-----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, AgNJJ4VoLr429No8iYw8Y0JY4MD3/wnPxRg3WZFxaBUHgU1NMjagDGfh2vkH4pR0 s6i6d3zx26PrJS7fHY+V0g== 0000858155-97-000005.txt : 19970815 0000858155-97-000005.hdr.sgml : 19970815 ACCESSION NUMBER: 0000858155-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660146 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 June 30, 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 August 13, 1997, 9,170,140 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 - June 30, 1997 and December 31, 1996............................ 3 Condensed Statements of Operations - For the Three and Six Months Ended June 30, 1997 and 1996........................................ 4 Condensed Statements of Cash Flows - For the Six Months Ended June 30, 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 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K.................... 10 Signature........................................... 11 2 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Balance Sheets June 30, December 31, 1997 1996 ____________ ____________ ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 520,854 $ 267,357 Short-term investments 3,158,443 993,042 Interest receivable 79,235 20,448 Inventory, net 10,167 20,694 Other current assets 184,049 36,113 ____________ ____________ Total current assets 3,952,748 1,337,654 Deposits 38,479 22,257 Deferred offering costs - 17,356 Equipment and leasehold improvements, net 530,081 369,314 ____________ ____________ $ 4,521,308 $ 1,746,581 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 360,399 $ 251,321 Accrued employee benefits 139,980 117,612 Other accrued expenses 82,197 53,525 Deferred revenue 75,000 75,000 ____________ ____________ Total current liabilities 657,576 497,458 Long-term portion capital leases 33,894 - Stockholders' equity: Series D convertible preferred stock, $.01 par value, 71,600 shares authorized,49,187 shares issued and outstanding at June 30, 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, 9,153,048 and 7,233,228 shares issued and outstanding at June 30, 1997 and December 31, 1996, respectively 91,531 72,333 Additional paid-in capital 20,238,721 15,619,282 Accumulated deficit (21,265,159) (19,207,237) ____________ ____________ Total stockholders' equity 3,829,838 1,249,123 ____________ ____________ $ 4,521,308 $ 1,746,581 ============ ============ See accompanying notes. 3 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Statements of Operations Three Months Six Months Ended June 30, Ended June 30, 1997 1996 1997 1996 __________ __________ __________ __________ Revenues: Contract revenue $ 95,750 $ 100,000 $ 233,000 $ 100,000 Interest income 59,289 18,102 121,734 39,057 Product and other income 15,300 9,010 33,904 24,524 __________ __________ __________ __________ Total revenues 170,339 127,112 388,638 163,581 Expenses: Cost of sales 6,033 5,670 17,921 11,885 Research and development 777,296 461,107 1,416,225 908,269 Selling, general and administrative 561,326 356,806 989,914 667,155 Royalties 6,250 6,250 22,500 22,500 __________ __________ __________ __________ Total expenses 1,350,905 829,833 2,446,560 1,609,809 __________ __________ __________ __________ Net loss (1,180,566) (702,721) (2,057,922) (1,446,228) Undeclared dividends on preferred stock 122,630 122,295 243,912 244,590 __________ __________ __________ __________ Net loss applicable to common shareholders $(1,303,196) $ (825,016) $(2,301,834) $(1,690,818) =========== =========== =========== =========== Net loss per common share $ (0.14) $ (0.13) $ (0.25) $ (0.27) =========== =========== =========== =========== Shares used in computing loss per common share 9,148,593 6,454,777 9,092,163 6,160,837 =========== =========== =========== =========== See accompanying notes. 4 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Statements of Cash Flows Six months ended June 30, 1997 1996 ____________ ____________ (unaudited) OPERATING ACTIVITIES Net loss $ (2,057,922) $ (1,446,228) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 76,572 55,098 Changes in assets and liabilities: Inventory 10,527 3,324 Deposits (16,222) (800) Deferred offering costs 17,356 - Other current assets (206,723) (331,798) Accounts payable 109,078 (14,636) Accrued employee benefits 22,368 12,039 Other accrued expenses 28,672 (16,325) ____________ ____________ Net cash used for operating activities (2,016,294) (1,739,326) INVESTING ACTIVITIES Purchase of equipment and improvements (198,744) (35,311) Short-term investments (2,165,401) 1,340,000 ____________ ____________ Net cash provided by (used for) investing activities (2,364,145) 1,304,689 FINANCING ACTIVITIES Net proceeds from exercise of options and warrants, and sale of common stock 4,638,637 1,093,939 Payment on capital lease obligations (4,701) - ____________ ____________ Net cash provided by financing activities 4,633,936 1,093,939 ____________ ____________ Net increase in cash and cash equivalents 253,497 659,302 Cash and cash equivalents at beginning of the period 267,357 471,296 ____________ ____________ Cash and cash equivalents at end of the period $ 520,854 $ 1,130,598 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 1,824 $ - Equipment financed by capital leases $ 38,595 $ - See accompanying notes. 5 PAGE PROTEIN POLYMER TECHNOLOGIES, INC. Notes to Condensed Financial Statements (Unaudited) June 30, 1997 1. Basis of Presentation The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three and six months ended June 30, 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 June 30, 1997 and the results of operations for the three and six months ended June 30, 1997 and 1996. The results of operations for the three and six months ended June 30, 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 June 30, 1997 is sufficient to meet its anticipated capital requirements until June 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. 6 PAGE Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED HEREIN, AS WELL AS THOSE DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1996. 