA) for the  treatment  of FBD is danazol,  a
masculinizing  hormone.  We are aware of one  company,  Mimetix  Inc.,  that has
conducted  human  clinical  trials in the United States and Canada  utilizing an
iodine-based  compound for the treatment of FBD. If Mimetix  receives  marketing
approval  for its drug  compound  before we do, they may  achieve a  significant
competitive advantage through FDA marketing exclusivity rights. This would delay
our ability to receive marketing approval.

IodoZyme could become  subject to FDA marketing  clearance that could affect our
ability to market IodoZyme

         Teat sanitizers,  although  considered  animal drugs by the FDA, do not
currently  require  clearance by the FDA prior to marketing.  The FDA,  however,
issued draft  guidelines in 1993  governing teat dips and it is possible that if
such  guidelines are adopted that IodoZyme will require  clearance by the FDA in
the future.  Required compliance with these guidelines or other FDA requirements
which may be adopted,  would have a significant  adverse effect on the marketing
of IodoZyme and, consequently, on our results of operations.

We have no marketing experience within our company

         Although  we have no  present  plans to do so, we may,  in the  future,
determine  to  directly  market  certain of our  proposed  products.  We have no
marketing  experience  and  significant   additional  capital  expenditures  and
management  resources  would be required to develop a direct sales force. In the
event we  elect  to  engage  in  direct  marketing  activities,  we  might  have
difficulty  obtaining the requisite  funds or attracting and retaining the human
resources necessary to successfully market any products.

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

         An important  aspect of our present and future  product  candidates  is
that  they  must be  compatible  with the  surfaces  with  which  they come into
contact.  We have  ceased  efforts to  develop  products  that clean  germs from
certain  medical and dental  instruments  as a result of staining and  corrosion
caused by the required concentrations of iodine in the formulations. We continue
to investigate  the balance  between the level of efficacy and the need to avoid
staining  and  corrosion.  For any  proposed  product  application,  staining or
corrosion  from a product  candidate  could be  sufficient to limit or forestall
regulatory approval or, if approved, could adversely affect market acceptance of
such  product.  We might not be  successful  in  overcoming  these  staining and
corrosion problems.

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

         Our manufacturing and development activities involve the controlled use
and shipment of hazardous  chemicals  and other  materials.  Although we believe
that  our  safety  procedures  for  handling,  shipping  and  disposing  of such
materials  comply with the  standards  prescribed  by  federal,  state and local
regulations, we cannot completely eliminate the risk of accidental contamination
or injury from these  materials.  In the event of such an accident,  we could be
held liable for any damages that result and any such liability  could exceed the

<PAGE>

our resources. There can be no assurance that current or future environmental or
transportation  laws,  rules,  regulations  or policies will not have a material
adverse effect on us.


Item 2.  Description of Property

         The Company leases approximately 5,400 square feet of office,  research
and  development  and  manufacturing  space in Framingham,  Massachusetts  for a
current base annual rental of approximately  $32,400 increasing $0.25 per square
foot each year  effective  September 1. The lease expires on August 31, 2002 and
may be renewed for a five-year  period at the Company's option on the same terms
and conditions  except that the rent shall continue to increase $0.25 per square
foot each year of the renewal  period.  The Company  believes that this space is
suitable and adequate for its current needs; however, because the existing space
has limited in-house manufacturing capacity,  additional manufacturing space may
be necessary if product volumes increase.

Item 3.  Legal Proceedings

         The Company is not a party to any legal proceedings.

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

         No matters  were  submitted  to a vote of security  holders  during the
quarter ended December 31, 2000.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

(a)  Price Range of Securities

         The Company's Class A Common Stock trades on the Nasdaq SmallCap Market
under the  symbol  "SYMBA."  There can be no  assurance  that the  Company  will
continue  to meet the  criteria  for  continued  listing on the Nasdaq  SmallCap
Market.  The following  sets forth the high and low sales prices for the Class A
Common Stock for each of the quarterly  periods  during fiscal 2000 and 1999, as
reported by Nasdaq.

                               Fiscal 2000                    Fiscal 1999
                       --------------------------    ---------------------------
                          High             Low          High              Low

         First quarter   14              2  1/4         3 7/8             1 1/2
         Second quarter   8 5/8          4 5/16         2 3/8             1 3/4
         Third quarter   12 1/16         4 1/32         2 13/16           1 3/4
         Fourth quarter   5 1/8          1  1/8         5                 2 1/16

         There are no outstanding shares of the Company's Class B Common Stock.



<PAGE>


         The Company's  Class A Warrants and Class B Warrants,  which had traded
on the Nasdaq SmallCap Market,  expired on December 7, 1998.  Effective December
31,  1999,  684,950  previously  outstanding  shares of Class A Common Stock and
15,050 previously outstanding shares of Class B Common Stock were transferred to
the  Company for no  consideration  pursuant  to a stock  restriction  agreement
entered into by certain  stockholders  in  connection  with the  Company's  1993
initial public  offering.  As part of terminating  its  relationship in November
2000  with  Symbollon,  B&L was  required  to  transfer  482,878  shares  of the
Company's  common stock to Symbollon for no  consideration.  B&L purchased those
shares for  $500,000.  See  "Description  of  Business - Product  Development  -
Ophthalmology Application" above in this Annual Report on Fom 10-KSB.

(b)  Approximate Number of Equity Security Holders

         Based upon information  supplied from the Company's transfer agent, the
Company  believes that there were 101 record  holders of the  Company's  Class A
Common  Stock as of March 16, 2001.  Based upon  information  supplied  from the
Company's  transfer  agent,  the Company  believes that the number of beneficial
holders of the Company's  Class A Common Stock as of March 16, 2001 is in excess
of 600.

(c)  Dividends

         The Company  has never paid a cash  dividend on any class of its common
stock and  anticipates  that for the  foreseeable  future any  earnings  will be
retained for use in its  business  and,  accordingly,  does not  anticipate  the
payment of cash dividends.

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

         The Company is a  development  stage  company.  Since  inception of the
Company's  predecessor  in 1986,  the  Company's  efforts have been  principally
devoted to research and  development,  securing patent and trademark  protection
and raising capital,  most of which efforts commenced after May 1991. Except for
revenue  earned since 1995 on sales of IodoZyme,  the Company's  sole revenue to
date has been from  licensing/option  arrangements  and  contract  research  and
development efforts with corporate partners.

         The following  discussion  contains  forward-looking  statements  which
involve risks and  uncertainties.  See "Special Note Regarding  Forward  Looking
Statements" above in this Annual Report on Form 10-KSB.


<PAGE>

Results of Operations

         Fiscal 2000 versus Fiscal 1999

         Symbollon's net loss in fiscal 2000 was $466,651, reflecting a decrease
of $263,753 or 36.1% from a net loss of $730,404 in fiscal 1999.  This decreased
loss resulted primarily from decreased research and development expenses related
to the IoGen clinical trials and increased interest income,  partially offset by
decreased  contract  and license fee  revenues  from  research  and  development
programs with  corporate  partners,  decreased  operating  profits from sales of
IodoZyme and increased general and administration expenses.

         Product revenues from sales of IodoZyme  decreased by $174,404 or 41.0%
from  $425,209 in fiscal 1999 to $250,805 in fiscal 2000.  The decrease in sales
resulted  primarily  from a decrease of $141,451 in foreign  sales of  IodoZyme.
Symbollon  anticipates  that future sales will be consistent  with current sales
levels.

