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, 1996
                                       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.)

        122 Boston Post Road                           (508) 443-0165
    Sudbury, Massachusetts 01776                 (Issuer's telephone number)
(Address of principal executive offices)

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

                                      None

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

  Units, each consisting of one share of Class A Common Stock, $.001 par value
  per share, one Redeemable Class A Warrant and one Redeemable Class B Warrant
                                (Title of class)

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

   Redeemable Class A Warrants, each Redeemable Class A Warrant entitling the
     holder to purchase one share of Class A Common Stock and one Redeemable
                                 Class B Warrant
                                (Title of class)

   Redeemable Class B Warrants, each Redeemable Class B Warrant entitling the
              holder to purchase one share of Class A Common Stock
                                (Title of class)

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

    Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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, 1996) were $762,897.

    As of March 21, 1997, the aggregate market value of the voting stock of
the issuer held by non-affiliates of the issuer was approximately $2,831,843
based upon the closing price of such stock on that date.

    As of March 21, 1997, 2,468,790 shares of Class A Common Stock and 15,738
shares of Class B 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 Proxy Statement for the 1997 Annual Meeting -- Part III

<PAGE>

                                     PART I

Item 1.  Description of Business

General Background

         Symbollon  Corporation  (the  "Company" or  "Symbollon")  is engaged in
research,   development   and   commercialization  of  proprietary  iodine-based
pharmaceutical agents, disinfectants,  antiseptics  and sanitizers (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

         The Company has  developed  proprietary  iodine  technologies  that the
Company believes addresses many of the issues associated with the use of iodine.
The technologies  control the equilibrium  ratio of molecular iodine (I2), which
is lethal to  microorganisms,  to other inactive  species of iodine in solution.
The  Company  believes  that  this  will  enable  it  to  produce   iodine-based
applications having advantages over currently available  iodine-based  products.
By increasing the equilibrium  ratio of molecular iodine to other iodine species
in  solution,  the  Company's  current and proposed  products  will have greater
killing power per unit of total iodine.  The Company  believes that this feature
will  enable its  current  and  proposed  products  to utilize  less  iodine and
therefore minimize or eliminate some of the negative characteristics  associated
with the use of iodine.

         In addition,  unlike other iodine-based  products,  which are generally
sold in solution,  applications based on the Company's  technologies may be sold
in either solid form such as tablets or powders or in  combinations  of liquids,
powders  and gels  which are  easier  and  cheaper  to ship and  store  than the
corresponding liquid-based products.

         Overall,  the Company believes that the major strengths of its patented
technologies  are the minimization of staining and color associated with iodine,
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  of a
multi-part delivery system and the potential for staining and corrosivity.

Initial Product

         The  Company  focused a majority  of its  initial  development  efforts
regarding   its   technologies   on  a  bovine  teat   sanitizer,   marketed  as
"IodoZyme(R)".  The Company co-developed IodoZyme 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.

<PAGE>

         Total  product  sales from IodoZyme for 1995 and 1996 were $122,981 and
$117,906, respectively.  Substantially all sales were in the United States. West
Agro,  through its foreign  affiliates,  has begun the  registration  process in
several foreign markets, for which clearances must be received prior to sales in
those foreign markets.

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

Research and Product Development

         During 1996 the Company  concentrated  its product  development work on
proposed product applications for a medical and dental instrument  disinfectant,
a treatment  for stomach  ulcers,  and the  treatment of various  dermatological
diseases.  Additional development efforts regarding the Company's technology for
use in medical instrument  sterilization and hemodialysis  membrane disinfection
were  conducted  during  1996 at  various  universities  and other  third  party
laboratories through grants from the Small Business Innovation Research ("SBIR")
program. See "Small Business Innovation Research."

         The Company spent approximately $980,220 and $1,002,208 on research and
development  during the years ended  December  31, 1995 and  December  31, 1996,
respectively. Since inception, the Company has spent approximately $3,474,338 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  areas from  corporate  partners  who would  ultimately  introduce  the
products  into  the  marketplace.  The  Company's  current  strategic  corporate
partners are described below.

         Material  developments in the Company's  ongoing programs during fiscal
1996 are detailed below:


         Medical and Dental Instrument Disinfection

         During 1995, the Company  developed a microbicidal  formulation that it
believed  addresses issues  regarding  materials  compatibility  with respect to
medical  and  dental  instruments  to be  disinfected  and  the  instrumentation
performing  the cleaning  process.  In August 1996,  the Company  completed  the
necessary  testing  of its  potential  product  formulation  and  filed a 510(k)
premarket  notification  with the Federal Food and Drug  Administration  ("FDA")
regarding such  formulation.  In December 1996, the Company  withdrew its 510(k)
premarket  notification  filing due to concerns  raised by the FDA regarding the
sporicidal  test  results  contained in the  Company's  510(k)  submission.  The
Company currently does not plan to resubmit the 510(k) application.

         Research  regarding medical instrument  sterilization  continued during
1996 under the auspices of Biomedical Development  Corporation ("BDC") through a
phase II SBIR grant of $500,000 received in 1994.

<PAGE>

         Ulcer Treatment

         In June  1995,  the  Company  entered  into an  Evaluation  and  Option
Agreement  with Astra Merck Inc.  ("Astra")  to explore the  possible use of the
Company's  technology against  Helicobacter  pylori for the treatment of stomach
ulcers.  Pursuant  to that  agreement,  during  1996 the  Company  continued  to
evaluate  formulations  in  animal  studies  paid  for  by  Astra.  The  Company
anticipates  screening  additional  formulations  over the course of 1997.  Upon
completion  of the  studies,  Astra has six  months to  evaluate  the  Company's
technology  and,  in  Astra's   discretion,   to  negotiate  a  development  and
commercialization  agreement  covering  the  technology  for use as a  treatment
against Helicobacter pylori in the gastrointestinal tract.

         Dermatology Applications

         In May 1996, the Company signed a collaboration  and license  agreement
with Oclassen  Pharmaceuticals,  Inc.  ("Oclassen") for dermatological  products
based on Symbollon's proprietary iodine technologies. Pursuant to the agreement,
the  companies  plan to  co-develop  products for the  treatment of certain skin
diseases,  with initial development focused on products for acne,  bacterial and
fungal  skin  diseases.  Under the  terms of the  agreement,  Oclassen  obtained
exclusive  marketing  rights in the United States and Canada for  dermatological
products based on Symbollon's  iodine  technologies.  Subject to continuation of
the agreement,  Oclassen will make a series of milestone  payments to Symbollon,
plus royalty  payments on product sales.  Oclassen is primarily  responsible for
product development and commercialization. Symbollon consults, for a fee, on the
product  development.  During  1996,  the  parties  worked  together to evaluate
suitable  formulation   candidates  for  application  in  the  field.  Symbollon
anticipates that work under the arrangement will continue throughout 1997.

         Hemodialysis Membrane Disinfection

         BDC has been  administering a phase II SBIR grant for $600,000 received
in  fiscal   1994  to  conduct   research   concerning   hemodialysis   membrane
disinfection.

         Other Potential Applications

         The Company believes that its microbicide  technologies  have potential
applications  in the  development  of a variety  of human  healthcare  and other
products such as topical  anti-infectives,  oral care and hygiene  products,  an
antimicrobial  ophthalmic  application,  and iodine deficiency diseases, such as
fibrocystic  breast syndrome.  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.

