-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NlrAY7sW9KgRnUuLy65QOWw69n1nVMTaGgcEvPZiF/yd1Nna+ns6B+2tgOS0S0Ue fjSrx5mK3Vt3nomXSwOovw== 0000858155-97-000003.txt : 19970514 0000858155-97-000003.hdr.sgml : 19970514 ACCESSION NUMBER: 0000858155-97-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROTEIN POLYMER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000858155 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 330311631 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19724 FILM NUMBER: 97602286 BUSINESS ADDRESS: STREET 1: 10655 SORRENTO VALLEY RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195586064 10QSB 1 FORM 10QSB PAGE ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ____________________ Commission file number 0-19724 PROTEIN POLYMER TECHNOLOGIES, INC. (Exact name of small business issuer as specified in its charter) Delaware 33-0311631 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10655 Sorrento Valley Road, San Diego, CA 92121 (Address of principal executive offices) (619) 558-6064 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of April 30, 1997, 9,141,228 shares of common stock were outstanding. Transitional Small Business Disclosure Format (check one): Yes ___ No _X_ ================================================================================ PAGE PROTEIN POLYMER TECHNOLOGIES, INC. FORM 10-QSB INDEX Page No. ________ PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Balance Sheets - March 31, 1997 and December 31, 1996........................... 3 Condensed Statements of Operations - For the Three Months ended March 31, 1997 and 1996....................................... 4 Condensed Statements of Cash Flows - For the Three Months ended March 31, 1997 and 1996....................................... 5 Notes to Condensed Financial Statements......................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................... 9 Signature........................................... 10 2 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Balance Sheets March 31, December 31, 1997 1996 ____________ ____________ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 661,939 $ 267,357 Short-term investments 4,329,113 993,042 Accounts receivable 56,922 20,448 Inventory 15,204 20,694 Other current assets 53,625 36,113 ____________ ____________ Total current assets 5,116,803 1,337,654 Deposits 30,479 22,257 Deferred offering costs - 17,356 Equipment and leasehold improvements, net 386,827 369,314 ____________ ____________ $ 5,534,109 $ 1,746,581 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 171,222 $ 251,321 Accrued employee benefits 134,078 117,612 Other accrued expenses 100,173 53,525 Deferred revenue 95,750 75,000 ____________ ____________ Total current liabilities 501,223 497,458 Stockholders' equity: Series D convertible preferred stock, $.01 par value, 71,600 shares authorized,49,187 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively - liquidation preference $4,918,700 4,764,745 4,764,745 Common stock, $.01 par value, 25,000,000 shares authorized, 9,141,228 and 7,233,228 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively 91,412 72,333 Additional paid-in capital 20,224,905 15,619,282 Accumulated deficit (20,084,593) (19,207,237) ____________ ____________ Total stockholders' equity 4,996,469 1,249,123 ____________ ____________ $ 5,534,109 $ 1,746,581 ============ ============ See accompanying notes. 3 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Statements of Operations Three months ended March 31, 1997 1996 ____________ ____________ (unaudited) Revenues: Contract revenue $ 137,250 $ - Interest income 62,445 20,955 Product and other income 18,604 15,514 ____________ ____________ Total revenues 218,299 36,469 Expenses: Cost of sales 11,888 6,214 Research and development 638,929 447,162 Selling, general and administrative 428,588 310,349 Royalties 16,250 16,250 ____________ ____________ Total expenses 1,095,655 779,975 ____________ ____________ Net loss (877,356) (743,506) Undeclared dividends on preferred stock 121,282 122,295 ____________ ____________ Net loss applicable to common shareholders $ (998,638) $ (865,801) ============ ============ Net loss per common share $ (0.11) $ (0.15) ============ ============ Shares used in computing net loss per common share 9,035,106 5,866,898 ============ ============ See accompanying notes. 4 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Statements of Cash Flows Three months ended March 31, 1997 1996 ____________ ____________ (unaudited) OPERATING ACTIVITIES Net loss $ (877,356) $ (743,506) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 36,289 28,101 Changes in assets and liabilities: Inventory 5,490 1,935 Deposits (8,222) (1,150) Deferred offering costs 17,356 - Other current assets (53,986) (23,817) Accounts payable (80,099) 46,837 Accrued employee benefits 16,466 7,067 Other accrued expenses 46,648 (19,778) Deferred revenue 20,750 - ____________ ____________ Net cash used for operating activities (876,664) (704,311) INVESTING ACTIVITIES Purchase of equipment and improvements (15,207) (63,157) Short-term investments (3,336,071) 650,000 ____________ ____________ Net cash provided by (used for) investing activities (3,351,278) 586,843 FINANCING ACTIVITIES Net proceeds from exercise of options and warrants, and sale of common stock 4,624,702 281,160 Payment on capital lease obligations (2,178) - ____________ ____________ Net cash provided by financing activities 4,622,524 281,160 ____________ ____________ Net increase in cash and cash equivalents 394,582 163,692 Cash and cash equivalents at beginning of the period 267,357 471,296 ____________ ____________ Cash and cash equivalents at end of the period $ 661,939 $ 634,988 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 472 $ - Equipment financed by capital leases $ 38,595 $ - See accompanying notes. 