10QSB 1 d10qsb.txt QUARTERLY REPORT ================================================================================ 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 September 30, 2001 [_] 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 Identification No.) incorporation or organization) 10655 Sorrento Valley Road, San Diego, CA 92121 (Address of principal executive offices) (858) 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 November 9, 2001, 21,735,420 shares of common stock were outstanding. Transitional Small Business Disclosure Format (check one): Yes [_] No [X] ================================================================================ 1 PROTEIN POLYMER TECHNOLOGIES, INC. FORM 10-QSB INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Balance Sheets - September 30, 2001 and December 31, 2000 .............................. 3 Condensed Statements of Operations - For the Three Months and Nine Months ended September 30, 2001 and 2000 and the period July 6, 1988 (inception) to September 30, 2001 ..... 4 Condensed Statements of Cash Flows - For the Nine Months ended September 30, 2001 and 2000 and the period July 6, 1988 (inception) to September 30, 2001 ..... 5 Notes to Condensed Financial Statements ............................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................... 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ................................. 15 Signature ........................................................ 14
2 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Balance Sheets
September 30, December 31, 2001 2000 ------------------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 683,675 $ 866,220 Other current assets 108,867 55,180 ------------------------------------- Total current assets 792,542 921,400 Deposits 73,977 71,177 Notes receivable from officers 140,000 140,000 Equipment and leasehold improvements, net 242,098 250,257 ------------------------------------- $ 1,248,617 $ 1,382,834 ===================================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 191,340 $ 206,981 Accrued employee benefits 109,197 69,657 Other accrued expenses 43,599 47,418 Current portion capital lease obligations - 25,088 Deferred revenue 333,333 333,333 Deferred rent 97,474 96,191 ------------------------------------- Total current liabilities 774,943 778,668 Long-term portion deferred revenue 83,333 333,334 Stockholders' equity: Convertible Preferred Stock, $.01 par value, 5,000,000 shares authorized, 88,259 and 80,076 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively; liquidation preference of $8,825,900 and $8,007,600 at September 30, 2001 and December 31, 2000, respectively 8,480,530 7,662,272 Common stock, $.01 par value, 40,000,000 shares authorized, 21,735,420 and 18,910,313 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively 217,365 189,115 Additional paid-in capital 33,789,995 32,163,017 Deficit accumulated during development stage (42,097,549) (39,743,572) ------------------------------------- Total stockholders' equity 390,341 270,832 ------------------------------------- $ 1,248,617 $ 1,382,834 =====================================
See accompanying notes. 3 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Operations (unaudited)
For the period July 6, 1988 Three months ended Nine months ended (inception) to September 30, September 30, Sept. 30, 2001 2000 2001 2000 2001 ------------------------------------------------------------------------------------------ Revenues: Contract revenue $ 283,333 $ 103,333 $ 550,000 $ 593,240 $ 6,014,681 Interest income 12,175 22,543 38,857 68,194 1,238,216 Product and other income - - 38 3,011 687,367 ------------------------------------------------------------------------------------------ Total revenues 295,508 125,876 588,895 664,445 7,940,264 Expenses: Research and development 677,861 579,041 1,880,382 1,775,779 28,956,437 Selling, general and administrative 299,845 273,537 1,062,490 1,012,981 17,132,990 ------------------------------------------------------------------------------------------ Total expenses 977,706 852,578 2,942,872 2,788,760 46,089,427 ------------------------------------------------------------------------------------------ Net loss (682,198) (726,702) (2,353,977) (2,124,315) (38,149,163) Undeclared, imputed and/or paid dividends on preferred stock 69,980 69,220 207,659 207,659 5,724,952 ------------------------------------------------------------------------------------------ Net loss applicable to common shareholders $ (752,178) $ (795,922) $ (2,561,636) $ (2,331,974) $ (43,874,115) ========================================================================================== Basic and diluted net loss per common share $ (0.03) $ (0.04) $ (0.12) $ (0.13) ====================================================================== Shares used in computing basic and diluted net loss per common share 21,735,420 18,503,655 20,749,940 17,404,729 ======================================================================