         Cost of goods sold for  IodoZyme  decreased  by  $139,932 or 43.9% from
$318,851 in fiscal 1999 to $178,919 in fiscal 2000.  The gross profit  margin on
product  sales  increased  slightly from 25.0% in fiscal 1999 to 28.7% in fiscal
2000. The Company  anticipates  that the gross profit margin in 2001 will remain
consistent with 2000.

         Contract  revenues  decreased  by $338,963  or 100.0% from  $338,963 in
fiscal 1999 to none in fiscal 2000.  License fee revenues  decreased by $250,000
or 33.3% from  $750,000 in fiscal 1999 to $500,000 in fiscal 2000.  The contract
and license fee revenues  generated in fiscal 2000 and 1999 primarily  relate to
the corporate  relationship with B&L. In 2000, B&L terminated their research and
development  contract  with  Symbollon.  Upon  termination,  B&L was required to
transfer  482,878  shares of the  Company's  common  stock to  Symbollon  for no
consideration.  B&L purchased  those shares in 1997 and 1998 for $500,000  which
amount was  recognized as license fee income by the Company in 2000. The Company
is not anticipating  generating any significant contract or license fee revenues
for 2001.

         Research and development  expenses  decreased by $909,046 or 55.3% from
$1,643,263 in fiscal 1999 to $734,217 in fiscal 2000. The decrease resulted from
decreased  development  expenses related to the Company's drug candidate for the
treatment of FBD,  including  consulting fees regarding  regulatory  matters and
clinical costs associated with the Company's Phase I and II clinical trials. The
Company is anticipating that research and development  expenses will increase in
2001 as the Company continues the clinical development of IoGen.

         General and administrative expenses increased by $103,169 or 28.1% from
$367,655  in fiscal  1999 to  $470,824 in fiscal  2000.  The  increase  resulted
primarily from  increased  employee  salaries and related  costs,  and increased
investor and public relations  expenses and other third party fees and services.
The Company  anticipates that general and administrative  expenses will increase
over  current  levels for 2001 as the  Company  anticipates  further  increasing
investor and public relations activities.

         The  Company's  interest  income  increased  by  $81,311  or 95.4% from
$85,193 in fiscal 1999 to $166,504 in fiscal 2000.  This increase  resulted from
an increase in available funds for investment.


<PAGE>

Liquidity and Capital Resources

         The Company has funded its activities  primarily  through proceeds from
private and public  placements of equity  securities.  During 1999,  the Company
sold 836,685 shares of Common Stock, together with warrants for a like number of
shares,  in  a  private  placement,  realizing  net  proceeds  of  approximately
$1,360,000.  During 2000,  the Company  received  net proceeds of  approximately
$1,761,000  from the  exercise  of 586,910  warrants  issued as part of the 1999
private placement.

         During 2000, the Company  continued to incur  operating  losses and has
incurred a  cumulative  loss  through  December  31, 2000 of  $6,911,420.  As of
December 31, 2000, the Company had working  capital of  $3,475,242.  The Company
believes  that it has the necessary  liquidity and capital  resources to sustain
planned  operations  for fiscal 2001. In the event that the  Company's  internal
estimates  relating to its planned  revenues  and  expenditures  for fiscal 2001
prove  inaccurate,  the Company may be  required to  reallocate  funds among its
planned activities and curtail certain planned  expenditures.  In any event, the
Company  anticipates that it will require  additional  financing after 2001, and
therefore,  the Company will seek new  financing in fiscal 2001.  The  Company's
ability to obtain new  financing  may, in part,  be  affected  by the  Company's
ability to continue to meet the criteria for continued listing of its securities
on the Nasdaq SmallCap  Market.  Nasdaq's  current  SmallCap  continued  listing
criteria  require,  in part, that the Company maintain net tangible assets of at
least $2,000,000, a minimum bid price of $1.00 per share of common stock and two
market makers for its  securities.  There can be no assurance that in the future
the Company will be able to continue to meet the criteria for continued  listing
of its securities on Nasdaq.

         During 2001, the Company is committed to pay approximately  $440,000 as
compensation to its current  executive  officers and  approximately  $33,000 for
lease payments on its  facilities.  The Company  anticipates  that the continued
clinical development of IoGen will cost approximately  $500,000 during 2001. The
Company plans to incur  approximately  $20,000 in material capital  expenditures
for fiscal  2001.  At December 31, 2000,  the Company had a net  operating  loss
carryforward  for  federal  income  tax  purposes  of  approximately  $6,667,000
expiring through 2020.


<PAGE>

Item 7.  Financial Statements

Report of Independent Certified Public Accountants


The Board of Directors and Stockholders
Symbollon Corporation
Framingham, Massachusetts

We have audited the  accompanying  balance  sheets of Symbollon  Corporation  (a
development  stage  company) as of December  31, 2000 and 1999,  and the related
statements of operations, stockholders' equity and cash flows for the years then
ended and for the period from July 15, 1986  (inception)  to December  31, 2000.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Symbollon  Corporation  (a
development stage company) at December 31, 2000 and 1999, and the results of its
operations  and its cash flows for the years then ended and for the period  from
July 15, 1986  (inception)  to December 31, 2000 in conformity  with  accounting
principles generally accepted in the United States of America.



Boston, Massachusetts
February 9, 2001

<PAGE>

<TABLE>


                              Symbollon Corporation
                          (a development stage company)


                                 Balance Sheets
<CAPTION>

December 31,                                                                         2000                 1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                   <C>

Assets

Current assets:
   Cash and cash equivalents                                                    $  3,470,682          $ 2,771,821
   Restricted cash                                                                         -               52,615
   Accounts receivable                                                                81,678               72,015
   Inventory (Note 3)                                                                 93,907               96,354
   Prepaid expenses                                                                   53,709               54,217
------------------------------------------------------------------------------------------------------------------

       Total current assets                                                        3,699,976            3,047,022

Equipment and leasehold improvements, net of
  accumulated depreciation and amortization (Note 4)                                  81,342               89,710

Other assets:
   Patent and trademark costs, net of accumulated
     amortization (Note 5)                                                           277,156              221,483
   Deposit                                                                             2,364                2,364
------------------------------------------------------------------------------------------------------------------

                                                                                $  4,060,838          $ 3,360,579
------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

<TABLE>
                              Symbollon Corporation
                          (a development stage company)

                                 Balance Sheets
                                   (Continued)
<CAPTION>

December 31,                                                                         2000                 1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                  <C>

Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable                                                             $      22,122        $     65,903
   Accrued clinical studies                                                           137,754             414,862
   Other current liabilities                                                           64,858              31,158
------------------------------------------------------------------------------------------------------------------

       Total current liabilities                                                      224,734             511,923
------------------------------------------------------------------------------------------------------------------

Redeemable common stock, Class A, par value $.001 per share,  93,334
  shares issued, (aggregate involuntary liquidation value $175,000
  at December 31, 2000) (Note 6)                                                      175,000             175,000
------------------------------------------------------------------------------------------------------------------

Commitments (Notes 6, 7 and 10)

