-----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, DU53gJ4Vd+CXY4ipi4BUiDhH7SKbkPs3OxvZDKrBouBEykvqaw/0Yp3XW1KavdKO xVCemLxf2zAlZNFarBfRww== 0000944209-99-000824.txt : 19990518 0000944209-99-000824.hdr.sgml : 19990518 ACCESSION NUMBER: 0000944209-99-000824 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: SEC FILE NUMBER: 000-19724 FILM NUMBER: 99624910 BUSINESS ADDRESS: STREET 1: 10655 SORRENTO VALLEY RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195586064 MAIL ADDRESS: STREET 1: 10655 SORRENTO VALLEY ROAD CITY: SAN DIEGO STATE: CA ZIP: 92121 10QSB 1 FOR PERIOD 3/31/1999 ================================================================================ 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, 1999 [_] 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 May 11, 1999, 12,232,510 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 - March 31, 1999 and December 31, 1998.......................... 3 Condensed Statements of Operations - For the Three Months ended March 31, 1999 and 1998 and the period July 6, 1988 (inception) to March 31, 1999... 4 Condensed Statements of Cash Flows - For the Three Months ended March 31, 1999 and 1998 and the period July 6, 1988 (inception) to March 31, 1999... 5 Notes to Condensed Financial Statements......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................ 13 Signature....................................................... 14 2 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Balance Sheets
MARCH 31, DECEMBER 31, 1999 1998 -------------------------------- ASSETS (UNAUDITED) Current assets: Cash and cash equivalents $ 305,113 $ 1,383,148 Short-term investments - - Other current assets 76,978 66,459 ------------ ------------ Total current assets 382,091 1,449,607 Deposits 36,977 36,177 Notes receivable from officers 140,000 141,000 Equipment and leasehold improvements, net 536,137 598,447 ------------ ------------ $ 1,095,205 $ 2,225,231 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 469,511 $ 515,413 Accrued employee benefits 178,881 167,849 Other accrued expenses 25,952 21,574 Current portion capital lease obligations 84,386 84,518 Deferred rent 60,668 60,668 ------------ ------------ Total current liabilities 819,398 850,022 Long-term portion capital lease obligations 85,476 105,548 Stockholders' equity: Convertible Preferred Stock, $.01 par value, 153,917 shares authorized, 77,202 and 79,202 shares issued and outstanding at March 31, 1999 and December 31, 1998, respectively; liquidation preference - $7,720,200 7,400,226 7,600,226 Common stock, $.01 par value, 25,000,000 shares authorized, 11,012,434 and 10,827,240 shares issued and outstanding at March 31, 1999 and December 31, 1998, respectively 110,136 108,274 Additional paid-in capital 26,774,033 26,549,125 Deficit accumulated during development stage (34,094,064) (32,987,964) ------------ ------------ Total stockholders' equity 190,331 1,269,661 ------------ ------------ $ 1,095,205 $ 2,225,231 ============ ============
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 (INCEPTION) TO MARCH 31, MARCH 31, 1999 1998 1999 ----------------------------------------------------- Revenues: Contract revenue $ - $ 53,750 $ 4,354,965 Interest income 13,002 8,656 1,093,931 Product and other income 22,649 25,039 652,663 ----------- ----------- ------------ Total revenues 35,651 87,445 6,101,559 Expenses: Cost of sales (195) 3,160 279,484 Research and development 708,077 853,224 22,093,331 Selling, general and administrative 427,619 502,048 13,583,921 Royalties 6,250 6,250 296,421 ----------- ----------- ------------ Total expenses 1,141,751 1,364,682 36,253,157 ----------- ----------- ------------ Net loss (1,106,100) (1,277,237) (30,151,598) Undeclared dividends on preferred stock 68,459 69,567 5,030,474 ----------- ----------- ------------ Net loss applicable to common shareholders $(1,174,559) $(1,346,804) $(35,182,072) =========== =========== ============ Net loss per common share - basic and diluted $(0.11) $(0.13) =========== =========== Shares used in computing net loss per common share - basic and diluted 10,940,748 10,429,094 ========== ===========
See accompanying notes. 4 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows (unaudited)
FOR THE PERIOD JULY 6, 1988 THREE MONTHS ENDED (INCEPTION) TO MARCH 31, MARCH 31, 1999 1998 1999 ----------- ----------- -------------- OPERATING ACTIVITIES Net loss $(1,106,100) $(1,277,237) $(30,151,598) Adjustments to reconcile net loss to net cash used for operating activities: Stock issued for compensation and interest 18,000 - 122,895 Depreciation and amortization 84,592 88,842 1,712,888 Write-off of purchased technology - - 503,500 Changes in assets and liabilities: Deposits (800) 440 (36,977) Notes receivable from officers 1,000 3,000 (140,000) Other current assets (10,519) 44,048 (76,978) Accounts payable (45,902) 122,015 469,511 Accrued employee benefits 11,032 33,019 178,881 Other accrued expenses 4,378 (18,355) 25,952 Deferred revenue - - 60,668 ----------- ----------- ------------ Net cash used for operating activities (1,044,319) (1,004,228) (27,331,258) INVESTING ACTIVITIES Purchase of technology - - (570,000) Purchase of equipment and improvements (22,282) (21,226) (1,806,996) Purchases of short-term investments - - (16,161,667) Sales of short-term investments - 974,817 16,161,667 ----------- ----------- ------------ Net cash provided by (used for) investing activities $ (22,282) $ 953,591 $ (2,376,996)
5 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows, continued (unaudited)