5 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Notes to Condensed Financial Statements (Unaudited) March 31, 1997 1. Basis of Presentation The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three months ended March 31, 1997 and 1996 are unaudited. These financial statements reflect all adjustments, consisting of only normal recurring adjustments which, in the opinion of management, are necessary to state fairly the financial position at March 31, 1997 and the results of operations for the three months ended March 31, 1997 and 1996. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results to be expected for the year ended December 31, 1997. For more complete financial information, these financial statements and the notes thereto should be read in conjunction with the audited financial statements included in the Company's Annual Report and Form 10-KSB for the year ended December 31, 1996, filed with the Securities and Exchange Commission. 2. Net Loss Per Share Net loss per share is computed using the weighted average number of common shares outstanding during the period. The net loss figures used for this calculation recognize accumulated dividends on the Company's Series D Preferred Stock. Such dividends are payable when declared by the Board of Directors in cash or common stock. 3. Accounting Standards on Earnings Per Share In February 1997 the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is not expected to be material. 4. Liquidity The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company believes its existing available cash and short-term investments as of March 31, 1997 is sufficient to meet its anticipated capital requirements until July 1998. Substantial additional capital resources will be required to fund continuing expenditures related to the Company's research, development and product marketing activities. If adequate funds are not available, the Company may be required to significantly curtail its operating plans and relinquish rights to significant portions of the Company's technology or potential products. 5. Subsequent Event A loan for $140,000, secured by a pledge of stock, was made to an officer of the Company on April 16, 1997, solely to meet tax obligations arising from the exercise of a stock option. Interest will accrue at the annual rate of 8% on the unpaid principal balance. All remaining principal and accrued interest thereon is to be paid to the Company in full by April 16, 1998. 6 PAGE Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Overview Protein Polymer Technologies, Inc. is a development-stage biotechnology company engaged in the research, development and production of proprietary protein-based biomaterials. Since 1992 the Company has focused on medical uses for its materials, primarily for the surgical repair markets: tissue adhesives and sealants; wound healing; tissue augmentation; surgical adhesion barriers; and drug delivery devices. The Company has also developed technology that can efficiently modify and improve the surface properties of more traditional implantable materials used in a variety of applications, including cardiovascular and stent products and contact lenses. The Company has been unprofitable to date, and has an accumulated deficit of $20,085,000. In September 1995 the Company entered into collaborative agreements with Ethicon, Inc., a subsidiary of the Johnson & Johnson Company, related to the Company's tissue adhesives and sealants program. To date the Company has received $1.6 million in contractual payments from Ethicon as reimbursements for ongoing program research and development efforts. The Company's intended strategy with most of its other programs is to enter into product development agreements with additional medical product marketing and distribution companies. In early January 1997 the Company received $4.76 million, less expenses of approximately $140,000, from a private placement of the Company's common stock with a number of institutional and qualified individual investors, consisting of 1,904,000 shares at $2.50 per share. The Company agreed to register the shares with the Securities and Exchange Commission promptly after the closing; the registration was declared effective on January 24, 1997. Results of Operations Contract research revenue for the three months ended March 31, 1997 totaled $137,000, compared to no revenue for the same period in 1996. The revenue represents contractual payments from Ethicon related to the Company's tissue adhesives and sealants program. Interest income was $62,000 for the three months ended March 31, 1997, versus $21,000 for the same period in 1996. The increase resulted from additional cash available for investing received from the sale of common stock in a private placement. For the three months ended March 31, 1997 and 1996, sales and license fees from the Company's ProNectin(R) F product line were $19,000 and $16,000, respectively. The increase was due to reorders into the distributor pipeline. Cost of sales was $12,000 for the three months ended March 31, 1997, compared to $6,000 for the same period in 1996. The increase related primarily to the mix of product sold. Royalty expenses paid to Stanford University and Telios Pharmaceuticals, Inc. were $16,000 for each of the three month periods ended March 31, 1997 and 1996. Research and development expenses for the three months ended March 31, 1997 were $639,000, compared to $447,000 for the same period in 1996, a 43% increase. The increase was primarily attributable to expanded efforts related to the tissue adhesives program, including preparation for Good Laboratory Practices ("GLP") laboratory testing and materials manufacturing capabilities, as required by the Food and Drug Administration. The Company expects that its research and development expenses will continue to increase over time to the extent its projects are successfully progressing and additional capital is obtained. 