Stockholders' equity (Notes 6 and 7):
   Preferred stock, par value $.001 per share, 5,000,000 shares
     authorized and unissued                                                                -                  -
   Common stock, Class A, par value $.001 per share, 18,750,000
     shares authorized, 3,708,309 and 3,557,339 shares issued and
     outstanding, respectively                                                          3,708               3,557
   Convertible common stock, Class B, par value $.001
     per share, 1,250,000 shares authorized, none and 688 shares
     issued and outstanding, respectively                                                   -                   1
   Additional paid-in capital                                                      10,568,816           9,114,867
   Deficit accumulated during the development stage                                (6,911,420)         (6,444,769)
------------------------------------------------------------------------------------------------------------------

       Total stockholders' equity                                                   3,661,104           2,673,656
------------------------------------------------------------------------------------------------------------------

                                                                                $   4,060,838        $  3,360,579
------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>

                              Symbollon Corporation
                          (a development stage company)

                            Statements of Operations

<CAPTION>

                                                                                                            For the
                                                                                                          Period from
                                                                            Year Ended                   July 15, 1986
                                                                           December 31,                 (Inception) to
                                                                  ---------------------------            December 31,
                                                                   2000                  1999                2000
--------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                    <C>                   <C>

Revenue (Note 11):
   Net product sales                                        $   250,805            $  425,209            $   1,717,002
   Contract revenue                                                   -               338,963                  983,713
   License fee revenue                                          500,000               750,000                3,440,000
--------------------------------------------------------------------------------------------------------------------------

     Total revenue                                              750,805             1,514,172                6,140,715
--------------------------------------------------------------------------------------------------------------------------

Operating expenses:
   Cost of goods sold                                           178,919               318,851                1,092,971
   Research and development costs                               734,217             1,643,263                7,659,194
   General and administrative expenses (Note 12)                470,824               367,655                4,773,745
--------------------------------------------------------------------------------------------------------------------------

     Total operating expenses                                 1,383,960             2,329,769               13,525,910
--------------------------------------------------------------------------------------------------------------------------

Loss from operations                                           (633,155)             (815,597)              (7,385,910)

Interest income                                                 166,504                85,193                  830,035

Interest expense and debt issuance costs                              -                     -                 (356,260)
--------------------------------------------------------------------------------------------------------------------------

Net loss                                                    $  (466,651)           $ (730,404)             $(6,911,420)
--------------------------------------------------------------------------------------------------------------------------

Basic and diluted net loss per share of
  common stock (Note 8)                                     $      (.12)           $    (.24)
--------------------------------------------------------------------------------------------------------------------------

Weighted average number of common shares
  outstanding - basic and diluted                             3,825,100             3,104,697
--------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to financial statements.

<PAGE>

<TABLE>

                              Symbollon Corporation
                          (a development stage company)

                       Statements of Stockholders' Equity
                                    (Note 6)
<CAPTION>

                                                                            Common Stock
                                                                           $.001 Par Value                       Deficit
                                                  Preferred Stock  ------------------------------              Accumulated
                                                  $.001 Par Value    Class A         Class B      Additional   During the
                                                  ---------------  -------------    -------------   Paid-in    Development
                                                  Shares Amount    Shares Amount    Shares Amount   Capital      Stage      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>    <C>       <C>    <C>       <C>   <C>    <C>        <C>          <C>
Balance, January 1, 1992, consisting of net
 losses from July 15, 1986 (inception) through
 December 31, 1991                                     - $   -         - $    -         - $    - $        - $  (143,451) $ (143,451)
  Merger and recapitalization, May 1991:
   Issuance of new shares of Symbollon Corporation     -     -         -      -   831,316    831      9,169           -      10,000
  Contribution of shares to the Company, September     -     -         -      -   (41,565)   (42)        42           -           0
  Issuances of shares                                  -     -         -      -   425,251    426    299,574           -     300,000
  Net loss for the year                                -     -         -      -         -      -          -    (207,457)   (207,457)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1992                             -     -         -      - 1,215,002  1,215    308,785    (350,908)    (40,908)
  Issuance of shares, June                             -     -         -      -    34,998     35    104,965           -     105,000
  Capital contribution as of July                      -     -         -      -         -      -    100,000           -     100,000
  Warrants issued with bridge financing                -     -         -      -         -      -     25,000           -      25,000
  Public offering, December:
   Issuance of shares                                  -     - 1,000,000  1,000         -      -  5,999,000           -   6,000,000
   Costs of offering                                   -     -         -      -         -      - (1,244,133)          -  (1,244,133)
   Sale of unit purchase option                        -     -         -      -         -      -        100           -         100
  Net loss for the year                                -     -         -      -         -      -          -  (1,186,132) (1,186,132)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1993                             -     - 1,000,000  1,000 1,250,000  1,250  5,293,717  (1,537,040)  3,758,927
  Issuance of over-allotment units of public offering  -     -   150,000    150         -      -    899,850           -     900,000
  Additional public offering costs                     -     -         -      -         -      -    (99,369)          -     (99,369)
  Net loss for the year                                -     -         -      -         -      -          -  (1,516,913) (1,516,913)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1994                             -     - 1,150,000  1,150 1,250,000  1,250  6,094,198  (3,053,953)  3,042,645
  Warrant conversion, July - August                    -     -    77,920     78         -      -    629,126           -     629,204
  Conversion of Class B to Class A                     -     -    35,287     35   (35,287)   (35)         -           -           -
  Stock purchase plan sales                            -     -     2,216      2         -      -      9,415           -       9,417
  Net loss for the year                                -     -         -      -         -      -          -  (1,373,711) (1,373,711)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1995                             - $   - 1,265,423 $1,265 1,214,713 $1,215 $6,732,739 $(4,427,664) $2,307,555
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

<TABLE>


                              Symbollon Corporation
                          (a development stage company)

                       Statements of Stockholders' Equity
                                    (Note 6)
                                   (Continued)

<CAPTION>

                                                                          Common Stock
                                                                         $.001 Par Value                      Deficit
                                                Preferred Stock  ------------------------------             Accumulated
                                                $.001 Par Value     Class A          Class B    Additional  During the
                                                ---------------  -------------    -------------   Paid-in   Development
                                                Shares Amount    Shares Amount    Shares Amount   Capital      Stage      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>     <C>    <C>       <C>     <C>       <C>     <C>        <C>          <C>

Balance, December 31, 1995                          - $   -  1,265,423 $1,265  1,214,713 $ 1,215 $6,732,739 $(4,427,664) $2,307,555
   Issuance of preferred stock, August        444,444   444          -      -          -       -    499,555           -     499,999
   Conversion of Class B to Class A                 -     -     18,438     19    (18,438)    (19)         -           -           -
   Stock purchase plan sales                        -     -      4,392      4          -       -      7,943           -       7,947
   Reduction of warrant conversion costs            -     -          -      -          -       -     33,116           -      33,116
   Net loss for the year                            -     -          -      -          -       -          -    (905,415)   (905,415)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1996                    444,444   444  1,288,253  1,288  1,196,275   1,196  7,273,353  (5,333,079)  1,943,202
   Conversion of preferred stock, May        (444,444) (444)   444,444    444          -       -          -           -           -
   Conversion of Class B to Class A                 -     -  1,180,537  1,180 (1,180,537) (1,180)         -           -           -
   Stock purchase plan sales                        -     -      3,052      4           -      -      3,738           -       3,742
   Issuance costs of redeemable
     common stock, August                           -     -          -      -           -      -    (25,000)          -     (25,000)
   Net income for the year                          -     -          -      -           -      -          -     511,464     511,464
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1997                          -     -  2,916,286  2,916      15,738     16  7,252,091  (4,821,615)  2,433,408
   Stock purchase plan sales                        -     -      3,500      4           -      -      2,621           -       2,625
   Net loss for the year                            -     -          -      -           -      -          -    (892,750)   (892,750)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998                          -     -  2,919,786  2,920      15,738     16  7,254,712  (5,714,365)  1,543,283
   Stock purchase plan sales                        -     -      2,940      3           -      -      4,767           -       4,770
   Reclass of redeemable common stock, March        -     -    482,878    483           -      -    499,517           -     500,000
   Issuance of shares, October                      -     -    836,685    836           -      -  1,355,171           -   1,356,007
   Forfeiture of restricted shares, December        -     -   (684,950)  (685)    (15,050)   (15)       700           -           -
   Net loss for the year                            -     -          -      -           -      -          -    (730,404)   (730,404)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999                          - $   -  3,557,339 $3,557         688 $    1 $9,114,867 $(6,444,769) $2,673,656
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