See accompanying notes. 4 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows (unaudited)
For the period July 6, 1988 Nine months ended (inception) September 30, to Sept. 30, 2001 2000 2001 ---------------------------------------------------------- Operating activities Net loss $ (2,353,977) $ (2,124,315) $ (38,149,163) Adjustments to reconcile net loss to net cash used for operating activities: Stock issued for compensation and interest - - 476,759 Depreciation and amortization 107,828 119,709 2,149,806 Write-off of purchased technology - - 503,500 Changes in assets and liabilities: Deposits (2,800) (20,800) (73,977) Notes receivable from officers - - (140,000) Other current assets (53,687) (7,763) (108,867) Accounts payable (15,641) (190,749) 191,340 Accrued employee benefits 39,540 (23,679) 109,197 Other accrued expenses (3,819) 26,871 43,599 Deferred revenue (250,001) 750,000 416,666 Deferred rent 1,283 15,029 97,474 ---------------------------------------------------------- Net cash used for operating activities (2,531,274) (1,455,697) (34,483,666) Investing activities Purchase of technology - - (570,000) Purchase of equipment and improvements (99,669) (36,154) (1,955,796) Purchases of short-term investments - - (16,161,667) Sales of short-term investments - - 16,161,667 ---------------------------------------------------------- Net cash provided by (used for) investing activities $ (99,669) $ (36,154) $ (2,525,796)
See accompanying notes. 5 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows, continued
For the period July 6,1988 Nine months ended (inception) to September 30, Sept. 30, 2001 2000 2001 --------------------------------------------------------- Financing activities Net proceeds from exercise of options and warrants, and sale of common stock $ 1,255,228 $ 2,354,032 $ 21,163,459 Net proceeds from issuance and conversion of preferred stock 1,218,258 - 15,508,418 Net proceeds from convertible notes and detachable warrants - - 1,068,457 Payment on capital lease obligations (25,088) (59,197) (288,770) Payment on note payable - - (242,750) Proceeds from note payable - - 484,323 --------------------------------------------------------- Net cash provided by financing activities 2,448,398 2,294,835 37,693,137 --------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (182,545) 802,984 683,675 Cash and cash equivalents at beginning of period 866,220 155,692 - --------------------------------------------------------- Cash and cash equivalents at end of period $ 683,675 $ 958,676 $ 683,675 ========================================================= Supplemental disclosures of cash flow information Equipment purchased by capital leases $ - $ - $ 288,772 Interest paid 3,924 6,124 129,039 Imputed dividend on Series E stock - - 3,266,250 Conversion of Series D preferred stock to common stock - - 2,142,332 Conversion of Series E preferred stock to common stock 400,000 698,800 2,512,550 Series D stock issued for Series C stock 2,073,925 Series C dividends paid with Series D stock - - 253,875 Series D dividends paid with common stock $ - $ - $ 422,341
See accompanying notes. 6 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Notes to Condensed Financial Statements (unaudited) September 30, 2001 1. Basis of Presentation The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three months and the nine months ended September 30, 2001 and 2000 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 September 30, 2001 and the results of operations for the three months and the nine months ended September 30, 2001 and 2000. The results of operations for the three months and the nine months ended September 30, 2001 are not necessarily indicative of the results to be expected for the year ended December 31, 2001. For more complete financial information, these financial statements and the notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-KSB for the year ended December 31, 2000, 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 loss figures used for this calculation recognize accumulated dividends on the Company's Series D and Series F Preferred Stock. Such dividends are payable when declared by the Board of Directors in cash or common stock. 3. Basic and Diluted Loss Per Share In accordance with FAS No. 128, we are required to present basic and diluted earnings per share if applicable. Basic and diluted earnings per share are determined based on the weighted average number of shares outstanding during the period. Diluted earnings per share also include potentially dilutive securities such as options and warrants outstanding and securities convertible into common stock. Both the basic and diluted loss per share for the three and nine months ended September 30, 2001 and 2000 are based on the weighted average number of shares of common stock outstanding during the periods. Since potentially dilutive securities have not been included in the calculation of the diluted loss per share for both periods as their effect is anti-dilutive, there is no difference between the basic and diluted loss per share calculations. 