FOR THE PERIOD JULY 6, 1988 THREE MONTHS ENDED (INCEPTION) TO MARCH 31, MARCH 31, 1999 1998 1999 ----------- ---------- ------------ FINANCING ACTIVITIES Net proceeds from exercise of options and warrants, and sale of common stock $ 8,770 $ 11,565 $16,606,682 Net proceeds from issuance and conversion of preferred stock - 12,215,565 Net proceeds from convertible notes and detachable warrants - - 1,068,457 Payment on capital lease obligations (20,204) (17,957) (118,910) Payment on note payable - - (92,750) Proceeds from note payable - - 334,323 ----------- --------- ----------- Net cash provided by (used for) financing activities (11,434) (6,392) 30,013,367 ----------- --------- ----------- Net increase (decrease) in cash and cash equivalents (1,078,035) (57,029) 305,113 Cash and cash equivalents at beginning of period 1,383,148 325,021 - ----------- --------- ----------- Cash and cash equivalents at end of period $ 305,113 $267,992 $ 305,113 =========== ========= =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Equipment purchased by capital leases $ - $ - $ 288,772 Interest paid 5,270 7,495 103,198 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 200,000 500,000 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) March 31, 1999 1. BASIS OF PRESENTATION The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three months ended March 31, 1999 and 1998 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, 1999 and the results of operations for the three months ended March 31, 1999 and 1998. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results to be expected for the year ended December 31, 1999. 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 on Form 10-KSB for the year ended December 31, 1998, 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 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 As required, the Company adopted Financial Accounting Standards Board Statement No. 128, "Earnings Per Share," ("FAS No. 128") for the year ended December 31, 1998. FAS No. 128 changes the method used to calculate earnings per share and requires the restatement of all prior periods reported. Under FAS No. 128, the Company is 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 includes 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 months ended March 31, 1999 and 1998 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 affect is antidilutive, there is no difference between the basic and diluted loss per share calculations. 4. NOTE RECEIVABLE WITH OFFICER 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 accrues at the annual rate of 8% on the unpaid principal balance. In February 1999, the loan term was extended one year. All remaining principal and accrued interest thereon is to be paid to the Company in full by February 2000. 7 5. SUBSEQUENT EVENTS Exercise of Warrants Between April 1 and April 15, 1999, the Company received approximately $506,000 from the exercise of redeemable, publicly traded warrants originally issued as part of PPTI's Initial Public Offering. Following the close of business on April 15, the remaining unexercised redeemable, publicly traded, warrants expired. On May 12, 1999, the company received approximately $416,000 from the exercise of warrants issued in conjunction with the private placement of the Company's Series E Convertible Preferred Stock. 6. 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 cash equivalents as of March 31, 1999, plus amounts received as of May 12, 1999 from the exercise of both public and private warrants is sufficient to meet its anticipated capital requirements until July 1999. 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 will be required to significantly curtail its operating plans and may have to sell or license out significant portions of the Company's technology or potential products. 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, compliance with NASDAQ listing requirements, 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. The reader is encouraged to refer to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998, as well as other recent filings with the Securities and Exchange Commission, to ascertain the risks associated with these statements. GENERAL OVERVIEW Protein Polymer Technologies, Inc., a Delaware corporation ("PPTI" or "the Company"), is a development-stage biotechnology company incorporated on July 6, 1988 and is engaged in the research, development and production of medical products based on its proprietary protein-based 8 biomaterials technology. The Company has been unprofitable to date, and has an accumulated deficit of $34,094,000. Since 1992, the Company has primarily focused on developing materials technology and products to be used in the surgical repair of tissue: soft tissue augmentation; surgical adhesives and sealants; wound healing and tissue engineering; drug delivery devices; and surgical adhesion barriers. The Company has also developed coating technology that can efficiently modify and improve the surface properties of more traditional biomedical devices. 