7 PAGE Selling, general and administrative expenses for the three months ended March 31, 1997 were $429,000, as compared to $310,000 for the same period in 1996, a 38% increase. This increase was primarily due to additional patent, legal and insurance expenses and expanded investor relations efforts. The Company expects its selling, general and administrative expenses to continue to increase as support for its research and development efforts require and to the extent additional capital is raised. For the three months ended March 31, 1997, the Company recorded a net loss applicable to common shareholders of $999,000, or $.11 per share compared to a loss of $866,000, or $.15 per share for the same period in 1996. Also included in each of the three month periods of 1997 and 1996 was $121,000 and $122,000, respectively, for undeclared dividends related to the Company's preferred stock. The Company expects to incur similar or increasing operating losses for the immediate future (to the extent additional capital is obtained), due primarily to increases in the Company's product development, manufacturing and business development activities. The Company's results depend on its ability to generate product and contract revenues and establish strategic alliances, increased research, development and manufacturing efforts, preclinical and clinical product testing and commercialization expenditures, expenses incurred for regulatory compliance and patent prosecution, and other factors. The Company's results will also fluctuate from period to period due to timing differences. To date the Company believes that inflation and changing prices have not had a material effect on its continuing operations. Liquidity and Capital Resources As of March 31, 1997, the Company had cash, cash equivalents and short-term investments of $4,991,000 as compared to $1,260,000 at December 31, 1996. As of March 31, 1997, the Company had working capital of $4,612,000, compared to $840,000 at December 31, 1996. In early January 1997 the Company received $4.76 million, less expenses of approximately $140,000, from a private placement of the Company's common stock with a number of institutional and qualified individual investors, consisting of 1,904,000 shares at $2.50 per share. The Company had long-term debt obligations as of March 31, 1997 of $36,000 in the form of capital lease obligations, versus no such obligation as of December 31, 1996. For the three months ending March 31, 1997, the Company's expenditures for capital equipment and leasehold improvements totaled $54,000, compared with $63,000 for the same period last year. The Company is expecting to increase its capital expenditures in the next few quarters (to the extent additional capital is obtained), as the Company improves existing space to achieve GLP compliance for laboratory testing and materials manufacturing requirements. The Company may enter into additional capital lease arrangements, if available or under appropriate terms and timing. The Company believes its existing available cash and short-term investments as of March 31, 1997 will be sufficient to meet its anticipated capital requirements until July 1998. Substantial additional capital resources will be required to fund continuing expenditures related to the Company's research, development and manufacturing activities. The Company believes there may be a number of alternatives to meet the continuing capital requirements of its operations, such as additional collaborative agreements and public or private financings, and is actively pursuing all of these approaches. However, there can be no assurance that the requisite fundings will be consummated in the necessary time frame or on terms favorable to the Company. If adequate funds are not available, the Company may be required to significantly curtail its operating plans and relinquish rights to significant portions of the Company's technology or potential products. 8 PAGE PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: Exhibit Number Description 27 Financial Data Schedule b. Reports on Form 8-K: None. 9 PAGE SIGNATURE In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PROTEIN POLYMER TECHNOLOGIES, INC. Date: May 9, 1997 By: /s/ J. Thomas Parmeter _______________ __________________________________ J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date: May 9, 1997 By: /s/ Aron P. Stern _______________ __________________________________ Aron P. Stern Vice President, Finance and Administration and Chief Financial Officer 10 PAGE EXHIBIT INDEX Exhibit Sequentially Number Description Numbered Page 27 Financial Data Schedule 12 11 PAGE EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 661939 4329113 22359 (435) 15204 5116803 1345278 (958451) 5534109 501223 0 0 4764745 20316317 (20084583) 4996469 18604 218299 11888 28138 1067517 0 0 (998638) 0 (998638) 0 0 0 (998638) (0.11) (0.11)
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