4. Revenue and Expense Recognition License fees and research and development contract revenues are recorded as earned based on the performance requirements of the contracts. If the research and development activities are not successful, we are not obligated to refund payments previously received. Milestone payments are recorded as revenue when received as they have not been refundable and we have no future performance obligations. Payments received in advance of amounts earned are recorded as deferred revenue. Research and development costs are expensed as incurred. 7 5. Note Receivable from Officer A loan for $140,000, secured by a pledge of stock, was made to one of our officers on April 16, 1997, solely to meet tax obligations arising from the exercise of a stock option. Interest accrues at the annual rate of 8% on the unpaid principal balance. In July 1999, the loan term was extended until April 2005. 6. Exercise and Exchange of Series G Warrants During March 2001, certain holders of warrants issued in connection with the sale of Series G Preferred Stock exercised their warrants to purchase common stock, which were due to expire in February, 2001, but which had been extended by the Board of Directors until February 2002. The original exercise price was $1.50 per share. As an inducement to exercise the warrant early, we offered to reduce the exercise price to $0.50 and offer each holder a new one year warrant for a similar number of shares at an exercise price of $1.00 per share. As a result we raised $1,246,000 (less expenses). The newly issued warrants will expire on the last day of February 2002. 7. Convertible Notes During March 2001, we issued convertible notes to two current shareholders in exchange for a total of $800,000. The notes provided for an interest rate of 7% and both principal and interest were convertible into Series H Preferred at a common equivalent price of $0.75 per share. The notes were converted in July 2001. 8. Series H Preferred On July 24, 2001, we announced the closing of a private placement for $1.2 million with a small group of institutional and accredited investors of 12,182 shares of our Series H Convertible Preferred Stock and warrants to purchase an aggregate of 304,550 shares of common stock. Each share of Series H Preferred Stock is convertible at any time at the election of the holder into 133 shares of common stock at a conversion price of $0.75 per share, subject to certain anti-dilution adjustments. No underwriters were engaged by us in connection with such issuance and, accordingly, no underwriting discounts were paid. The offering is exempt from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and met the requirements of Rule 506 of Regulation D promulgated under the Securities Act. The Series H Preferred Stock, warrants and underlying common stock have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Each share of Series H Preferred Stock also received two common stock warrants. One warrant is exercisable at any time for 15 shares of common stock at an exercise price of $1.50 per share, and expires approximately 12 months after the close of the offering; the other warrant is exercisable at any time for 10 shares of common stock at an exercise price of $2.00 per share, and expires approximately 24 months after the close of the offering 9. Liquidity We believe our existing available cash and cash equivalents as of September 30, 2001, plus contractual amounts receivable, is sufficient to meet our anticipated capital requirements until January 2002. Substantial additional capital resources will be required to fund continuing expenditures related to our research, development, clinical trials, and product marketing activities. If adequate funds are not available, we will be required to significantly curtail our operating plans and may have to sell or license out significant portions of our technology or potential products. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-QSB constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Such risks and uncertainties include, among others, history of operating losses, raising adequate capital for continuing operations, early stage of product development, scientific and technical uncertainties, competitive products and approaches, reliance upon collaborative partnership agreements and funding, regulatory testing and approvals, patent protection uncertainties and manufacturing scale-up and required qualifications. While these statements represent management's current judgment and expectations for the company, such risks and uncertainties could cause actual results to differ materially from any future results suggested herein. The company undertakes no obligation to release publicly the results of any revisions to these forward-looking statements to reflect events or circumstances arising after the date hereof. General Overview Incorporated in 1988, Protein Polymer Technologies, Inc., a Delaware corporation with corporate offices and laboratories located in San Diego, California, is a development-stage