-----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, Sssf4ODvYpnwu+JYnKTZEuZ7Xr9eVV0dhxZIxGseB9S8NUrYRu7XYUminXIbhWwE VkZWmM0sMhiGjUafJDKL3g== 0000898430-96-005217.txt : 19961113 0000898430-96-005217.hdr.sgml : 19961113 ACCESSION NUMBER: 0000898430-96-005217 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96658768 BUSINESS ADDRESS: STREET 1: 10655 SORRENTO VALLEY RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195586064 10QSB 1 FORM 10QSB 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, 1996 [ ] 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) (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 October 28, 1996, 7,208,228 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, 1996 and December 31, 1995............... 3 Condensed Statements of Operations - For the Three and Nine Months ended September 30, 1996 and 1995.......................... 4 Condensed Statements of Cash Flows - For the Nine Months ended September 30, 1996 and 1995.......................... 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 PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Balance Sheets September 30, December 31, 1996 1995 ____________ ____________ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 608,903 $ 471,296 Short-term investments 1,558,042 1,540,000 Accounts receivable 21,053 28,099 Inventory 45,151 54,534 Other current assets 52,531 20,178 ____________ ____________ Total current assets 2,285,680 2,114,107 Deposits 23,057 22,257 Equipment and leasehold improvements, net 315,437 302,795 ____________ ____________ $ 2,624,174 $ 2,439,159 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 225,100 $ 157,971 Accrued employee benefits 111,142 101,284 Deferred revenue 200,000 - Other accrued expenses 41,130 51,598 ____________ ____________ Total current liabilities 577,372 310,853 Stockholders' equity: Series D convertible preferred stock, $.01 par value, 71,600 shares authorized, 49,187 shares issued and outstanding at September 30, 1996 4,764,746 4,764,745 Common stock, $.01 par value, 25,000,000 shares authorized, 7,208,228 and 5,832,925 shares issued and outstanding at September 30, 1996 and December 31, 1995, respectively 72,083 58,330 Additional paid-in capital 15,594,532 13,648,036 Accumulated deficit (18,384,559) (16,342,805) ____________ ____________ Total stockholders' equity 2,046,802 2,128,306 ____________ ____________ $ 2,624,174 $ 2,439,159 ============ ============ See accompanying notes. 3 PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Statements of Operations (unaudited) Three Months Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 __________ __________ __________ __________ Revenues: Product sales $ 21,140 $ 35,342 $ 45,664 $ 94,530 Contract revenue 310,000 800,000 410,000 810,000 Interest income 26,206 5,805 65,263 27,961 __________ __________ __________ __________ 357,346 841,147 520,927 932,491 Expenses: Cost of goods sold 7,994 24,158 19,878 53,762 Research and development 544,146 375,179 1,452,415 1,295,932 Selling, general and administrative 394,482 326,373 1,061,637 1,013,545 Royalties 6,250 6,250 28,750 28,750 __________ __________ __________ __________ 952,872 731,960 2,562,680 2,391,989 __________ __________ __________ __________ Net loss $ (595,526) $ 109,187 $(2,041,753) $(1,459,498) Undeclared accumulated and/ or paid dividends on Preferred Stock 123,639 261,166 368,228 261,166 __________ __________ __________ __________ Net loss applicable to common shareholders $ (719,165) $ (151,979) $(2,409,981) $(1,720,664) =========== =========== =========== =========== Net loss per common share $ (0.10) $ (0.03) $ (0.37) $ (0.30) =========== =========== =========== =========== Shares used in computing loss per common share 7,008,171 5,830,990 6,445,343 5,830,947 =========== =========== =========== =========== See accompanying notes. 4 PROTEIN POLYMER TECHNOLOGIES, INC. Condensed Statements of Cash Flows (unaudited) Nine Months Ended September 30, 1996 1995 ____________ ____________ OPERATING ACTIVITIES: Net loss $ (2,041,754) $ (1,713,372) Adjustments to reconcile net loss to net cash used for operating activities: Dividends paid by issuance of preferred stock - 253,874 Loan interest paid by issuance of preferred stock - 4,795 Depreciation and amortization 84,265 107,878 Changes in assets and liabilities: Accounts receivable (1,454) (87,440) Inventory 9,383 (47,021) Other current assets (23,853) (27,144) Deposits (800) 1,300 Accounts payable 67,129 (9,159) Accrued employee benefits 9,858 14,690 Other accrued expenses (10,468) (45,556) Deferred revenue 200,000 (5,000) ____________ ____________ Net cash used for operating activities (1,707,694) (1,552,155) INVESTING ACTIVITIES: Purchase of