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. In December 1998, the Company filed its first Investigational Device Exemption ("IDE") with the U.S. Food and Drug Administration ("FDA") to request approval to begin human clinical testing of its urethral bulking agent for the treatment of female stress urinary incontinence. The Company intends to submit an additional IDE to the FDA in the third quarter of 1999 to request approval to begin human clinical testing of its dermal bulking agent for use in cosmetic and reconstructive surgery applications. PPTI began studies to identify its most promising biomaterial formulations for use in these soft tissue augmentation products in 1996 and has devoted increasing resources to this program area through 1997 and 1998 in preparation for beginning human clinical testing. Between 1994 and 1997, the Company's efforts were focused predominantly on the development of its surgical adhesive and sealant technology. As part of this effort, the Company targeted the establishment of a strategic alliance with a market leader in the field of surgical wound closure products which lead to the execution of comprehensive license, supply and development agreements in September 1995, with Ethicon, Inc. ("Ethicon"), a subsidiary of the Johnson & Johnson Company ("J&J"). Ethicon elected to terminate these agreements in December 1997. The Company has demonstrated both the adhesive performance and the biocompatibility of its product formulations in animal models, including the resorption of the adhesive matrix in conjunction with the progression of wound healing. PPTI is committed to the commercial development of its adhesive and sealant technology and during 1998 the Company worked to determine the specific markets and products providing the most significant opportunities for its use. In particular, the Company has identified and initiated preliminary research and development on an injectable adhesive product aimed at the repair of spinal discs for the treatment of lower back pain. PPTI is seeking to establish a strategic alliance with a leader in the targeted orthopedic markets. To the extent sufficient resources are available, the Company continues to research the use of its protein polymers for other tissue repair and medical device applications, principally for use in tissue engineering matrices and drug delivery devices. PPTI is aggressively pursuing domestic and international patent protection for its 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 fourteen patents to the Company, eight of which were issued in 1998. In addition, PPTI has filed corresponding patent applications in most other relevant commercial jurisdictions. In 1992, the Company raised approximately $8.9 million through its initial public offering of common stock and redeemable warrants. The Company used a major portion of these proceeds to generate substantive in vitro laboratory evidence and in vivo animal test data demonstrating the biocompatibility and performance of its protein polymers and derived biomaterials, and to establish a materials science group which has developed important materials modification and fabrication technology. 9 In July 1994, the Company raised approximately $2.1 million from the sale of its unregistered Series C Preferred Stock to private investors. In September 1995, the Company raised approximately $2.4 million from the sale of its unregistered Series D Preferred Stock to the same private investors. Also at this time these investors exchanged all of their holdings of Series C Preferred Stock and accumulated dividends into Series D Preferred Stock. In January 1997, the Company raised approximately $4.6 million from a private placement of the Company's common stock with a number of institutional and accredited investors. In April and May of 1998, the Company raised approximately $5.4 million from the sale of 54,437.5 shares of the Company's unregistered Series E Convertible Preferred Stock ("Series E Stock") priced at $100 per share with warrants to purchase an aggregate of 3,266,250 shares of common stock to a small group of institutional and accredited investors. In connection with this transaction, the Company issued 26,240 shares of Series F Convertible Preferred Stock in exchange for the same number of shares of outstanding Series D Convertible Preferred Stock. The Company's cash balance as of March 31, 1999 was $305,000. The Company plans to raise additional funds for continuing operations through private or public offerings and collaborative agreements. On April 15, 1999 the Company received approximately $506,000 from the exercise of redeemable, publicly traded, warrants issued as part of the initial public offering. On May 12, 1999, the Company received $416,000 from the exercise of warrants issued in conjunction with the sale of its Series E Convertible Preferred Stock. On a pro forma basis on March 31, 1999, the cash balance including the net amount raised with existing cash would be $1,227,000. At planned spending levels this amount is expected to meet the Company's anticipated capital requirements until July 1999. The Company's strategy with most of its programs is to enter into collaborative development agreements with major medical 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 several more years. In their report for the year ended December 31, 1998, our independent auditors stated that without additional financing, there is substantial doubt about our ability to continue as a going concern. We believe there are a number of alternatives available to meet our continuing capital requirements. See the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion. RESULTS OF OPERATIONS The Company received no contract research revenue for the three months ended March 31, 1999, compared to $54,000 in revenue for the same period in 1998. The reduction in contract revenue primarily represents the termination of research and development reimbursements from various operating entities of the Johnson & Johnson Company, including Ethicon, Inc. No additional contract revenues will be generated from the Ethicon agreements which were terminated in December 