<TABLE>


                              Symbollon Corporation
                          (a development stage company)

                       Statements of Stockholders' Equity
                                    (Note 6)
                                   (Continued)

<CAPTION>

                                                                          Common Stock
                                                                         $.001 Par Value                      Deficit
                                                Preferred Stock  ------------------------------             Accumulated
                                                $.001 Par Value     Class A          Class B    Additional  During the
                                                ---------------  -------------    -------------   Paid-in   Development
                                                Shares Amount    Shares Amount    Shares Amount   Capital      Stage      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>     <C>    <C>       <C>     <C>       <C>     <C>        <C>          <C>


Balance, December 31, 1999                          -     -  3,557,339  3,557         688     1   9,114,867  (6,444,769)  2,673,656
   Issuance of shares, August                       -     -    586,910    587           -     -   1,760,143           -   1,760,730
   Conversion of Class B to Class A                 -     -        688      1        (688)   (1)          -           -           -
   Stock purchase plan sales                        -     -      2,000      2           -     -       4,748           -       4,750
   Forfeiture of restricted shares, November        -     -   (482,878)  (483)          -     -    (499,517)          -    (500,000)
   Option exercise, February-August                 -     -     44,250     44           -     -     188,575           -     188,619
   Net loss for the year                            -     -          -      -           -     -           -    (466,651)   (466,651)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000                          - $   -  3,708,309 $3,708           - $   - $10,568,816 $(6,911,420) $3,661,104
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
                                 See accompanying notes to financial statements.



<PAGE>

<TABLE>


                              Symbollon Corporation
                          (a development stage company)

                            Statements of Cash Flows

<CAPTION>



                                                                                                           For the
                                                                                                         Period from
                                                                                Year Ended              July 15, 1986
                                                                               December 31,             (Inception) to
                                                                        ------------------------         December 31,
                                                                         2000               1999             2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>                  <C>
Cash flows from operating activities:
   Net loss                                                       $  (466,651)        $ (730,404)          $(6,911,420)
   Adjustments to reconcile net loss to net cash used in
    operating activities:
     Depreciation and amortization                                     42,630             47,355               518,364
     Amortization of debt issuance costs                                    -                  -               130,000
     Loss on disposition of equipment and patents                           -             19,175                38,717
     License fees recognized for common stock forfeiture             (500,000)          (175,000)             (675,000)
     Changes in operating assets and liabilities:
       Restricted cash                                                 52,615            244,939                     -
       Accounts receivable                                             (9,663)           135,157               (81,678)
       Inventory                                                        2,447            (26,972)              (93,907)
       Prepaid expenses                                                   508             28,887               (53,709)
       Accounts payable and other current liabilities                (287,189)           400,717               281,909
------------------------------------------------------------------------------------------------------------------------------------
         Net cash used in operating activities                     (1,165,303)           (56,146)           (6,846,724)
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
   Purchase of equipment and leasehold improvements                   (20,123)            (3,562)             (388,511)
   Patent and trademark cost additions                                (69,812)           (43,363)             (538,368)
   Proceeds from sale of equipment                                          -                  -                11,300
   Deposit                                                                  -                  -                (2,364)
------------------------------------------------------------------------------------------------------------------------------------
         Net cash used in investing activities                        (89,935)           (46,925)             (917,943)
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
   Issuance of common stock                                         1,765,480          1,360,777            11,814,192
   Option exercise                                                    188,619                  -               188,619
   Borrowings from stockholders                                             -                  -               253,623
   Repayment of borrowings from stockholders                                -                  -              (127,683)
   Sale of option to purchase units                                         -                  -                   100
   Public offering costs                                                    -                  -            (1,343,502)
   Issuance of preferred stock                                              -                  -               450,000
------------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by financing activities                  1,954,099          1,360,777            11,235,349
------------------------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                             698,861          1,257,706             3,470,682

Cash and cash equivalents, beginning of period                      2,771,821          1,514,115                     -
------------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                          $ 3,470,682         $2,771,821           $ 3,470,682
------------------------------------------------------------------------------------------------------------------------------------

Supplemental cash flow information:
   Cash paid for income taxes                                     $         -         $      541


See accompanying notes to financial statements.

</TABLE>

<PAGE>

                              Symbollon Corporation
                          (a development stage company)

                          Notes to Financial Statements



 1.    Description of                 Symbollon   Corporation   was  formed  to
       Business and                   develop  and   commercialize   proprietary
       Basis of                       iodine-based   products  for  infection
       Presentation                   control  and  treatment in  biomedical and
                                      bioagricultural  industries.  The Company
                                      is in the development  stage and its
                                      efforts since inception have been
                                      principally  devoted to research and
                                      development, securing patent and trademark
                                      protection and raising capital.

                                       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.


 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 Equivalents               Cash   equivalents   include
                                      short-term, highly liquid investments with
                                      maturities  of less than three months when
                                      acquired.

       Restricted Cash                At December 31, 1999, the Company had
                                      $52,615   deposited   in  a  bank  account
                                      jointly  controlled  by the  Company and a
                                      clinical  research  organization.   During
                                      2000,   the   Company   transferred   sole
                                      ownership  of the account to the  clinical
                                      research   organization   to  satisfy  the
                                      obligations   of  the  Company  under  the
                                      agreement.

       Concentration of               The Company has very few customers.
       Credit Risks                   Customers' financial condition is reviewed
                                      on an ongoing basis, and collateral is not
                                      required.  The Company maintains  reserves
                                      for potential credit losses and such
                                      losses, in  the   aggregate,   have  not
                                      exceeded management's expectations.



<PAGE>



 2.    Summary of
       Significant
       Accounting
       Policies
       (Continued)

       Inventory                      Inventory is stated at the lower of cost
                                      (determined on a first-in,  first-out
                                      basis) or market.

       Long-Lived Assets              The Company  follows the provisions
                                      of  Statement   of  Financial   Accounting
                                      Standards  ("SFAS")  No. 121,  "Accounting
                                      for the  Impairment of  Long-Lived  Assets
                                      and  Assets  to  be  Disposed  of,"  which
                                      establishes  accounting  standards for the
                                      impairment   of   long-lived   assets  and
                                      certain  identifiable  intangibles  to  be
                                      held and used  and for  long-lived  assets
                                      and certain identifiable intangibles to be
                                      disposed of.

                                      The Company  reviews the carrying  values
                                      of   its   long-lived   and   identifiable
                                      intangible assets for possible  impairment
                                      whenever     events    or    changes    in
                                      circumstances  indicate  that the carrying
                                      amount   of   the   assets   may   not  be
                                      recoverable.  Any  long-lived  assets held
                                      for  disposal are reported at the lower of
                                      their carrying  amounts or fair value less
                                      cost to sell.