Small Business Innovation Research

         In  1989,  the  Company  entered  into  an  agreement  with  Biomedical
Development  Corporation  located in San Antonio,  Texas ("BDC") to cooperate in
applying for and performing under Small Business  Innovation  Research  ("SBIR")
grants  based  on  the  Company's  technology.  The  Small  Business  Innovation
Development Act of 1982 requires agencies of the Federal  government  engaged in
research  to set aside a  specified  percentage  of their  research  budgets for
grants  ranging  from  approximately  $50,000 to  $75,000  for Phase I and up to
$500,000 to $600,000 for Phase II.

<PAGE>

         The  Company is  required to pay to BDC a royalty of 5% of net sales up
to a maximum of the amount of the SBIR grant related to the product. To date, an
aggregate of $1,475,000 in SBIR funding  under eight  different  grants has been
received  by BDC for  funding  of various  projects.  The  results  of  research
undertaken by BDC become the property of the Company. In some instances, BDC may
cause  research to be  conducted by  employees  of academic  institutions.  Such
institutions  may  have  rights  in the  results  of such  research.  Under  the
agreement,  BDC is required to use its best  efforts to obtain  licenses to such
information and to transfer all such technical  information to the Company.  The
United  States  government  retains a  royalty-free  license  in the  results of
research funded by SBIR grants, whether patented or not.

Manufacturing and Supplies

         The  Company  currently  produces  IodoZyme  through a  combination  of
internal  manufacturing   activities  and  a  network  of  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 in-house, additional manufacturing
space and equipment may be necessary if product volumes increase.
See "Description of Property."

         The  Company  believes  that  there  are  adequate  sources  of the raw
materials  required to produce its  applications  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 for
the  healthcare  industry  directly  or 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 products are, and its proposed  products
likely will be, subject to regulation by  numerous  governmental  authorities in
the United States including the FDA, the Federal  Environment  Protection Agency
("EPA"),  the United States  Department of  Agriculture  ("USDA") and comparable
state agencies.  Foreign  governments also regulate the development,  production
and marketing of products in their  countries.  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


<PAGE>

that other  regulatory action might  result in an adverse impact  on the ability
to market the Company's proposed products.

         Federal Environmental Protection Agency
         Some  uses  of  the  Company's   products  and  proposed  products  are
considered  pesticidal uses.  Pesticides are generally required to be registered
with the EPA  under the  Federal  Insecticide,  Fungicide  and  Rodenticide  Act
("FIFRA") prior to sale or  distribution in the United States.  The EPA will not
approve an application  for  registration  unless it determines that the product
will perform its intended  function  without posing an unreasonable  risk to the
environment.  In general,  applications  for EPA  registration  are  required to
include extensive data relating to product chemistry, efficacy and toxicity.

         Products  that have more than one use will require  registration  if at
least one of the uses is pesticidal.  For such  products,  the EPA has taken the
position that the Company will be required to submit  efficacy data for only the
use(s) that require FIFRA registration.  Products that are considered  identical
or  substantially  similar  to  existing  products  may be  granted  conditional
registration  subject to the submission of any additional  data that the EPA may
require at a later date. Identical or substantially similar product applications
generally include less data and take less time for the EPA to review. States may
impose similar,  and in some cases additional and more stringent,  standards and
requirements.  The Company believes that certain uses of its proposed  products,
including   disinfectants  for  medical  equipment  and  hemodialysis   membrane
disinfection, will require FIFRA registration.

         For several of the Company's  products and proposed  products,  the EPA
and FDA have areas of mutual regulatory  responsibility.  Pursuant to agreements
between the  agencies,  the primary and  secondary  responsibility  is allocated
between the two agencies  depending  upon the proposed use of the product.  As a
general rule, the EPA does not consider products that are intended to kill pests
when  directly  applied  to humans or animals  as  effectively  within its FIFRA
jurisdiction.  The Company  believes that such uses of its products and proposed
products are not likely to require  FIFRA  registration.  These uses include the
bovine teat sanitizer (IodoZyme) and certain medical products (such as treatment
of skin diseases, toothpaste and anti-plaque oral rinses).

         The  Company  has  not  yet  commenced  the  EPA or  state  application
processes  with  respect  to any of  its  proposed  products  or  uses  thereof.
Therefore,  the  Company  cannot be certain as to whether  the EPA will  require
FIFRA registration of uses other than those described herein. Although there are
existing iodine  applications on the market,  the Company cannot predict whether
the EPA or the states will view its  products as  substantially  similar to such
existing products. Thus, the Company cannot be certain as to either the type and
volume of data it will be required to include in its  applications or the length
of time the review  processes  will take.  Based on  estimates  contained in the
EPA's regulations, the EPA review process may take from several months to over a
few years,  and the state  application  processes may take additional  time, but
there can be no assurance that the review processes will not take longer. If the
applications are approved,  the Company will be subject to continuing regulation
by the EPA and comparable  state  agencies  pursuant to which the Company may be
required to submit additional data, conduct  additional tests,  maintain records
and notify such agencies of any required information.

         Federal Food and Drug Administration
         Pursuant to the Federal Food, Drug and Cosmetic Act, the FDA regulates,
where applicable,  development,  testing, labeling,  manufacturing processes and
facilities,  registration,   notification,  clearance  or  approval,  marketing,
distribution,  record  keeping and reporting  requirements  for human and animal
drugs, medical devices, biologics, cosmetics and food additives. The only filing
with the FDA regarding  clearance or approval for any of the Company's  proposed
products was the 510(k) premarket  notification


<PAGE>

filing (subsequently  withdrawn)  covering  the  Company's  formulation  for the
disinfection  of  medical and  dental instruments.  See  "Research  and  Product
Development  -  Medical  and  Dental Instrument Disinfection."

         Bovine Teat Sanitizer
         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,  the probability 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.

         Medical and Dental Instrument Disinfection
         The Company's proposed medical and dental instruments disinfectants are
considered under current law chemical germicides regulated as medical devices by
the  FDA.  The  FDA   categorizes   medical   devices   into  three   regulatory
classifications  subject to varying degrees of regulatory  control.  In general,
Class I devices require compliance with premarket clearance, labeling and record
keeping  requirements and are subject to other general controls.  In addition to
the same  controls  as Class I  devices,  Class II  devices  may be  subject  to
additional  regulatory  controls,  including  performance  standards.  Class III
devices are typically invasive or life-sustaining products, but also include new
products  which are not similar  enough to  previously  marketed  products to be
marketed  without  a higher  level of  regulation.  Class III  products  require
clinical  testing to assure safety and  effectiveness  and FDA approval prior to
marketing. The FDA also has the authority to require clinical testing of Class I
and Class II devices  prior to  clearance,  and in recent years has imposed such
testing requirements more routinely.

         The Company believes its applications will be considered  germicides by
the FDA. Liquid chemical germicides have not yet been classified by the FDA into
Class I, II, or III, but the FDA  currently  allows the  marketing of germicides
pursuant  to  FDA  clearance  of  510(k)  premarket  notifications.  The  510(k)
premarket  notification  must be supported by appropriate data  establishing the
claim of substantial  equivalence to the  satisfaction of the FDA.  Although the
510(k) clearance is technically a 90-day process, clearance generally takes five
to six months or longer for  glutaraldehyde-based  products  and may require the
submission  of  additional  clinical  safety and  efficacy  data to the FDA. The
Company  filed  a  510(k)  premarket  notification  filing  with  the  FDA,  and
subsequently   withdrew  such  filing,   in  1996.  See  "Research  and  Product
Development - Medical and Dental Instrument Disinfection."