biotechnology company engaged in the research, development, production and clinical testing of medical products based on its proprietary protein-based biomaterials technology. Since 1992, we have focused primarily on developing materials technology and products to be used in the surgical repair, augmentation, and regeneration of tissue: surgical adhesives and sealants; soft tissue augmentation products; matrices for wound healing and tissue engineering; drug delivery formulations; and surgical adhesion barriers. We have been unprofitable to date, and as of September 30, 2001 had an accumulated deficit of $ (42,098,000). Protein polymers are synthetic proteins created "from scratch" through chemical DNA (gene) synthesis, and produced in quantity by traditional large-scale microbial fermentation methods. As a result, protein polymers contain no human or animal components that could potentially transmit or cause disease. Due to their synthetic design, protein polymers are capable of combining the biological functionality of natural proteins with the chemical functionality and exceptional physical properties of synthetic polymers. A common goal is to develop materials that beneficially interact with human cells, enabling cell growth and the regeneration of tissues with improved outcomes as compared to current products and practices. Our product candidates for surgical repair, augmentation and regeneration of human tissues are in various stages of research and development. The more advanced programs are bulking agents for soft tissue augmentation, particularly for use in urethral tissue for the treatment of female stress incontinence and in dermal tissue for cosmetic and reconstructive procedures. We currently are devoting the majority of our resources to the development and registration of these products. 9 Because of our technology's breadth of commercial opportunity, we are pursuing multiple routes for commercial development. Currently, we independently are developing the incontinence and the dermal augmentation products, which share similar technology and product characteristics. We have established a comprehensive license and development agreement with Genencor International for the use of our biomaterials and technology to develop, manufacture and commercialize products for industrial markets. Genencor International is one of the world's largest manufacturers of industrial enzymes and other biologically derived products. Through this arrangement, we will receive development payments, and eventually royalties on the sale of products. For development and commercialization of our spinal disc repair product, we have joined with Windamere Venture Partners to establish a new company, SpineWave, Inc., that will provide us with both near term research and development support and eventually royalties on the sale of licensed products. Except for the industrial products, we have retained manufacturing rights. To the extent sufficient resources are available, we continue to research the use of our protein polymers for other tissue repair and medical device applications, principally for use in tissue engineering matrices and drug delivery devices. Our strategy with most of our programs is to enter into collaborative development agreements with product marketing and distribution companies. Although these relationships, to the extent any are consummated, may provide significant near-term revenues through up-front licensing fees, research and development reimbursements and milestone payments, the Company expects to continue incurring operating losses for the next several years. We are aggressively pursuing domestic and international patent protection for our technology, making claim to an extensive range of recombinantly prepared structural and functional proteins, methods for preparing synthetic repetitive DNA, methods for the production and purification of protein polymers, end-use products incorporating such materials and methods for their use. To date, the United States Patent and Trademark Office ("USPTO") has issued 21 patents to us. In addition, we have filed corresponding patent applications in other relevant commercial jurisdictions. During March 2001, certain holders of warrants, issued in connection with the sale of Series G Preferred Stock, exercised their warrants to purchase common stock which were due to expire in February, 2001, but which had been extended by the Board of Directors until February 2002. The original exercise price was $1.50 per share. As an inducement to exercise the warrant early, we offered to reduce the exercise price to $0.50 and offer each holder a new one year warrant for a similar number of shares at an exercise price of $1.00 per share. As a result we raised $1,246,000 (less expenses). The newly issued warrants will expire on the last day of February 2002. During March 2001, we issued convertible notes to two current shareholders in exchange for a total of $800,000. The notes provided for an interest rate of 7% and both principal and interest were convertible into Series