       Depreciation and               Equipment is stated at cost and is
       Amortization                   depreciated over its estimated useful life
                                      using the straight-line method.  Leasehold
                                      improvements  are stated at cost and are
                                      being amortized by the straight-line
                                      method over the term of the lease which is
                                      less than their estimated useful lives.

                                      Patent  and  trademark  costs  are  being
                                      amortized  over  their  estimated   useful
                                      lives of 15-17 years by the  straight-line
                                      method.

       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.



<PAGE>



 2.    Summary of
       Significant
       Accounting
       Policies
       (Continued)

       Fair  value  of                The  carrying  amounts  of cash and cash
       Financial                      equivalents, restricted cash, accounts
       Instruments                    receivable, other current assets and
                                      accounts payable  approximate  fair  value
                                      based on their short-term maturities.

       Revenue                        The   Company's   contract   and  license
       Recognition                    fee   revenues  are  based  on  fixed  fee
                                      arrangements. Revenues are recognized when
                                      all of the Company's  obligations  under
                                      its research and licensing agreements have
                                      been  performed  and  collectibility  is
                                      assured. Product sales are recognized upon
                                      shipment.

       Research and                   Research and development costs are
       Development                    expensed as incurred.

       Stock-Based                    The Company  follows the  provisions of
       Compensation                   SFAS No. 123, "Accounting  for Stock-Based
                                      Compensation."  The Company  has  elected
                                      to continue to account for stock options
                                      at their intrinsic value with disclosure
                                      of the effects of fair value accounting on
                                      net loss and loss per  basic  and  diluted
                                      share  of  common  stock  on a  pro  forma
                                      basis.

       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.



<PAGE>



 2.    Summary of
       Significant
       Accounting
       Policies
       (Continued)

       Recent                         In June 1998, the Financial  Accounting
       Accounting                     Standards Board (FASB) issued SFAS No.133,
       Standards                      "Accounting  for  Derivative   Instruments
                                      and  Hedging   Activities."  SFAS  No. 133
                                      requires  companies to recognize  all
                                      derivative contracts at their fair values,
                                      as either assets or  liabilities   on  the
                                      balance sheet.  If certain  conditions are
                                      met,  a  derivative  may  be  specifically
                                      designated  as a hedge,  the  objective of
                                      which is to match  the  timing  of gain or
                                      loss recognition on the hedging derivative
                                      with the recognition of (1) the changes in
                                      the  fair  value  of the  hedged  asset or
                                      liability  that  are  attributable  to the
                                      hedged risk, or (2) the earnings effect of
                                      the hedged forecasted  transaction.  For a
                                      derivative  not  designated  as a  hedging
                                      instrument, the gain or loss is recognized
                                      in income in the  period of  change.  SFAS
                                      No.  133,  as  amended by SFAS No. 137 and
                                      138, is effective for all fiscal  quarters
                                      of fiscal years  beginning  after June 15,
                                      2000.

                                      Historically, the Company has not entered
                                      into derivative  contracts either to hedge
                                      existing   risks   or   for    speculative
                                      purposes.  Accordingly,  the Company  does
                                      not expect adoption of the new standard to
                                      affect its financial statements.
                                       In   March   2000,    the   FASB   issued
                                      interpretation    No.   44   ("FIN   44"),
                                      "Accounting   for   Certain   Transactions
                                      Involving    Stock    Compensation,     an
                                      interpretation of APB Opinion No. 25." FIN
                                      44 clarifies the application of APB No. 25
                                      for (a) the  definition  of  employee  for
                                      purposes of  applying  APB No. 25, (b) the
                                      criteria  for  determining  whether a plan
                                      qualifies as a  noncompensatory  plan, (c)
                                      the  accounting  consequences  of  various
                                      modifications   to  the  previously  fixed
                                      stock   option  or  award,   and  (d)  the
                                      accounting   for  an   exchange  of  stock
                                      compensation    awards   in   a   business
                                      combination.  FIN 44 is effective  July 1,
                                      2000   but   certain   conclusions   cover
                                      specific  events that occur  after  either
                                      December 15, 1998 or January 12, 2000. The
                                      Company  has adopted FIN 44 in fiscal 2000
                                      and it did not have a  material  effect on
                                      the Company's financial statements.


<PAGE>



 2.    Summary of
       Significant
       Accounting
       Policies
       (Continued)

       Recent                         In December  1999,  the  Securities  and
       Accounting                     Exchange Commission  ("SEC")  issued Staff
       Standards                      Accounting  Bulletin  No. 101 which
       (Continued)                    summarizes certain of the SEC staff's
                                      views in applying generally accepted
                                      accounting  principles to revenue
                                      recognition in financial statements.  The
                                      Staff Accounting bulletin became effective
                                      in the fourth quarter of 2000. The initial
                                      adoption  of  this guidance did not have a
                                      material impact on the  Company's  results
                                      of  operations  or financial position,
                                      however, the guidance may  impact  the way
                                      in which the  Company will account for
                                      future transactions.




<TABLE>
<CAPTION>


 3.    Inventory                      Inventory consists of:

                                      December 31,                                                 2000               1999
                                      --------------------------------------------------------------------------------------
                                      <S>                                                     <C>                <C>
                                      Raw materials                                           $  54,927          $  95,198
                                      Finished goods                                             38,980              1,156
                                      --------------------------------------------------------------------------------------

                                                                                              $  93,907          $  96,354
                                      --------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>


 4.    Equipment and                  Equipment and leasehold improvements are stated at cost and consist of the following:
       Leasehold
       Improvements                   December 31,                                                 2000               1999
                                      --------------------------------------------------------------------------------------
                                      <S>                                                    <C>               <C>
                                      Equipment and fixtures                                 $  204,806        $   191,503

                                      Leasehold improvements                                     61,811             61,811
                                      --------------------------------------------------------------------------------------

                                                                                                266,617            253,314

                                      Less accumulated depreciation
                                        and amortization                                        185,275            163,604
                                      --------------------------------------------------------------------------------------

                                      Equipment and leasehold
                                        improvements, net                                    $   81,342        $    89,710
                                      --------------------------------------------------------------------------------------


</TABLE>


<PAGE>

<TABLE>
<CAPTION>



 5.    Patent and                     Patent and trademark costs consist of the following:
       Trademark
       Costs                          December 31,                                                 2000               1999
                                      --------------------------------------------------------------------------------------
                                 <S>                                                    <C>               <C>
                                      Patent costs                                           $  305,055        $   235,243
                                      Trademark costs                                             2,444              2,444
                                      --------------------------------------------------------------------------------------

                                                                                                307,499            237,687

                                      Less accumulated amortization                              30,343             16,204
                                      --------------------------------------------------------------------------------------

                                      Patent and trademark costs, net                        $  277,156        $   221,483
                                      --------------------------------------------------------------------------------------
</TABLE>

 6.    Stockholders'
       Equity

       Class A and                    The Company has issued both Class A and
       Class B                        Class B common stock.  The Class A and
       Common  Stock                  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.