         While it is likely that these products will eventually be classified as
Class I or Class II devices  and remain  subject to the  premarket  notification
process,  there can be no assurance that 510(k)  clearances  will be obtained or
that the FDA will not regulate  these  products as Class III devices  subject to
the more rigorous  pre-market  approval  ("PMA") review process,  which requires
conducting  clinical  trials  pursuant to an  investigational  device  exemption
(IDE),   establishing  safety  and  efficacy,   and  submitting  clinical  data,

<PAGE>

manufacturing and quality control data and other  information.  This process can
take several years and there are no assurances that a PMA will be approved.

         Other Medical Products
         The Company  expects that certain of its  potential  products such as a
treatment  for  certain  skin  diseases  and  a  treatment  for  certain  iodine
deficiency  diseases will be regulated by the FDA as pharmaceuticals  for use in
humans. The regulatory approval of pharmaceutical  products in the United States
intended for  therapeutic  use in humans involves many steps and generally takes
many years. The initial phase of the FDA approval  process involves  preclinical
testing  which is  followed  by  filing  an  investigational  new  drug  ("IND")
application  with the FDA to obtain  permission to test the drug in humans.  The
application must contain detailed  information  about the product  including its
composition,  manufacturing  data, results of preclinical studies and a clinical
design and  protocol.  The  application  must also  include  information  on the
investigators,  the necessary  agreements among parties involved in the testing,
and  approval  of  an  institutional  review  board  ("IRB")  at  the  center(s)
conducting the study or studies.  If the  application  has not been denied or if
additional  information  has not been  requested  by the FDA  within  30 days of
filing, the applicant may generally begin clinical studies.

         Clinical  testing to  demonstrate  safety and  efficacy  of the product
occurs in three phases,  each with an expanded  patient group.  Upon  successful
completion of the third phase of testing, a New Drug Application  ("NDA") can be
filed.  Approval  requires a review of  detailed  data of  results  of  clinical
studies,  the  composition  of  the  drug,  the  labeling  that  will  be  used,
information on manufacturing  methods, and samples of the product. After the FDA
completes its review of the application,  the product is typically reviewed by a
panel of  medical  experts  who then  advise  the FDA as to  whether  a new drug
approval should be granted.  A pre-approval  inspection is required prior to the
FDA  authorizing  the  marketing  of the  product.  After the  product  has been
approved for marketing,  postmarketing  surveillance  studies may be required to
provide additional data to the FDA for longer-term follow-up concerns.

Patents and Proprietary Rights

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

         The first of the  Company's  patents  was issued in 1984 and relates to
bactericidal  compositions  and methods for  applications to oral cavities.  The
second  patent  was  issued  in 1990  and  relates  to the use of the  Company's
technology as an aqueous sporicidal microbicide. In 1991, two additional patents
were issued one of which covers  formulations  of the  Company's  technology  to
rapidly  sterilize and maintain a sterile  environment for an extended period of
time while the other issued patent relates to methods to avoid  discoloration of
plant or animal tissue during the sterilization process. The fifth patent, which
was issued in 1993, relates to a method to clean and disinfect  pathogens on the
epidermis.  The sixth  patent,  which was issued in October  1994,  relates to a
composition  to clean and  disinfect  pathogens  on the  epidermis.  The seventh
patent,  which was issued in 1995,  relates to a method for  forming a sterilant
using an immobilized  enzyme.  The Company  intends to continue to pursue patent
protection for the various applications of its microbicide technology.

         The Company also relies upon unpatented proprietary technology,  and in
the future may determine in some cases that its interest  would be better served
by reliance on trade secrets or confidentiality  agreements rather than patents.
To the extent  that  consultants  or other  third  parties  apply  technological

<PAGE>

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 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,  efficiency,  safety 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.

Employees

         As of December 31, 1996,  the Company had six  employees,  all of which
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.      46     Executive Vice-President, Chief
                                            Scientific Officer, Secretary and
                                            Chairman of the Board of Directors

         Paul C. Desjourdy           35     Executive Vice-President,
                                            Chief Financial Officer,
                                            Treasurer and Director


<PAGE>

         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
Executive  Vice-President,  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. Prior to that time, and since the Company was
initially  formed  in  Illinois  in 1986,  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 Executive  Vice  President  and Chief
Financial   Officer   since  July  1996,   as   Vice-President   -  Finance  and
Administration and Chief Financial Officer of the Company from September 1993 to
June 1996, as Treasurer from May 1994 to present, and as a director since August
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.

Item 2.  Description of Property

         The Company leases approximately 6,000 square feet of office,  research
and development and manufacturing space in Sudbury,  Massachusetts for a current
base annual rental of  approximately  $51,000  through  September 30, 1997.  The
existing lease expires on September 30, 1997 and may be renewed at the Company's
option on the same terms and  conditions  as the existing  lease except that the
rent shall be at the then current fair market value.  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.  The Company
intends to investigate  possibly  relocating its operations  into a similar size
space with increased manufacturing capability in the greater metropolitan Boston
area if such alternative space can be obtained on reasonable terms.

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, 1996.

<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

(a)  Price Range of Securities

         The  Company's  Class A Common  Stock,  Class A  Warrants  and  Class B
Warrants trade separately on the Nasdaq SmallCap Market tier of The Nasdaq Stock
Market under the symbols:  SYMBA, SYMBW and SYMBZ,  respectively.  The following
sets  forth  the high and low sales  prices  for each of the  quarterly  periods
during fiscal 1995 and 1996, as reported by Nasdaq.

                                   Fiscal 1995                Fiscal 1996
                                -----------------          -----------------
                                 High        Low            High        Low
                                 ----        ---            ----        ---
     Class A Common Stock

     First quarter                9          5 7/8           6 15/16    4 1/8
     Second quarter              11 1/2      8 1/2           6 3/8      1 5/8
     Third quarter               11 3/8      3               2 1/2        3/4
     Fourth quarter               6 1/8      3 1/8           2 5/8        5/8

     Class A Warrants

     First quarter                6 3/8      3 3/4           4 3/4      2
     Second quarter               9          5 1/32          4 3/4        31/32
     Third quarter                9          1 3/4           1 1/16       1/4
     Fourth quarter               4 3/4      1 7/8             1/2        3/32

     Class B Warrants

     First quarter                4 5/16     2 1/8           4          1 7/8
     Second quarter               8 3/4      3 5/8           2 3/8        1/4
     Third quarter                8          1 1/2             15/32      1/8
     Fourth quarter               4 7/8      1 3/4             7/32       1/16

         There is no established public trading market for the Company's Class B
Common Stock.

<PAGE>

(b)  Approximate Number of Equity Security Holders

         Based upon information  supplied from the Company's transfer agent, the
Company  believes  that the  number of record  holders of the  Company's  equity
securities as of March 21, 1997 are approximately as follows:

         Title of Class                      Number of Record Holders
         --------------                      ------------------------
         Class A Common Stock                          32
         Class B Common Stock                           3
         Series A Preferred Stock                       2
         Class A Warrants                              13
         Class B Warrants                               9

         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 21, 1997 is in excess of 800.

(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 in 1995 and 1996 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.

Safe Harbor Statements

         Any  statements  contained  herein by the  Company  with  regard to its
expectations  as to  financial  results and other  aspects of its  business  may
constitute   forward-looking  statements  within  the  meaning  of  the  Private
Securities  Litigation  Reform  Act of 1995.  Although  the  Company  makes such
statements  based  on  assumptions  which  it  believes  to be  reasonable,  the
Company's business is subject to significant risks and there can be no assurance
that actual results will not differ materially from the Company's  expectations.
Accordingly,  the Company  hereby  identifies the following  important  factors,
among  others,  which could  cause its results to differ from any results  which
might  be  projected,  forecasted  or  estimated  by the  Company  in  any  such
forward-looking  statements:  (i) the timely  development  and acceptance of new
products,  (ii)  the  achievement  of  product  development  milestones  by  the
Company's corporate partners,  (iii) the timely receipt of regulatory clearances
required to market the Company's proposed  products,  (iv) the continued sale of
IodoZyme,  the Company's only product,  (v) the Company's  ability to enter into
new arrangements with corporate partners.