H Preferred at a common equivalent price of $0.75 per share. The notes were converted into Series H Preferred stock in July 2001 (see below). In April 2001, we joined with Windamere Venture Partners and affiliates to form a new orthopedic company, SpineWave, Inc., to develop and commercialize an injectable protein-based formulation for the repair of spinal discs damaged either by injury or aging. Based on Protein Polymer's proprietary tissue adhesive technology, the product under development has potential to be an effective outpatient surgical treatment for chronic low back pain. As a result of the agreements we executed, SpineWave has acquired a license to Protein Polymer's technology for use in spinal and other defined orthopedic applications. We received approximately 33% of the founding stock in SpineWave and will receive royalties on the sale or sublicensing of licensed products. In addition to the License Agreement, we agreed in a separate Supply and Services Agreement to provide SpineWave with a variety of research and development services, 10 and to supply materials to SpineWave for pre-clinical and clinical testing, and ultimately for commercial sale. If we are unable to meet the requirements for product delivery, we agreed to make the manufacturing methods and materials available to SpineWave as specified in a separate Escrow Agreement. SpineWave will be responsible for product development, clinical testing, regulatory approvals, and commercialization. We are represented on the SpineWave Board of Directors, and have agreed to support the election of other Directors nominated by SpineWave. On July 24, 2001, we closed a private placement for $1.2 million with a small group of institutional and accredited investors of 12,182 shares of the Company's Series H Convertible Preferred Stock and warrants to purchase an aggregate of 304,550 shares of common stock. Each share of Series H Preferred Stock is convertible at any time at the election of the holder into 133 shares of common stock at a conversion price of $0.75 per share, subject to certain anti-dilution adjustments. No underwriters were engaged by us in connection with such issuance and, accordingly, no underwriting discounts were paid. The offering is exempt from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and met the requirements of Rule 506 of Regulation D promulgated under the Securities Act. The Series H Preferred Stock, warrants and underlying common stock have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Each share of Series H Preferred Stock also received two common stock warrants. One warrant is exercisable at any time for 15 shares of common stock at an exercise price of $1.50 per share, and expires approximately 12 months after the close of the offering; the other warrant is exercisable at any time for 10 shares of common stock at an exercise price of $2.00 per share, and expires approximately 24 months after the close of the offering. As of September 30, 2001, we had cash and cash equivalents totaling $684,000. We believe our available cash and cash equivalents, accounts receivable, and future contractual research and development payments will be sufficient to meet our anticipated capital requirements until January 2002. We will continue to attempt to raise additional funds for continuing operations through private or public offerings and collaborative agreements. See "Liquidity and Capital Resources" below for additional information and a description of the associated risks. Results of Operations The Company received $283,000 in contract and licensing revenue for the three months ended September 30, 2001 and $550,000 for the nine months ended September 30, 2001 as compared to $103,000 and $593,000 respectively in contract and licensing revenue for the three months and nine months ended September 30, 2000. The contract and licensing revenue primarily represents the amortized portion of an up-front license payment of $1 million (being recognized ratably over a period of three years) from Femcare Ltd. for the commercial rights to our potential incontinence product in Europe and Australia, and payments from our affiliate, SpineWave, Inc., for R&D associated with the development of a product for the repair of spinal disks for the treatment of lower back pain. The decrease in contract and licensing revenue over the nine-month period primarily reflects the one-time payment in 2000 from Sanyo Chemical Industries Ltd. for a license to our in vitro cell culture business and existing product inventory. Interest income was $12,000 and $39,000, respectively, for the three months and nine months ended September 30, 2001 versus $23,000 and $68,000 respectively for the same periods in 2000. Research and development expenses for the three months ended September 30, 2001 were $678,000 compared to $579,000 for the same period in 2000. Research and development expenses for the nine-month period ended September 30, 2001 were $1,880,000 as compared to $1,776,000 for the same period in 2000. We expect, in general, that our research