equipment and improvements (96,907) (55,851) Short-term investments 18,042 - ____________ ____________ Net cash provided by (used for) investing activities (114,949) (55,851) FINANCING ACTIVITIES: Net proceeds from issuance of warrants and sale of common stock 1,867,240 2,429,844 Exercise of common stock options 93,010 1,060 ____________ ____________ Net cash provided by financing activities 1,960,250 2,430,904 ____________ ____________ Net increase (decrease) in cash and cash equivalents: 137,607 822,898 Cash and cash equivalents at beginning of the period: 471,296 1,848,391 ____________ ____________ Cash and cash equivalents at end of the period: $ 608,903 $ 2,671,289 ============ ============ Supplemental Schedule of non-cash financing activities Dividends paid by issuance of preferred stock $ - $ 253,874 Loan interest paid by issuance of preferred stock - 4,795 See accompanying notes. 5 PROTEIN POLYMER TECHNOLOGIES, INC. Notes to Condensed Financial Statements (Unaudited) September 30, 1996 1. Basis of Presentation The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three and nine months ended September 30, 1996 and 1995 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, 1996 and the results of operations for the three and nine months ended September 30, 1996 and 1995. The results of operations for the three and nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the year ended December 31, 1996. 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, 1995, 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 in cash or common stock. 3. 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 September 30, 1996 is sufficient to meet its anticipated capital requirements until May 1997. 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 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 that has concentrated its research efforts on establishing a scientific and technical leadership position in the design and manufacture of unique protein-based materials. The Company has identified biomedical market and product opportunities that it believes will exploit the unique properties of the technology to competitive advantage. The Company has been unprofitable to date, and has an accumulated deficit of $18,385,000. 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 $1.4 million in contractual payments from Ethicon as reimbursements for ongoing program research and development efforts. The Company's other programs it is currently pursuing include tissue augmentation, surgical adhesion barriers, drug delivery and medical device coatings. 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. Although these arrangements, to the extent they become available to the Company, may provide significant near-term revenues in the form of up-front license fees, research and development revenues and milestone payments, the Company expects to incur continuing operating losses for the next several years. Results of Operations For the three months ended September 30, 1996 and 1995, sales and license fees from the Company's ProNectin(R) F product line were $21,000 and $35,000, respectively. For the nine months ended September 30, 1996 and 1995 these revenues were $46,000 and $95,000, respectively. The decreases were due to the launch in 1995 of the Company's SmartPlastic(TM) Activated Plasticware(TM) product line which included sales into the distributor pipeline. Contract research revenue for the three months ended September 30, 1996 totaled $310,000, versus $800,000 for the same period in 1995. The revenue represents contractual payments from Ethicon related to the Company's tissue adhesives and sealants program, including in the 1995 period an $800,000 payment upon the signing of the agreements. For the nine months ended September 30, 1996 and 1995 these revenues were $410,000 and $810,000, respectively. Interest income was $26,000 for the three months ended September 30, 1996, versus $6,000 for the same period in 1995. For the nine months ended September 30, 1996 and 1995 it was $65,000 and $28,000, respectively. The increases resulted primarily from additional cash available for investing received from the sale of common stock and the exercise of privately held warrants. Cost of goods sold was $8,000 for the three months ended September 30, 1996, compared to $24,000 for the same period in 1995. For the nine month periods these expenses were $20,000 and $54,000, respectively. The decreases related primarily to reduced sales of the SmartPlastic product line. Royalty expenses paid to Stanford University and Telios Pharmaceuticals, Inc. were $6,000 for each of the three month periods ended September 30, 1996 and 1995, and $29,000 for each of the nine month periods ended September 30, 1996 and 1995. 