<PAGE>

Results of Operations

         Fiscal 1996 versus Fiscal 1995

         Symbollon's  net loss decreased by $468,296 or 34.1% from $1,373,711 in
fiscal 1995 to $905,415 in fiscal 1996.  This decrease  resulted  primarily from
increased  license fee revenues  from  research and  development  programs  with
corporate partners, and to a lesser extent, decreased general and administration
expenses.

         Product  revenues  from sales of IodoZyme  decreased  by $5,075 or 4.1%
from  $122,981  in  fiscal  1995 to  $117,906  in  fiscal  1996.  Based on sales
forecasts  provided to Symbollon by West Agro,  Symbollon  anticipates  slightly
increased sales volume for IodoZyme in 1997.

         Cost of goods  sold for  IodoZyme  decreased  by  $33,494 or 32.3% from
$103,600 in fiscal 1995 to $70,106 in fiscal 1996. The resulting increase in the
gross profit margin on product sales in fiscal 1996,  from the  comparable  1995
period, was primarily due to resolution of prior period manufacturing  problems,
and reduced labor costs  associated  with certain  manufacturing  activities now
being internally performed. The Company anticipates that the gross profit margin
in 1997 will remain consistent with 1996.

         Contract  revenues  decreased  by  $105,009  or 42.0% from  $250,000 in
fiscal 1995 to $144,991 in fiscal 1996.  License fee revenues  were  $500,000 in
fiscal 1996,  as compared to none in fiscal  1995.  The contract and license fee
revenues generated in fiscal 1996 relate to one corporate  relationship  entered
into in May 1996 in the field of dermatology. The contract revenues generated in
fiscal  1995  related to  research  and  development  contracts  with  corporate
partners  which were in  existence  during  fiscal 1996 but which  generated  no
revenue.  In 1997,  subject to continuation of existing research and development
contracts,  the Company  anticipates  receiving  $1,000,000 in license fees. The
level of contract  revenues for 1997 is difficult to predict since it depends on
the amount of  consulting  effort  expended  by the  Company  at the  request of
corporate partners.

         Research  and  development  expenses  increased by $21,988 or 2.2% from
$980,220 in fiscal 1995 to $1,002,208 in fiscal 1996. The increase resulted from
increased  development  expenses,  including  third party testing and consultant
fees,  related to the preparation of the 510(k) filing with the FDA covering the
Company's high level  disinfectant  formulation  (which filing was  subsequently
withdrawn).

         General and administrative expenses decreased by $112,309 or 14.1% from
$798,335  in fiscal  1995 to $686,026 in fiscal  1996.  This  decrease  resulted
primarily  from  decreases  in  salaries  and other  labor  related  costs,  and
consulting  fees,  partially  offset by an  increase  in  director  and  officer
insurance premiums.  The decrease in consulting fees resulted primarily from the
termination of certain contractual  commitments and a general decrease in market
communications.

         The  Company's  interest  income  decreased  by  $46,693  or 33.6% from
$138,791 in fiscal 1995 to $92,098 in fiscal 1996.  This decrease  resulted from
decreased levels in cash reserves during 1996.

         During the first half of 1997,  the Company  expects its  research  and
development and general and  administrative  expenses to continue at or slightly
below  their  present  levels.  During  the  later  half of  1997,  the  Company
anticipates  incurring  additional  expenses,  including third party testing and
consultant  fees,  related to preparation of an IND application  with the FDA to
obtain  permission  to test a  formulation  of its  technology in humans for its
effectiveness against certain iodine deficiency diseases.


<PAGE>

Liquidity and Capital Resources

         The Company has funded its activities  primarily  through proceeds from
private  and  public  placements  of  equity  and debt  securities.  Independent
research and development  activities regarding the Company's technology has been
funded through SBIR grants received and administered by BDC. See "Small Business
Innovation Research."

         During 1996,  the Company  generated  revenues  from product  sales and
contract and license fees;  however,  the Company's income remains less than its
operating expenses.  The Company has incurred a cumulative loss through December
31, 1996 of $5,333,079. As of December 31, 1996, the Company had working capital
of  $1,700,642.  The Company  believes that it has the  necessary  liquidity and
capital  resources to sustain  planned  operations for fiscal 1997. In the event
that the Company's internal estimates relating to its planned expenditures prove
inaccurate,  the Company may be required to  reallocate  funds among its planned
activities and curtail certain planned expenditures.

         During 1997, the Company is committed to pay approximately  $280,000 as
compensation for its current executive  officers and  approximately  $51,000 for
lease  payments  on  its   facilities.   The  Company  has  no  planned  capital
expenditures  for fiscal  1997.  At  December  31,  1996,  the Company had a net
operating loss  carryforward  for Federal  income tax purposes of  approximately
$5,010,000 expiring through 2011.

         In  connection  with the Company's  initial  public  offering,  certain
stockholders of the Company agreed to transfer an aggregate of 700,000 shares of
Common  Stock to the  Company if the  Company  does not attain  certain  minimum
earnings  thresholds.  In the event the  Company  attains  any of such  earnings
thresholds,  the position of the Securities and Exchange  Commission is that the
release of these restrictions will be treated,  for financial reporting purposes
only, as expense to the Company which is nondeductible  for income tax purposes.
Accordingly,  the Company will, in the event of the release of the restrictions,
recognize during the period in which the earnings thresholds are met or probable
of being met, what could be a substantial  one-time  charge which would have the
effect of substantially increasing the Company's loss or reducing or eliminating
earnings,  if any, at such time. The amount of expense recognized by the Company
will not affect the Company's total stockholders' equity.

<PAGE>

Item 7.  Financial Statements

Report Of Independent Auditors



The Board of Directors and Stockholders
Symbollon Corporation
Sudbury, Massachusetts


         We  have  audited  the   accompanying   balance   sheets  of  Symbollon
Corporation (a  development  stage company) as at December 31, 1996 and December
31, 1995,  and the related  statements of operations,  stockholders'  equity and
cash flows for each of the years in the two-year  period ended December 31, 1996
and for the period from July 15, 1986  (inception)  to December 31, 1996.  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 generally  accepted auditing
standards.  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  enumerated  above  present
fairly,  in  all  material   respects,   the  financial  position  of  Symbollon
Corporation  at December 31, 1996 and December 31, 1995,  and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 1996 and for the period from July 15, 1986  (inception) to December
31, 1996 in conformity with generally accepted accounting principles.