and 11 development, human clinical testing, and manufacturing expenses will increase over time if our incontinence and dermal products, and other products in development, successfully progress and additional capital is obtained. Selling, general and administrative expenses for the three months and the nine months ended September 30, 2001 were $300,000 and $1,062,000 respectively, as compared to $274,000 and $1,013,000 for the same periods in 2000. We expect that our selling, general and administrative expenses will remain largely unchanged in the near term, but may increase in the future as support for our research and development, regulatory and manufacturing efforts require additional resources and to the extent additional capital is obtained. For the three months ended September 30, 2001, we recorded a net loss applicable to common shareholders of $752,000, or $0.03 per share as compared to a loss of $796,000, or $0.04 per share for the same period in 2000. For the nine-month period ended September 30, 2001, our net loss applicable to common shareholders was $2,562,000, or $0.12 per share as compared to $2,332,000, or $0.13 per share for the same period in 2000. Also included in each of the three month periods of 2001 and 2000 were $70,000 and $208,000 for each of the nine-month periods, respectively, for undeclared dividends related to our preferred stock. In general, there can be significant fluctuation in revenue from quarter to quarter due to variability in outside contract and licensing payments. In general, we expect to incur increasing operating losses in the future (to the extent additional capital is obtained), due primarily to increases in our soft tissue augmentation program's development, manufacturing and business development activities. Our results depend on our ability to establish strategic alliances and generate contract revenues, increased research, development and manufacturing efforts, pre-clinical and clinical product testing and commercialization expenditures, expenses incurred for regulatory compliance and patent prosecution, and other factors. To date we believe that inflation and changing prices have not had a material effect on our continuing operations. However, the sharp rise in utility costs may have an impact in the future. In addition, following the tragic events of September 11, we are being notified in advance by our various insurance carriers to expect both changes in coverage and/or increased rates. Liquidity and Capital Resources As of September 30, 2001, we had cash and cash equivalents of $684,000 as compared to $866,000 at December 31, 2000. As of September 30, 2001, we had working capital of $18,000 as compared to $143,000 at December 31, 2000. We had no long-term debt obligations as of September 30, 2001 or as of December 31, 2000. We had $100,000 in expenditures for capital equipment and leasehold improvements for the nine months ending September 30, 2001, compared to $36,000 for the same period last year. We are expecting to increase our capital expenditures in the next few quarters (to the extent additional capital is obtained), as we improve existing space to expand capacity to meet materials manufacturing requirements for clinical testing. We may also enter into capital lease arrangements if available at appropriate rates and terms. We believe our existing available cash, cash equivalents and accounts receivable, in combination with anticipated contract research payments and revenues received from the transfer of clinical testing materials, will be sufficient to meet our anticipated capital requirements until January 2002. Substantial additional capital resources will be required to fund continuing expenditures related to our research, development, manufacturing and business development activities. We believe there may be a number of alternatives to meeting the continuing capital requirements of our operations, including additional collaborative agreements and public or private financings. 12 However, there can be no assurance that any of these fundings will be consummated in the necessary time frames needed for continuing operations or on terms favorable to us. If adequate funds are not available, we will be required to significantly curtail or cease our operations, and may have to sell or license out significant portions of our technology or potential products. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: Exhibit Number Description ------ ----------- 10.37 Series H Securities Purchase Agreement b. Reports on Form 8-K None. 13 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 November 13, 2001 By /s/ J. Thomas Parmeter ----------------- ------------------------------- J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date November 13, 2001 By /s/ Janis Y. Neves ----------------- ------------------------------- Janis Y. Neves Director of Finance, Controller and Assistant Secretary 14 EXHIBIT INDEX Exhibit Sequentially Number Description Numbered Page ------ ----------- ------------- 10.37 Series H Securities Purchase Agreement 15