       Redeemable                     During 1997,  the Company  entered into a
       Common Stock                   Collaboration  and License  Agreement and
       and Common Stock               a Stock  Purchase  Agreement (the
       Forfeitures                    "Agreements")  with a pharmaceutical
                                      company related to the  development  of an
                                      ophthalmology  product.  Under  the terms
                                      of the Agreements,  the  pharmaceutical
                                      company purchased a total of 669,545
                                      shares of redeemable Class A
                                      common  stock  for  $850,000,  subject  to
                                      various  restrictions.   The  Company  was
                                      required  to redeem such shares if certain
                                      cash   flow    levels    were    achieved.
                                      Additionally,  the pharmaceutical  company
                                      could  return the Class A common  stock to
                                      the  Company  in  exchange   for  required
                                      milestone payments. On August 4, 1999, the
                                      pharmaceutical  company returned 93,333 of
                                      these  shares  in   consideration   for  a
                                      $175,000  milestone  payment  due on  that
                                      date.

                                      During  1999,  482,878 of the  redeemable
                                      common stock shares were reclassified from
                                      redeemable  common stock to Class A common
                                      stock  since  such  shares no  longer  had
                                      mandatory  redemption  conditions.  During
                                      2000,   the   Collaboration   and  License
                                      Agreement   was   amended  to  extend  the
                                      pharmaceutical   company's  required  2000
                                      milestone payment and on November 14, 2000
                                      the  pharmaceutical   company  elected  to
                                      terminate  the  Collaboration  and License
                                      Agreement    with   the   Company.    Upon
                                      termination,



<PAGE>



 6.    Stockholders'
       Equity
       (Continued)

       Redeemable                     the pharmaceutical company was required to
       Common  Stock                  return the 482,878 shares of the
       and Common  Stock              restricted  Class A common  stock as a
       Forfeitures                    termination  fee.  The  returned  Class A
       (Continued)                    common stock shares were cancelled and the
                                      consideration  originally paid of $500,000
                                      was recognized  as license fee revenue in
                                      the accompanying statements  of operations
                                      for the year ended  December 31, 2000.

                                      For the calendar years ended December 31,
                                      2001,  2002 and 2003,  the  pharmaceutical
                                      company  has  the  right  to  require  the
                                      Company to purchase the  remaining  93,334
                                      shares of redeemable  common stock, at the
                                      per share price that it  originally  paid.
                                      The  required  redemption  of such  shares
                                      will  be  based  on 25% of  positive  cash
                                      flows  from  operations,  if any,  for the
                                      years ended  December 31,  2001,  2002 and
                                      2003, not to exceed $175,000 in total.

       Restricted                     In connection with the Company's 1993
       Common Stock                   public offering, certain stockholders
                                      agreed  to restrictions on 700,000 shares
                                      of the then 1,250,000 Class B common
                                      shares outstanding prior to the  offering.
                                      The Agreement with the stockholders
                                      provided that  the   restricted   shares
                                      would  be transferred   to   the   Company
                                      for no consideration if  certain  earnings
                                      and stock price criteria were not achieved
                                      prior to December  31,  1999.  On December
                                      31,  1999,  684,950  and 15,050  shares of
                                      restricted  Class  A and  Class  B  common
                                      stock,  respectively  were  transferred to
                                      the Company at no  consideration  and were
                                      retired since the  established  thresholds
                                      were not achieved.

       Common  Stock                  In fiscal 1999,  the  Company  raised  net
       Purchase  Warrants             proceeds of $1,356,007 in  connection with
                                      a private  placement equity offering. The
                                      offering consisted of the sale of 836,685
                                      units,  at a price of $1.75 with each unit
                                      consisting  of one share of the  Company's
                                      Class A common  stock  and one  redeemable
                                      common stock  warrant.  In  addition,  the
                                      Company  issued  to  the  placement  agent
                                      60,940  warrants  having terms  similar to
                                      the common stock warrant  issued with each
                                      unit. In August 2000, the warrant  holders
                                      purchased 586,910 shares of Class A common
                                      stock at  $3.00  per  share in  accordance
                                      with the terms of the warrants.



<PAGE>



 6.    Stockholders'
       Equity
       (Continued)

       Common Stock                   The holders of the remaining  310,715
       Purchase  Warrants             warrants are entitled to purchase one
       (Continued)                    share of Class A common stock for each
                                      warrant at an exercise  price per share of
                                      $3.00 during the first year after the date
                                      purchased,  $4.00 during the second year,
                                      $5.00 during the  third  year  and  $6.00
                                      thereafter.  Warrants may be redeemed by
                                      the Company at $0.01 per  warrant  in the
                                      event  that the average  closing bid price
                                      as quoted by Nasdaq (the  average last
                                      reported  sales price if then  listed  on
                                      any  national securities  exchange)  of
                                      Class A  common stock over twenty
                                      successive  trading days is equal to or
                                      greater  than $5.00  during
                                      the first  year,  $6.00  during the second
                                      year,  $7.00  during  the  third  year and
                                      $8.00 thereafter,  subject to the holder's
                                      right  to  exercise.   The  warrants  will
                                      expire in 2003.


 7.    Stock Plans                    The Company has adopted three stock plans:
                                      a stock option plan,  an employee  stock
                                      purchase 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. At December 31, 2000
                                      the Company has reserved  1,600,000 shares
                                      for issuance under this plan.

                                      The employee stock purchase plan provides
                                      for the  purchase of Class A common  stock
                                      at 85 percent of the fair market  value at
                                      specific   dates,   to   encourage   stock
                                      ownership  by all eligible  employees.  At
                                      December   31,   2000,   the  Company  has
                                      reserved 200,000 shares for purchase under
                                      this plan. During the years ended December
                                      31,  2000 and  1999,  the  Company  issued
                                      1,000 and 2,940 shares,  respectively,  to
                                      satisfy its obligation under the plan.

                                      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.

                                      Under the above plans 442,842  shares are
                                      available for future grant or purchase.



<PAGE>



7.     Stock Plans                     The Company had the following option
                                       activity in 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                                            Weighted -
                                                                                                               Average
                                                                                                          Exercise Price
                                                                                          Shares             Per Share
                                      --------------------------------------------------------------------------------------
                                      <S>                                                 <C>                   <C>

                                      Balance, December 31, 1998                          743,145               $ 2.10
                                         Granted                                          397,500                 2.87
                                         Cancelled                                        (20,000)                1.44
                                      --------------------------------------------------------------------------------------

                                      Balance, December 31, 1999                        1,120,645                 3.80
                                         Granted                                          330,000                 1.98
                                         Exercised                                        (44,250)                4.26
                                         Cancelled                                        (14,500)                2.27
                                      --------------------------------------------------------------------------------------

                                      Balance, December 31, 2000                        1,391,895               $ 2.68
                                      --------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>


                                       All options  outstanding  at December 31,
                                      2000  are  categorized  by  the  following
                                      ranges in the table below:

                                                                                            Weighted-
                                                                        Weighted -           Average
                                                                          Average           Remaining
                                                     Share               Exercise          Contractual          Number of
                                                  Price Range              Price          Life (years)           Shares
                                      --------------------------------------------------------------------------------------
                                           <S>                              <C>                <C>                <C>
                                           $ 1.02   to  $ 4.00              $ 1.81             6.5                1,007,395
                                           $ 4.00   to  $ 9.06              $ 5.26             8.5                  384,500
                                                                                                                  ---------
                                                                                                                  1,391,895
                                                                                                                  =========

</TABLE>
<PAGE>


7.     Stock Plans                    All options exercisable at December 31,
       (Continued)                    2000 are categorized by the following
                                      ranges in the table below:

<TABLE>
<CAPTION>
                                                                                            Weighted-
                                                                        Weighted -           Average
                                                                          Average           Remaining
                                                     Share               Exercise          Contractual          Number of
                                                  Price Range              Price          Life (years)           Shares
                                      --------------------------------------------------------------------------------------
                                           <S>                              <C>                <C>                  <C>

                                           $ 1.02   to  $ 4.00              $ 1.82             5.0                  590,145
                                           $ 4.00   to  $ 9.06              $ 5.26             7.6                  144,500
                                                                                                                    -------
                                                                                                                    734,645
                                                                                                                    =======
</TABLE>

       Stock Based                    The Company  accounts for its stock-based
       Compensation                   compensation plan using the intrinsic
                                      value method. Accordingly,  there was no
                                      compensation expense recognized in 2000 or
                                      1999.  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,  net loss per share  would
                                      have been changed to the pro forma amounts
                                      indicated below:
<TABLE>
<CAPTION>

                                      Year ended December 31,                                     2000                1999
                                      --------------------------------------------------------------------------------------
                                      <S>                            <C>                  <C>               <C>
                                      Net loss                       As reported          $   (466,651)     $     (730,404)
                                                                     Pro forma            $   (677,037)     $     (821,494)

                                      Basic and diluted net          As reported          $       (.12)     $        (.24)
                                       loss per share of             Pro forma            $       (.18)     $        (.26)
                                        common stock


</TABLE>

                                      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  value at grant  date using
                                      the  Black-Scholes   option-pricing  model
                                      with   the   following    weighted-average
                                      assumptions    for    2000    and    1999,
                                      respectively:  dividend  yield  of 0%  for
                                      both years; expected volatility of 46% for
                                      both years;  a risk-free  interest rate of
                                      between  5.85%  and  6.30%  and  4.60% and
                                      5.25%; and an expected holding period of 2
                                      to 9 years and 7 to 10 years.

                                      The   weighted-average   fair   value  of
                                      options  granted  during  the years  ended
                                      December  31,  2000 and 1999 was $1.06 and
                                      $.85 per share, respectively.




<PAGE>

8.     Loss Per  Share                The  Company's  basic and
                                      diluted net loss per share of common stock
                                      for the years ended  December 31, 2000 and
                                      1999 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,
                                      2000  and  1999  but not  included  in the
                                      calculation  of diluted net loss per share
                                      because such shares are antidilutive:
<TABLE>
<CAPTION>

                                      December 31,                                                2000                1999
                                      --------------------------------------------------------------------------------------
                                      <S>                                                    <C>                   <C>
                                      Stock options                                          1,391,895           1,120,645
                                      Stock warrants                                           310,715             897,625


</TABLE>


9 .    Income Taxes                   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:
<TABLE>
<CAPTION>

                                      December 31,                                                2000                1999
                                      --------------------------------------------------------------------------------------
                                      <S>                                               <C>                 <C>
                                      Tax credits                                              314,000             277,000
                                      Net operating loss carryforwards                       2,667,000           2,517,000
                                      --------------------------------------------------------------------------------------

                                      Gross deferred tax asset                               2,981,000           2,794,000

                                      Deferred tax assets valuation
                                        allowance                                           (2,981,000)         (2,794,000)
                                      --------------------------------------------------------------------------------------

                                      Net deferred tax assets                           $            -      $            -
                                      --------------------------------------------------------------------------------------
</TABLE>

                                      As of  December  31,  2000 and 1999,  the
                                      deferred tax assets have been fully offset
                                      by   valuation   allowances,   since   the
                                      realization of such amounts is uncertain.

                                       As of December 31, 2000,  the Company has
                                      net operating loss carryforwards  totaling
                                      approximately  $6,667,000.  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.




<PAGE>




 9.    Income Taxes                   The following is a breakdown of the net
       (Continued)                    operating loss expiration period:

<TABLE>
<CAPTION>

                                                                                                                 Amount of
                                      Expiration Date                                                          Remaining NOL
                                      --------------------------------------------------------------------------------------
                                      <S>                                                                    <C>
                                      2008                                                                   $     743,000
                                      2009                                                                       1,514,000
                                      2010                                                                       1,374,000
                                      2011                                                                         921,000
                                      2018                                                                         900,000
                                      2019                                                                         739,000
                                      2020                                                                         476,000
</TABLE>

                                       In  addition,  the Company has  available
                                      tax  credit  carryforwards   (adjusted  to
                                      reflect  provisions  of the Tax Reform Act
                                      of 1986) of approximately $314,000,  which
                                      are  available  to offset  future  taxable
                                      income and income  tax  liabilities,  when
                                      earned or incurred.  These amounts  expire
                                      in various years through 2020.


10.    Commitments

       Facilities Lease               The  Company  leases  its  research
                                      facilities  under an operating  lease that
                                      expires  August 31, 2002 with an option to
                                      extend  for  five  additional  years.  The
                                      lease  requires  payment  of  real  estate
                                      taxes and other  common  area  maintenance
                                      expenses. Rent expense for the years ended
                                      December 31, 2000 and 1999 was $32,000 and
                                      $30,000, respectively.

                                      Future minimum rental  payments due are as
                                      follows:
<TABLE>
<CAPTION>

                                      Year ending December 31,                                                       Total
                                      --------------------------------------------------------------------------------------
                                      <S>                                                                        <C>

                                      2001                                                                          33,000
                                      2002                                                                          23,000
                                      ---------------------------------------------------------------------------------------

                                                                                                                 $  56,000
                                      ---------------------------------------------------------------------------------------

</TABLE>


<PAGE>




11.    Commitments
       (Continued)

       Employment                     The Company has  employment  agreements
       Agreements                     with its  principal  officers  providing
                                      for minimum base  compensation and
                                      severance pay which expire December 31,
                                      2005. For the years ended December 31,
                                      2000 and 1999, the aggregate amount paid
                                      under these agreements was $345,000 and
                                      $305,000, respectively.  The employment
                                      agreements  provide for inflationary
                                      adjustments and are subject to other
                                      increases based on the Board of Directors'
                                      approval. Minimum amounts to be paid under
                                      these agreements total approximately
                                      $440,000 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,
                                      2000 no royalties have been earned under
                                      this agreement.

       Consulting                     The Company has entered into various
       Agreements                     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, 2000 and 1999 amounted    to
                                      approximately    $141,900   and   $40,900,
                                      respectively. The Company expects to incur
                                      similar  or  higher   expenses  in  future
                                      years.

       Finder's Fees                  The  Company  has  entered  into  an
                                      agreement   to  pay  a  finder's  fee  for
                                      agreements   entered   into  with  certain
                                      companies   for   investment   or  revenue
                                      purposes.  The  finder's fee is based on a
                                      percentage of the investment or revenue up
                                      to a maximum of $150,000 with increases if
                                      more than one  product  is  commercialized
                                      under the agreements.