Richard A. Eisner & Company, LLP

Cambridge, Massachusetts
January 30, 1997


<PAGE>

<TABLE>
                              SYMBOLLON CORPORATION
                          (a development stage company)

                                 BALANCE SHEETS

<CAPTION>
                                                             December 31,
ASSETS                                                   ------------------
------                                                   1996          1995
                                                         ----          ----
<S>                                                 <C>            <C>
Current assets:
   Cash and cash equivalents. . .. . . . . . . . .  $ 1,707,099    $ 2,087,753
   Accounts receivable. . . . . . . . . . . . . .        50,406         30,870
   Inventory. . . . . . . . . . . . . . . . . . .        17,818         31,279
   Prepaid expenses . . . . . . . . . . . . . . .        82,439         80,554
                                                    -----------    -----------
          Total current assets. . . .. . . . . . .    1,857,762      2,230,456

Equipment and leasehold improvements, net of
   accumulated depreciation and amortization (Note C)   124,463        159,990
Other assets:
   Patent and trademark costs, net of accumulated
     amortization (Note D). . . . . . . . . . . .       127,097         90,099
   Deposit. . . . . . . . . . . . . . . . . . . .         5,000          5,000
                                                    -----------    -----------

          TOTAL . . . . . . . . . . . . . . . . .   $ 2,114,322    $ 2,485,545
                                                    ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
   Accounts payable . . . . . . . . . . . . . . .   $    41,173    $    30,385
   Notes payable to stockholder (Note G). . . . .                       47,549
   Legal fees payable to related party (Note J) .        30,676          4,782
   Accrued interest . . . . . . . . . . . . . . .                       21,989
   Other accrued professional fees. . . . . . . .        53,234          3,822
   Other current liabilities. . . . . . . . . . .        14,441         44,963
   Deferred revenue . . . . . . . . . . . . . . .        17,596
                                                    -----------    -----------

          Total current liabilities . . . . . . .       157,120        153,490

Accrued rent (Note I) . . . . . . . . . . . . . .        14,000         24,500
                                                    -----------    -----------
          Total liabilities . . . . . . . . . . .       171,120        177,990
                                                    -----------    -----------
Commitments (Note I)

Stockholders' equity (Notes E and F):
   Preferred stock, par value $.001 per share,
     5,000,000 shares authorized, 444,444 shares
     issued at December 31, 1996 (liquidation
     preference, $500,000) . . . . . . . . . . . .          444
   Common stock, Class A, par value $.001 per share,
     18,750,000 shares authorized, 1,288,253 and
     1,265,423 shares issued in 1996 and 1995,
     respectively . . . . . . . . . . . . . . . .         1,288          1,265
   Common stock, Class B, par value $.001 per share,
     1,250,000 shares authorized, 1,196,275 and
     1,214,713 shares issued in 1996 and 1995,
     respectively.  Each share is convertible into
     one share of Class A common stock . . . . . .        1,196          1,215
   Additional paid-in capital . . . . . . . . . .     7,273,353      6,732,739
   Deficit accumulated during the development stage  (5,333,079)    (4,427,664)
                                                    -----------    -----------
          Total stockholders' equity. . . . . . . .   1,943,202      2,307,555
                                                    -----------    -----------

          TOTAL . . . . . . . . . . . . . . . . . . $ 2,114,322    $ 2,485,545
                                                    ===========    ===========

The accompanying notes to financial statements are an integral part hereof.
</TABLE>

<PAGE>

<TABLE>
                              SYMBOLLON CORPORATION
                          (a development stage company)

                            STATEMENTS OF OPERATIONS

<CAPTION>
                                                                  July 15, 1986
                                        Year Ended December 31,   (Inception) to
                                       -------------------------    December 31,
                                            1996         1995            1996
                                        -----------  -----------     -----------

<S>                                      <C>          <C>            <C>       
Net sales. . . . . . . . . . . . . . .   $   117,906  $   122,981    $  240,887
Contract revenue . . . . . . . . . . .       144,991      250,000       469,991
License fee revenue. . . . . . . . . .       500,000                    540,000
                                         -----------  -----------    ----------

          Total income . . . . . . . .       762,897      372,981     1,250,878
                                         -----------  -----------    ----------

Operating expenses:
   Cost of goods sold. . . . . . . . .        70,106      103,600       173,706
   Research and development costs . . .    1,002,208      980,220     3,474,338
   General and administrative expenses.      686,026      798,335     2,982,709
                                         -----------  -----------    ----------

          Total operating expenses . .     1,758,340    1,882,155     6,630,753
                                         -----------  -----------    ----------

Loss from operations . . . . . . . . .      (995,443)  (1,509,174)   (5,379,875)

Interest income. . . . . . . . . . . .        92,098      138,791       386,832

Interest expense and debt issuance costs.     (2,070)      (3,328)     (340,036)
                                          ----------  -----------    ----------

NET LOSS . . . . . . . . . . . . . . .    $ (905,415) $(1,373,711)  $(5,333,079)
                                          =========== ============  ============

NET LOSS PER SHARE OF COMMON STOCK . .         $(.52)       $(.79)
                                               ======       ======

Weighted average number of
   common shares outstanding . . . . .     1,781,796    1,734,019
                                          ==========    =========

The accompanying notes to financial statements are an integral part hereof.

</TABLE>

<PAGE>

<TABLE>
                              SYMBOLLON CORPORATION
                          (a development stage company)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<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. . . . . . . . . . . . .                                                            $  (143,451) $(143,451)
Merger and recapitalization, May 1991 (Note A):
  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 -
Issuance of shares, September . . . . . . . . . .                                  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)                              - 0 -
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
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)                              - 0 -
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
                                                 =======   ==== ========= ====== ========= ====== ========== ============ ==========
See Note E for additional information.

The accompanying notes to financial statements are an integral part hereof.

</TABLE>

<PAGE>

<TABLE>
                              SYMBOLLON CORPORATION
                          (a development stage company)

                            STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                                             July 15, 1986
                                                                 Year Ended December 31,     (Inception) to
                                                               --------------------------     December 31,
                                                                  1996           1995             1996
                                                               ----------    ------------     ------------

<S>                                                            <C>           <C>              <C>
Cash flows from operating activities:
   Net loss . . . . . . . . . . . . . .                        $(905,415)    $(1,373,711)     $(5,333,079)
   Adjustments to reconcile net loss to
    net cash used in operating activities:
       Depreciation and amortization expense. . . . . . .          57,680          57,493          319,525
       Amortization of debt issuance costs. . . . . . . .                                          130,000
       Accrued rent . . . . . . . . . . . . . . . . . . .        (10,500)         (4,500)           14,000
       Changes in operating assets and liabilities:
           Accounts receivable. . . . . . . . . . . . . .        (19,536)          15,330         (50,406)
           Inventory. . . . . . . . . . . . . . . . . . .          13,461        (15,763)         (17,818)
           Prepaid expenses . . . . . . . . . . . . . . .         (1,885)           6,402         (82,439)
           Deferred revenue . . . . . . . . . . . . . . .          17,596        (62,500)           17,596
           Accounts payable and other current liabilities.         90,758        (52,593)          196,699
                                                               ----------    ------------      -----------

             Net cash used in operating activities . . . .      (757,841)     (1,429,842)      (4,805,922)
                                                               ----------    ------------      -----------

Cash flows from investing activities:
   Purchase of equipment and leasehold improvements . . .         (5,828)        (79,800)        (255,320)
   Patent and trademark costs . . . . . . . . . . . . . .        (53,323)        (39,601)        (315,765)
   Deposit. . . . . . . . . . . . . . . . . . . . . . . .                                          (5,000)
                                                               ----------    ------------      -----------

             Net cash used in investing activities . . . .       (59,151)       (119,401)        (576,085)
                                                               ----------    ------------      -----------

Cash flows from financing activities:
   Warrant conversion . . . . . . . . . . . . . . . . . .                         629,204          629,204
   Borrowings from stockholders . . . . . . . . . . . . .                                          253,623
   Repayment of borrowings from stockholders. . . . . . .        (21,609)                        (127,683)
   Sale of common stock and units . . . . . . . . . . . .           7,947           9,417        7,227,364
   Sale of option to purchase units . . . . . . . . . . .                                              100
   Public offering costs. . . . . . . . . . . . . . . . .                                      (1,343,502)
   Issuance of preferred stock. . . . . . . . . . . . . .         450,000                          450,000
                                                               ----------    ------------      -----------

             Net cash provided by financing activities . .        436,338         638,621        7,089,106
                                                               ----------    ------------      -----------

NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . .       (380,654)       (910,622)        1,707,099

Cash and cash equivalents at beginning of period . . . . .      2,087,753       2,998,375
                                                               ----------    ------------      -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . . . . .      $1,707,099     $ 2,087,753      $ 1,707,099
                                                               ==========     ===========      ===========

See Note E with respect to noncash transactions.