7 Research and development expenses for the three months ended September 30, 1996 were $544,000, compared to $375,000 for the same period in 1995, a 45% increase. The increase was attributable to expanded efforts related to the tissue adhesives program, including preparation for Good Laboratory Practices ("GLP") animal testing and materials manufacturing capabilities, as required by the Food and Drug Administration. For the nine months ended September 30, 1996 and 1995 these expenses were $1,452,000 and $1,296,000, respectively, a 12% increase. The Company expects that its research and development expenses will increase over time to the extent its projects are successfully developed and additional capital is obtained. Selling, general and administrative expenses for the three months ended September 30, 1996 were $394,000, as compared to $326,000 for the same period in 1995, a 21% increase. This increase was primarily due to additional patent and legal expenses and expanded investor relations efforts. For the nine months ended September 30, 1996 and 1995 these expenses were $1,062,000 and $1,014,000, respectively, a 5% increase. The Company expects its selling, general and administrative expenses to increase as support for its research and development efforts require and to the extent additional capital is raised. For the three months ended September 30, 1996, the Company recorded a net loss applicable to common shareholders of $719,000, or $.10 per share compared to a loss of $152,000, or $.03 per share for the same period in 1995. The 1995 period included an $800,000 payment upon the signing of the Ethicon agreements. Also included in the three month periods of 1996 and 1995 were $124,000 and $261,000 for undeclared and/ or paid cumulative dividends related to the Company's outstanding preferred stock. For the nine months ended September 30, 1996 and 1995, the Company recorded a net loss applicable to common shareholders of $2,410,000, or $.37 per share compared to $1,721,000, or $.30 per share for the same period in 1995. Included in the nine month periods of 1996 and 1995 were $368,000 and $261,000 for undeclared and/or paid cumulative dividends related to the Company's outstanding 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 September 30, 1996, the Company had cash, cash equivalents and short-term investments of $2,167,000 as compared to $2,011,000 at December 31, 1995. As of September 30, 1996, the Company had working capital of $1,708,000, compared to $1,803,000 at December 31, 1995. For the nine months ending September 30, 1996 the Company raised a net of $1,960,000 from the exercise of warrants and options for common stock, which offset losses from operations and capital expenditures. 8 The Company had no long-term debt obligations as of September 30, 1996 and December 31, 1995. For the nine months ending September 30, 1996, the Company's expenditures for capital equipment and leasehold improvements totaled $97,000, compared with $56,000 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 moves into its expanded facilities and retrofits existing space to achieve GLP compliance for laboratory testing and materials manufacturing requirements. The Company believes its existing available cash and short-term investments as of September 30, 1996 will be sufficient to meet its anticipated capital requirements until May 1997. Substantial additional capital resources will be required to fund continuing expenditures related to the Company's research, development and product marketing 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. 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 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 7, 1996 By /s/ J. Thomas Parmeter _______________ ___________________________________ J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date November 7, 1996 By /s/ Aron P. Stern _______________ ___________________________________ Aron P. Stern Vice President, Finance and Administration and Chief Financial Officer 10 EXHIBIT INDEX Exhibit Sequentially Number Description Numbered Page 27 Financial Data Schedule 12 11 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 3-MOS 9-MOS DEC-31-1996 DEC-31-1996 SEP-30-1996 SEP-30-1996 608903 608903 1558042 1558042 21053 21053 0 0 45151 45151 2285680 2285680 1204661 1204661 (889224) (889224) 2624174 2624174 577372 577372 0 0 0 0 4764745 4764745 15666615 15666615 (18384558) (18384558) 2624174 2624174 21140 45664 357346 520927 7994 19878 7994 19878 944878 2542802 0 0 0 0 (595526) (2041753) 0 0 (595526) (2041753) 0 0 123639 368228 0 0 (719165) (2409981) (0.10) (0.37) 0 0
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