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: surgical adhesives and sealants, soft tissue augmentation, wound healing and tissue engineering, surgical adhesion barriers and drug delivery devices. The Company has also developed coating technology that can efficiently modify and improve the surface properties of more traditional implantable materials used in a variety of applications, including cardiovascular products and contact lenses. The Company has been unprofitable to date, and has an accumulated deficit of $21,265,000. In September 1995 the Company entered into collaborative agreements with Ethicon, Inc., a subsidiary of the Johnson & Johnson Company, related to the Company's surgical adhesives and sealants program. To date the Company has received $1.7 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 June 30, 1997 totaled $96,000, compared to $100,000 revenue for the same period in 1996. For the six month period ended June 30, 1997 these revenues were $233,000, compared to $100,000 for the same period in 1996. The revenue represents contractual payments from Ethicon related to the Company's surgical adhesives and sealants program. 7 PAGE Interest income was $59,000 for the three months ended June 30, 1997, versus $18,000 for the same period in 1996. For the six month period ended June 30, 1997 interest income was $122,000, compared to $39,000 for the same period in 1996. The increase in income resulted from additional cash made available for investing from the sale of common stock in a private placement during January 1997. For the three months ended June 30, 1997 and 1996, sales from the Company's ProNectin(R) F product line were $15,000 and $9,000, respectively. For the six month period ended June 30, 1997 these product sales were $34,000, compared to $25,000 for the same period in 1996. The increases were due to reorders into the distributor pipeline. Cost of sales was $6,000 for the three months ended June 30, 1997, compared to $6,000 for the same period in 1996. For the six month period ended June 30, 1997 these expenses were $18,000, compared to $12,000 for the same period in 1996. The increases related primarily to the mix of product sold. Royalty expenses paid to Stanford University and Telios Pharmaceuticals, Inc. were $6,000 for each of the three month periods ended June 30, 1997 and 1996. These expenses were $23,000 for each of the six month periods ended June 30, 1997 and 1996. Research and development expenses for the three months ended June 30, 1997 were $777,000, compared to $461,000 for the same period in 1996, a 69% increase. For the six month period ended June 30, 1997 these expenses were $1,416,000, compared to $908,000 for the same period in 1996, a 56% increase. These increases were primarily attributable to expanded efforts related to the Company's surgical adhesives and sealants program and the soft tissue augmentation program, including preparation for Good Laboratory Practices ("GLP") materials manufacturing and testing capabilities, as required by the Food and Drug Administration before entering clinical trials. The Company expects that its research and development expenses will continue to increase over time to the extent its programs are successfully progressing and additional capital is obtained. Selling, general and administrative expenses for the three months ended June 30, 1997 were $561,000, as compared to $357,000 for the same period in 1996, a 57% increase. For the six month period ended June 30, 1997 these expenses were $990,000, compared to $667,000 for the same period in 1996, a 48% increase. These increases were 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 June 30, 1997, the Company recorded a net loss applicable to common shareholders of $1,303,000, or $.14 per share, compared to a loss of $825,000, or $.13 per share for the same period in 1996. For the six month period ended June 30, 1997 the net loss applicable to common shareholders was $2,302,000, or $.25 per share, compared to a loss of $1,691,000, or $.27 per share for the same period in 1996. Included in the net loss figures for each of the three and six month periods of 1997 and 1996 were undeclared dividends related to the Company's preferred stock. 8 PAGE 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, establish and maintain strategic alliances, increased research, development and manufacturing efforts, preclinical and clinical product testing and commercialization expenditures, expenses incurred for regulatory compliance and seeking various regulatory approvals, 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 June 30, 1997, the Company had cash, cash equivalents and short-term investments of $3,679,000 as compared to $1,260,000 at December 31, 1996. As of June 30, 1997, the Company had working capital of $3,295,000, 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 June 30, 1997 of $34,000 in the form of capital lease obligations, versus no such obligation as of December 31, 1996. For the six months ending June 30, 1997, the Company's expenditures for capital equipment and leasehold improvements totaled $199,000, compared with $35,000 for the same period last year. The Company is expecting to continue increasing 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 June 30, 1997 will be sufficient to meet its anticipated capital requirements until June 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. 9 PAGE PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders was held on April 25, 1997. Proposals voted upon and the results of voting were as follows: (1) Proposal to approve the Company's 1996 Employee Stock Purchase Plan. Votes for: 4,678,394 Votes against: 87,843 Abstentions: 60,925 Broker non-votes: 2,040,050 (2) Proposal to approve ratification of Ernst & Young, LLP as independent auditors for the fiscal year ending December 31, 1997. Votes for: 6,827,392 Votes against: 19,345 Abstentions: 20,475 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. 10 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: August 13, 1997 By: /s/ J. Thomas Parmeter _________________ __________________________________ J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date: August 13, 1997 By: /s/ Aron P. Stern _________________ __________________________________ Aron P. Stern Vice President, Finance and Administration and Chief Financial Officer 11 PAGE EXHIBIT INDEX Exhibit Sequentially Number Description Numbered Page ________ ___________________________________________ _____________ 27 Financial Data Schedule 13 12 PAGE EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 3-MOS 6-MOS DEC-31-1997 DEC-31-1997 APR-01-1997 JAN-01-1997 JUN-30-1997 JUN-30-1997 520854 520854 3158443 3158443 8383 8383 0 0 10167 10167 3952748 3952748 1528815 1528815 (998734) (998734) 4521308 4521308 657576 657576 0 0 0 0 4764745 4764745 20330252 20330252 (21265159) (21265159) 4521308 4521308 15300 33904 170339 388638 6033 17921 12283 40421 1338622 2406139 0 0 0 0 (1303196) (2301834) 0 0 (1303196) (2301834) 0 0 0 0 0 0 (1303196) (2301834) (0.14) (0.25) (0.14) (0.25)
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