The accompanying notes to financial statements are an integral part hereof.

</TABLE>

<PAGE>

(NOTE A) - Certain Transactions and Description of Business:

         Symbollon Corporation (the "Company") was originally incorporated as an
Illinois  corporation  on July 15,  1986 as  Symbollon,  Inc.  On May 21,  1991,
Symbollon,   Inc.  was  merged  into  Symbollon  Corporation,   a  newly  formed
Massachusetts  corporation (which was subsequently  reincorporated in Delaware),
to carry on the business of Symbollon,  Inc. At that time, the merged  companies
were recapitalized,  the sole stockholder of Symbollon,  Inc. contributed all of
his stock  subscription  rights and $5,000 to the Company in exchange  for newly
issued shares of the Company and shares of the Company were also issued to a new
investor for $5,000. Except where otherwise indicated, references to the Company
in these  financial  statements  and notes  thereto  include the  activities  of
Symbollon, Inc.

         The  Company  was  formed  to  develop  and  commercialize  proprietary
enzyme-based  products for infection  control and  treatment in  biomedical  and
bioagricultural  industries.  The  Company is in the  development  stage and its
efforts  since  inception  have  been   principally   devoted  to  research  and
development,  securing  patent and  trademark  protection  and raising  capital.
Management of the Company anticipates that additional losses will be incurred as
these efforts are pursued.  Management will seek additional  financing when, and
if,  required  although  there can be no assurance  that such  financing will be
available or on terms acceptable to the Company.

(NOTE B) - Summary of Significant Accounting Policies:

         [1]  Cash and cash equivalents:

                  Cash  and  cash  equivalents  are  short-term,  highly  liquid
investments with maturities of less than three months when purchased.

         [2]  Inventory:

                  Inventory is stated at the lower of cost or market.

         [3]  Revenue recognition:

                  The Company  recognizes  revenue when the Company fulfills all
of its  obligations  under its research  and  licensing  agreements  or when its
products are shipped.  Through  December 31, 1996 the Company has  generated its
revenue from a small number of customers and agreements.

         [4]  Depreciation and amortization:

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

                  Patent  and  trademark  costs are being  amortized  over their
estimated useful lives of 17 years by the straight-line  method.  Such costs are
reviewed  for  impairment  periodically.  If  the  sum of  the  expected  future
undiscounted  cash flows is less than the carrying  amount of such costs, a loss
will be recognized.

<PAGE>

(NOTE B) - Summary of Significant Accounting Policies:  (continued)

         [5]  Loss per share:

                  Loss per share is  calculated  based on the  weighted  average
number of shares of common stock outstanding  during the period.  Shares subject
to restriction  (Note E) are not considered as  outstanding  for  calculation of
loss per share during any period.  Options,  warrants and convertible  preferred
stock have not been considered as they are antidilutive.

         [6]  Stock-based compensation:

                  The Company accounts for its employee stock-based compensation
under Accounting  Principles Board Opinion No. 25,  "Accounting for Stock Issued
to Employees".  In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"  ("SFAS No. 123").  SFAS No. 123  establishes  a  fair-value-based
method of accounting for stock-based compensation plans. The Company adopted the
disclosure only  alternative in 1996 which requires  disclosure of the pro forma
effects on loss and loss per share as if SFAS No. 123 had been adopted,  as well
as certain other information.

         [7]  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.

(NOTE C) - Equipment and Leasehold Improvements:

         Equipment and leasehold  improvements are stated at cost and consist of
the following:

                                                               December 31,
                                                          ---------------------
                                                            1996         1995
                                                          ---------   ---------
                  Equipment and fixtures . . . . . . . .   $218,528    $212,700
                  Leasehold improvements . . . . . . . .     36,791      36,791
                                                          ---------   ---------

                                                            255,319     249,491
                  Less accumulated depreciation
                     and amortization. . . . . . . . . .    130,856      89,501
                                                          ---------   ---------

                  Equipment and leasehold
                     improvements, net . . . . . . . . .   $124,463    $159,990
                                                          =========    ========

<PAGE>

(NOTE D) - Patent and Trademark Costs:

                                                               December 31,
                                                          ---------------------
                                                            1996         1995
                                                          ---------    --------
         Patent costs. . . . . . . . . . . . . . . . . .   $298,704    $253,477
         Trademark costs . . . . . . . . . . . . . . . .     16,272       8,176
                                                          ---------    --------

                                                            314,976     261,653
         Less accumulated amortization . . . . . . . . .    187,879     171,554
                                                          ---------    --------

         Patent and trademark costs, net . . . . . . . .   $127,097    $ 90,099
                                                          =========    ========

(NOTE E) - Capitalization:

         The Company has issued both Class A and B common stock. The Class A and
Class B common stock are substantially  identical except that holders of Class A
common stock have the right to cast one vote for each share held and the Class B
shareholders  have the right to cast five votes for each share held. The Class B
shares are automatically convertible into an equal number of Class A shares upon
the sale or transfer of Class B shares by the original holders thereof,  subject
to certain exceptions.

         On  December  13,  1996  the  Company  requested  its  Class  B  common
stockholders to voluntarily  convert their outstanding  shares of Class B common
stock into an equal number of shares of Class A common stock which  convert on a
one-for-one  basis.  On January 15, 1997,  1,180,537 of the 1,196,275  shares of
Class B common stock were converted.

         On August 14, 1996 the Company completed a private placement of 444,444
shares of a new series of convertible  preferred  stock at a price of $1.125 per
share.  The preferred  stock is  convertible at any time into an equal number of
shares of Class A common stock.  After one year, the conversion  rate is subject
to adjustment if the price of the Class A common stock for the twenty days prior
to conversion is below $1.125.

         In exchange for the shares issued in the private placement, the Company
received net proceeds of approximately  $450,000 and the cancellation of $50,000
of principal and accrued interest on a demand note payable to a stockholder. The
purchasers  of the stock also have a right to purchase  up to 222,222  shares of
Class A common  stock  during the first year after the  private  placement  at a
purchase  price of $2.00 per share if the  preferred  stock is  converted  on or
before  March 31, 1997 or $3.00 per share if the  conversion  is after March 31,
1997.

         The  liquidation  preference  of the  Series A  preferred  stock is the
greater of $1.125 per share plus any  dividends  or an amount  payable  had each
share of preferred  stock been  converted to common stock  immediately  prior to
liquidation.

         If declared, the holders of the outstanding shares of Series A
preferred stock are entitled to cumulative dividends at the annual rate of $.09
per share.

         The  preferred  stock will be  converted  into Class A common  stock if
there is a public  offering  greater than  $5,000,000  with a price per share of
$3.00 or more or a majority  of the  Series A  preferred  stockholders  elect to
convert. The preferred stock will automatically convert on August 14, 2001.