       Employee  Benefit              Effective  January 1, 1999, the Company
       Plan                           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's
                                      contribution   to  the  plan  amounted  to
                                      approximately  $14,900 and $4,400 for the
                                      years  ended December 31, 2000 and 1999,
                                      respectively.
<PAGE>


11.    Major Customers                Through December 31, 2000,
                                      the Company has generated its revenue from
                                      a   small   number   of   customers    and
                                      collaborative  agreements.  Revenues  from
                                      major customers were generated as follows:
<TABLE>
<CAPTION>

                                                                                      Net         License
                                                                                    Product         Fee
                                      Year ended December 31, 2000                   Sales        Revenue
                                      -------------------------------------------------------------------
                                      <S>                                       <C>            <C>

                                      Customer A                                $   250,805    $         -
                                      Customer B                                          -        500,000
                                      --------------------------------------------------------------------

                                                                                $   250,805    $   500,000
                                      --------------------------------------------------------------------


                                                                                      Net                        License
                                                                                    Product      Contract          Fee
                                      Year ended December 31, 1999                   Sales        Revenue        Revenue
                                      --------------------------------------------------------------------------------------
                                      Customer A                                $   425,209      $       -     $         -
                                      Customer B                                          -        338,963         750,000
                                      --------------------------------------------------------------------------------------

                                                                                $   425,209      $ 338,963     $   750,000
                                      --------------------------------------------------------------------------------------

</TABLE>




                                      In November, 2000, the Company's
                                      collaborative product development
                                      agreement  with  Customer  B  related  to
                                      an  ophthalmology  product was terminated
                                      (see Note 6).

                                      Net  product   sales  based  on  customer
                                      location are as follows:
<TABLE>
<CAPTION>

                                      Year ended December 31,                                     2000                1999
                                      --------------------------------------------------------------------------------------
                                      <S>                                                   <C>                <C>

                                      United States                                         $  250,805         $   283,758
                                      United Kingdom and New Zealand                                 -             141,451
                                      --------------------------------------------------------------------------------------

                                                                                            $  250,805         $   425,209
                                      --------------------------------------------------------------------------------------
</TABLE>


12.    Related Party                  A member of the board of directors
       Transactions                   provides legal  services to the Company.
                                      Amounts paid for legal services rendered
                                      by the director,  either  individually or
                                      through his firm, totalled  approximately
                                      $84,000 and $63,000 for the years ended
                                      December 31, 2000 and 1999, respectively.





<PAGE>



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

         None.


                                    PART III

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

         The Company incorporates herein by reference the information  appearing
under the  caption  "Board  of  Directors"  in the  Company's  definitive  Proxy
Statement to be filed with the Securities and Exchange  Commission in connection
with the Company's 2001 Annual Meeting of Stockholders.

         Information  concerning  executive officers of the Company is contained
in Part I of this report under the caption "Executive Officers."

Item 10.  Executive Compensation

         The Company incorporates herein by reference the information  appearing
under the caption  "Executive  Compensation"  in the Company's  definitive Proxy
Statement to be filed with the Securities and Exchange  Commission in connection
with the Company's 2001 Annual Meeting of Stockholders.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The Company incorporates herein by reference the information  appearing
under the caption  "Principal  Stockholders"  in the Company's  definitive Proxy
Statement to be filed with the Securities and Exchange  Commission in connection
with the Company's 2001 Annual Meeting of Stockholders.

Item 12.  Certain Relationships and Related Transactions

         The Company incorporates herein by reference the information  appearing
under the caption  "Certain  Transactions"  in the  Company's  definitive  Proxy
Statement to be filed with the Securities and Exchange  Commission in connection
with the Company's 2001 Annual Meeting of Stockholders.



<PAGE>


Item 13.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

         See Index to Exhibits on Page E-1.  Compensatory plans and arrangements
required to be filed as exhibits are as follows:

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 December 14, 1999, between the Company and
         Dr. Jack H. Kessler.

6        Employment Agreement, dated December 14, 1999, between the Company and
         Paul C. Desjourdy.

         (b)  Reports on Form 8-K

         No reports on Form 8-K were filed during the last quarter ended
         December 31, 2000.

<PAGE>


                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                            SYMBOLLON CORPORATION

                                            By: /s/ Paul C. Desjourdy
                                                --------------------------------
                                                Paul C. Desjourdy
                                                President

Date: March 29, 2001

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.

      Signature                Title                               Date

 /s/ Jack H. Kessler         Chief Executive Officer,            March 29, 2001
---------------------        Chief Scientific Officer,
   Jack H. Kessler           Secretary and Chairman
                             of the Board of Directors
                             (Principal Executive Officer)


 /s/ Paul C. Desjourdy       President, Chief Operating Officer, March 29, 2001
----------------------       Treasurer, General Counsel, Chief
  Paul C. Desjourdy          Financial Officer, and Director (Principal
                             Financial and Accounting Officer)


/s/ James C. Richards        Director                            March 29, 2001
----------------------
  James C. Richards

/s/ Richard F. Maradie       Director                            March 29, 2001
----------------------
  Richard F. Maradie

/s/ Eugene Lieberstein       Director                            March 29, 2001
----------------------
  Eugene Lieberstein



<PAGE>
                              Symbollon Corporation
                                Index to Exhibits

3.1      Amended Certificate of Incorporation of the Company;  including
         Certificate of Designations,  Preferences and Rights of Series
         A Preferred  Stock of the  Company.  (previously  filed as exhibit 3.1
         to Form 10-QSB for the quarter  ended June 30, 1999 and
         incorporated by reference)
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. (previously  filed
         as exhibit 10.1 to Form 10-QSB for the quarter  ended
         June 30, 1999 and incorporated by reference)
10.2     Employment Agreement, dated December 14, 1999, between the Company and
         Paul C. Desjourdy. (previously filed as exhibit 10.2 to Form 10-KSB for
         the year ended December 31, 1999 and incorporated by reference)
10.3     Employment Agreement, dated December 14, 1999, between the Company and
         Dr. Jack H. Kessler. (previously filed as exhibit 10.3 to Form 10-KSB
         for the year ended December 31, 1999 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    Collaboration and Sale/License Agreement, dated August 4, 1997, between
         the Company and Bausch & Lomb  Pharmaceuticals,  Inc. (previously filed
         as exhibit  number 10.19 to Form 10-QSB for the quarter  ended June 30,
         1997 and incorporated by reference) *
10.12    Stock Purchase Agreement, dated August 4, 1997, between the Company and
         Bausch & Lomb Pharmaceuticals, Inc. (previously filed as exhibit number
         10.20  to  Form  10-QSB  for  the  quarter  ended  June  30,  1997  and
         incorporated by reference)
10.13    Form of Subscription  Agreement,  dated as of August 10, 1999,  between
         the Company and the  purchasers of Units  (previously  filed as exhibit
         number 10.14 to Form 10-QSB for the quarter  ended  September  30, 1999
         and incorporated by reference)
10.14    Form of Redeemable Warrant for the purchase of shares of Class A Common
         Stock,  dated as of August  10,  1999,  issued to  purchasers  of Units
         (previously  filed  as  exhibit  number  10.15 to Form  10-QSB  for the
         quarter ended September 30, 1999 and incorporated by reference)
10.15    Promissory Note, dated January 11, 2001, between the Company and Dr.
         Jack H. Kessler, together with the Pledge Agreement and Letter
         Agreement related thereto.
10.16    Promissory Note, dated January 11, 2001, between the Company and
         Paul C. Desjourdy, together with the Pledge Agreement and Letter
         Agreement related thereto.
23.1     Consent of BDO Seidman, LLP relating to Form S-8.
23.2     Consent of BDO Seidman, LLP relating to Form S-3.
--------------------------------------
* Indicates that material has been omitted and  confidential  treatment has been
granted  or  requested  therefor.  All such  omitted  material  has  been  filed
separately with the Commission pursuant to Rule 24b-2.