<PAGE>

(NOTE E) - Capitalization:  (continued)

         In addition to the outstanding  options under the Company's stock plans
(Note F), the Company has the  following  options and  warrants  outstanding  at
December 31, 1996:

                                          Number of     Exercise    Expiration
          Security                     Units/Warrants    Price         Date
---------------------------            --------------   ---------  -------------
Redeemable Class A warrants. . . . . .    1,572,080     See below  December 1998
Redeemable Class B warrants. . . . . .    1,227,920     See below  December 1998
Unit purchase option . . . . . . . . .    100,000 units   $9.00    December 1998

         Each Class A warrant  entitles the holder to purchase,  for $8.50,  one
share of Class A common  stock and one  Class B  warrant.  Each  Class B warrant
entitles the holder to purchase,  for $11.00, one share of Class A common stock.
The exercise  prices of the warrants are subject to adjustment  and the warrants
are subject to redemption  in certain  circumstances.  The unit purchase  option
entitles the holder to purchase one share of Class A common  stock,  one Class A
warrant, and one Class B warrant.

         In connection with the Company's public offering,  certain stockholders
agreed to  restrictions on 700,000 shares of the 1,250,000 Class B common shares
outstanding  prior to the offering  whereby those shares will be  transferred to
the Company for no  consideration  if the future earnings  thresholds  described
below are not achieved.  When, and if, the share restrictions are released,  the
Company  will incur an expense  based on the fair market  value of the shares at
the time  the  restrictions  lapse,  which is a  nondeductible  expense  for tax
purposes.

         The  restricted  shares are to be released if the Company  meets any of
the  following  earnings  levels,   (defined  as  income  before  income  taxes,
extraordinary items or any charge related to the release of shares):

                     Fiscal Year Ending                     Earnings
                        December 31,                          Level
                     ------------------                   -----------
                           1997. . . . . . . . . . . . .  $ 7,000,000
                           1998. . . . . . . . . . . . .   10,000,000
                           1999. . . . . . . . . . . . .   15,000,000


(NOTE F) - Stock Plans:

         [1]  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, 1996 the Company has reserved 800,000 shares for issuance under the
Plan, which is an increase of 400,000 shares from December 31, 1995.



<PAGE>


(NOTE F) - Stock Plans:  (continued)

         [1]  Stock plans:  (continued)

                  The employee stock purchase plan (the "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, 1996,  the Company has reserved  200,000  shares for purchase under
the  Plan,  and  there  were  five  employees   eligible  and  three   employees
participating in the Plan.  During the year ended 1996, the Plan purchased 4,392
shares from the Company to satisfy its obligation under the Plan.

                  The Company's  Board of Directors  agreed that on January 1 of
each year,  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.  Pursuant to this arrangement,  options to
purchase  5,000 shares were granted on January 1, 1995.  Subsequent  to December
31, 1995 these options will be granted under the  nonemployee  directors'  stock
option 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.  Options to purchase  15,000 shares were granted on
January 2, 1996. At December 31, 1996 five outside directors were included under
this plan.

                  Under the above plans 636,892  shares are available for future
grant or purchase.

                  On July 1, 1996 all 128,333 of the then  outstanding  employee
stock  options were  repriced to the current  market  price,  using the existing
exercise  durations.   All  vested  options  that  were  repriced  will  not  be
exercisable  until July 1, 1997. If any employee  should leave the Company prior
to July 1, 1997 the vested  options held by that employee can be exercised for a
period up to 60 days following July 1, 1997.



<PAGE>


(NOTE F) - Stock Plans:  (continued)

         [1]  Stock plans:  (continued)

                  The Company had the following option activity in 1995 and
1996:

                                                    Number     Weighted-Average
                                                      of        Exercise Price
                                                    Shares         Per Share
                                                   -------     ----------------
Balance - December 31, 1994. . . . . . . . . . .   163,833           $5.59
Granted. . . . . . . . . . . . . . . . . . . . .    58,000           $5.97
                                                   -------

Balance - December 31, 1995. . . . . . . . . . .   221,833           $3.74
Granted. . . . . . . . . . . . . . . . . . . . .   251,500           $2.32

Repriced options:
   Original. . . . . . . . . . . . . . . . . . .  (128,333)          $5.74
   Repriced. . . . . . . . . . . . . . . . . . .   128,333           $2.31

Cancelled. . . . . . . . . . . . . . . . . . . .   (16,833)          $2.98
                                                  --------           -----
Balance - December 31, 1996. . . . . . . . . . .   456,500           $2.99
                                                  ========           =====

                  Options for 88,333 shares are  exercisable  as of December 31,
1996 at  exercise  prices  ranging  from $4.81 to $10.00 and a  weighted-average
exercise  price  of  approximately  $5.41  per  share,  with a  weighted-average
remaining contractual life of approximately seven years.

                  The  exercise  prices of options  outstanding  at December 31,
1996 range from $1.13 to $10.00 per share and have a  weighted-average  exercise
price of  approximately  $2.99  per  share,  with a  weighted-average  remaining
contractual life of approximately seven years.

                  All options  outstanding at December 31, 1996 are  categorized
by the following ranges in the table below:

                                               Weighted-Average      Number of
                      Range                     Exercise Price        Shares
                  ---------------              ----------------      ---------
                  $1.00 to $ 4.00. . . . . . .      $1.99              318,500
                  $4.00 to $10.00. . . . . . .      $5.26              138,000
                                                                       -------

                                                                       456,500
                                                                       =======

<PAGE>

(NOTE F) - Stock Plans:  (continued)

         [2]  Stock-based compensation:

                  The Company has adopted the disclosure-only provisions of SFAS
No. 123,  but applies  Accounting  Principles  Board  Opinion No. 25 and related
interpretations in accounting for its plans.  There was no compensation  expense
recognized in 1996 or 1995. If the Company had elected to recognize compensation
cost for the plans based on the fair value at the grant date for awards  granted
as of January 1, 1995 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:

                                                    Year Ended December 31,
                                                    --------------------------
                                                     1996              1995
                                                    -----------   ------------
Net loss              As reported. . . . . . . . .  $  (905,415)  $(1,373,711)
                      Pro forma. . . . . . . . . .   (1,019,725)   (1,382,724)
Net loss per share    As reported. . . . . . . . .         (.52)         (.79)
                      Pro forma. . . . . . . . . .         (.57)         (.80)

                  The fair value of the Company's  stock options used to compute
pro forma net loss and net loss per share  disclosures is the estimated  present
value at grant  date  using  the  Black-Scholes  option-pricing  model  with the
following  weighted-average  assumptions  for 1996 and 1995:  dividend  yield of
2.5%;  expected  volatility of 40%; a risk-free  interest rate of between 5% and
8%; and an expected holding period of two to five years.

                  The  per  share  weighted-average  grant-date  fair  value  of
options  granted during the years ended December 31, 1996 and 1995 was $1.23 and
$2.03, respectively.

(NOTE G) - Notes Payable:

         At December 31, 1995, a note payable to a  stockholder  for $47,549 was
outstanding.  On August 14, 1996 the note and accrued  interest  thereon totaled
$71,608.  The  stockholder  received cash of $21,608 and converted  $50,000 into
preferred stock (Note E).


(NOTE H) - Income Taxes:

         At December  31,  1996,  the Company  had no current tax  liability  or
deferred tax  liability.  It had deferred tax assets due to net  operating  loss
carryforwards   and  research   and   development   tax  credits   amounting  to
approximately $2,004,000 and $100,000, respectively, all of which had been fully
reserved  because  the  likelihood  of  realization  of the  benefits  cannot be
established. The expected tax benefit derived by applying statutory tax rates to
the loss before  income taxes for 1996 and 1995 has been  eliminated  due to the
increase in the valuation reserve.

         At December 31, 1996, the Company had a net operating loss carryforward
amounting to approximately $5,010,000 which expires at various dates through
2011.

         The Company is subject to Internal  Revenue Code provisions which limit
the  loss  carryforwards  available  for use in any  given  year if  significant
changes in ownership occur.


<PAGE>

(NOTE I) - Commitments:

         [1]  Facilities lease:

                  The Company  leases its  facilities  under an operating  lease
that expires on  September  30, 1997 for which the rent for the year then ending
amounts to $51,000.  The lease is  renewable at the option of the Company for an
additional  five  years at a rent to be  negotiated  at the time the  option  is
exercised.

                  Rent  expense  for the  years  ended  December  31,  1996  and
December 31, 1995 was $36,000.

         [2]  Employment agreements:

                  The Company has entered into  employment  agreements  with its
principal  officers  providing for minimum base  compensation and severance pay.
For the years ended  December  31, 1996 and December  31,  1995,  the  aggregate
amounts paid under these  agreements  were $280,000 and $329,000,  respectively.
The employment  agreements provide for inflationary  adjustments and are subject
to other  increases  based on the Board of Director's  approval.  Two employment
agreements  are in effect  which expire  December  31, 2000.  Amounts to be paid
under these agreements in 1997 total approximately $280,000.

         [3]  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, 1996 no
royalties have been earned under this agreement.

         [4]  Consulting agreements:

                  The Company has entered into various  scientific  advisory and
consulting  agreements,  including  agreements  with  certain  directors  of the
Company,  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, 1996 and December 31,
1995 amounted to approximately $125,400 and $216,000,  respectively. The Company
expects to incur similar or higher expenses in future years.

(NOTE J) - Legal Fees Payable to Related Party:

         A partner in the law firm that  received  fees of $31,200  and  $77,245
from the  Company  in 1996 and 1995,  respectively,  is also a  director  of the
Company and a principal stockholder of a corporate stockholder of the Company.


<PAGE>

(NOTE K) - Collaborative Agreement:

         On May 14, 1996, the Company entered into a  collaboration  and license
agreement with a pharmaceutical  company.  The agreement  provides for milestone
and  royalty  payments  in  exchange  for a license to  Symbollon's  technology,
proprietary  information  and patents.  The Company is  reimbursed  for its work
under the  agreement  on an hourly basis plus  materials  and third party costs.
Through December 31, 1996,  approximately  $145,000 of  reimbursement  costs had
been received and an  additional  $500,000 was received for the execution of the
agreement.  Unless  terminated sooner by either party, the agreement will remain
in effect until the last of the licensed patents expire.

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 1997 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 1997 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 1997 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 1997 Annual Meeting of Stockholders.

<PAGE>

Item 13  .  Exhibits, List 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.

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 23, 1995, between the Company and
         Dr. Jack H. Kessler.

6        Employment Agreement, dated July 1, 1996, 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 of the year
ended December 31, 1996.


<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
                                               Executive Vice President,
                                               Chief Financial Officer

Date: March 28, 1997

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          Executive Vice-President,          March 28, 1997
------------------------      Chief Scientific Officer,
     Jack H. Kessler          Secretary and Chairman
                              of the Board of Directors
                              (Principal Executive Officer)

 /s/ Paul C. Desjourdy        Executive Vice President           March 28, 1997
-------------------------     Treasurer, Chief Financial
     Paul C. Desjourdy        Officer, and Director (Principal
                              Financial and Accounting Officer)

 /s/ Stuart M. Paley          Director                           March 28, 1997
-------------------------
     Stuart M. Paley

 /s/ Edward A. Mason          Director                           March 28, 1997
-------------------------
     Edward A. Mason

 /s/ James C. Richards        Director                           March 28, 1997
-------------------------
     James C. Richards

 /s/ Irwin M. Rosenthal       Director                           March 28, 1997
--------------------------
     Irwin M. Rosenthal

<PAGE>

                              Symbollon Corporation
                                Index to Exhibits

3.1      Certificate of Incorporation of the Company;  including  Certificate of
         Designations, Preferences and Rights of Series A Preferred Stock of the
         Company. (previously filed as an exhibit to Form 10-QSB for the quarter
         ended September 30, 1996 and incorporated by reference.)

3.2      By-Laws of the Company. (1)

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). (1)

4.1      Form of Warrant Agreement among the Company, D.H. Blair Investment
         Banking Corp. (the  "Underwriter") and American Stock Transfer and
         Trust Company, including forms of Class A and Class B Warrant
         Certificates. (1)

4.2      Form of Specimen Class A Common Stock Certificate. (1)

4.3      Form of Stock Restriction Agreement among the Company, the Class B
         Stockholders and the Underwriter. (1)

10.1     1993 Stock Option Plan of the  Company,  as amended.  (incorporated  by
         reference  to  Exhibit  A to the  Company's  1994  Annual  Stockholders
         Meeting Proxy  Statement filed under cover of Schedule 14A dated May 4,
         1994.)

10.2     Consulting and Separation Agreement, dated September 24, 1995, between
         the Company and Dr. James C. Richards. (previously filed as an exhibit
         to Form 10-KSB for the year ended December 31, 1995 and incorporated
         by reference.)

10.3     Employment Agreement, dated December 23, 1995, between the Company and
         Dr. Jack H. Kessler. (previously  filed as an  exhibit  to Form  10-KSB
         for the year ended December 31, 1995 and incorporated by reference.)

10.4     Lease dated October 1, 1992 between Stanley W. Snider and the Company.
         (1)

10.5     Form of Employment Agreement, effective July 1, 1996, between the
         Company and Paul C. Desjourdy. (previously filed as an exhibit to Form
         10-QSB for the quarter ended June 30, 1996 and incorporated by
         reference.)

10.6     Form of Indemnification Agreement between the Company and each officer
         and director of the Company. (1)

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

10.8     Agreement, dated August 31, 1992 among the Company, Dr. Jack H. Kessler
         and Dr. Robert Rosenbaum. (1)

10.9     Promissory note dated August 1, 1993 issued by the Company to Dr. Jack
         Kessler. (1)

10.10    Form of Stock Option Agreement to be entered into between the Company
         and each option holder. (1)

10.11    Consultant Agreement between Mr. Smith and the Company dated
         March 23, 1994, as amended on September 1, 1995. (previously filed
         as an exhibit to Form 10-KSB for the year ended December 31, 1995 and
         incorporated by reference.)

10.12    Consultant  Agreement  between Dr. Mason and the Company  dated June 1,
         1994  (previously  filed as an exhibit to Form  10-QSB for the  quarter
         ended June 30, 1994 and incorporated by reference).

10.13    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.)

10.14    1995 Non-Employee Directors' Stock Option Plan of the Company.
         (previously filed as an exhibit to Form 10-QSB for the quarter ended
         June 30, 1995 and incorporated by reference.)

10.15    Collaboration  and License  Agreement,  dated May 14, 1996  between the
         Company and  Oclassen  Pharmaceuticals,  Inc.  (previously  filed as an
         exhibit  to Form  10-QSB  for the  quarter  ended  June  30,  1996  and
         incorporated by reference.)

10.16    Stock Purchase Agreement, dated August 14, 1996, among the Company,
         Anthony J. Cantone and Jack H. Kessler. (previously filed as an exhibit
         to Form 10-QSB for the quarter ended September 30, 1996 and
         incorporated by reference.)

11.1     Statement re Computation of Earnings per Share.

23.1     Consent of Richard A. Eisner & Company, LLP

27.1     Financial Data Schedule
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(1)  Incorporated  by  reference  to the  corresponding  exhibit  number  of the
Registration  Statement  on Form  SB-2  (Registration  No.  33-68828)  filed  on
November 24, 1993 and declared effective on December 7, 1993.