1997. Interest income was $13,000 for the three months ended March 31, 1999, versus $9,000 for the same period in 1998. The increase resulted from increased cash available for investing. For the three months ended March 31, 1999 and 1998, sales and license fees from the Company's ProNectin(R) and SmartPlastic(R) products were $23,000 and $25,000, respectively. The difference was due to fluctuations in reorders by distributors. The Company incurred no cost of sales for the three months ended March 31, 1999, compared to $3,000 for the same period in 1998. The decrease in costs related primarily to adjustments in 10 inventory charges. Royalty expense was $6,000 for both the three month periods ended March 31, 1999 and 1998. Research and development expenses for the three months ended March 31, 1999 were $708,000, compared to $853,000 for the same period in 1998, a 17% decrease. The decrease was primarily attributable to completion of external contracts and consulting services related to the Company's soft tissue augmentation program, including preclinical testing and preparation of the Investigational Device Exemption submitted to the Food and Drug Administration ("FDA") in December 1998 requesting permission to begin human clinical testing, and implementation of the required Good Laboratory Practices ("GLP") manufacturing facilities and monitoring systems. The Company expects, in general, that its research and development expenses will continue to increase over time if its other products in development and other contemplated projects successfully progress and additional capital is obtained. Selling, general and administrative expenses for the three months ended March 31, 1999 were $428,000, as compared to $502,000 for the same period in 1998, a 15% decrease. This decrease was due to a reduction in legal and other professional services primarily related to Securities and Exchange Commission filings and reduced investor relations expenses. The Company expects its selling, general and administrative expenses to continue to decrease in the near term, but will increase in the future as support for its research and development efforts may require and to the extent additional capital is obtained. For the three months ended March 31, 1999, the Company recorded a net loss applicable to common shareholders of $1,175,000, or $0.11 per share compared to a loss of $1,347,000, or $0.13 per share for the same period in 1997, a 13% decrease. Also included in each of the three month periods of 1999 and 1998 was $68,000 and $70,000, respectively, for undeclared dividends related to the Company's preferred stock. The Company expects to incur similar or increasing operating losses in the future (to the extent additional capital is obtained), due primarily to increases in the Company's soft tissue augmentation program's development, manufacturing and business development activities. The Company's results depend on its ability to establish strategic alliances and generate contract revenues, 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, 1999, the Company had cash, cash equivalents and short-term investments of $305,000 as compared to $1,383,000 at December 31, 1998. As of March 31, 1999, the Company had working capital of ($437,000) as compared to $600,000 at December 31, 1998. In April and May 1999, the Company received $922,000 from the exercise of redeemable, publicly traded, warrants issued in conjunction with PPTI's Initial Public Offering and from the exercise of certain warrants issued in conjunction with the private placement of the Company's Series E Convertible Preferred Stock. The Company had long-term debt obligations as of March 31, 1999 of $85,000 in the form of capital lease obligations, versus $106,000 as of December 31, 1998. For the three months ending March 31, 1999, the Company's expenditures for capital equipment and leasehold improvements totaled $22,000, compared with $21,000 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 11 obtained), as the Company improves existing space to expand capacity to meet materials manufacturing requirements for clinical testing. The Company may enter into additional capital lease arrangements if available at appropriate rates and terms. The Company believes its existing available cash and short-term investments, including the proceeds from the recent exercise of warrants, will be sufficient to meet its anticipated capital requirements until July 1999. Substantial additional capital resources will be required to fund continuing expenditures related to the Company's research, development, manufacturing and business development activities. The Company believes there may be a number of alternatives to meeting the continuing capital requirements of its operations, including additional collaborative agreements and public or private financings. The Company is currently in discussions at various stages with several potential collaborative partners that, based on the results of various in vitro and in vivo product performance evaluations, could result in generating revenues in the form of license fees, milestone payments or research and development reimbursements. 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 the Company. If adequate funds are not available, the Company will be required to significantly curtail its operating plans and may have to sell or license out significant portions of the Company's technology or potential products. YEAR 2000 COMPLIANCE The Company continues to modify its information technology in recognition of the year 2000 issue. The "Year 2000" issue concerns potential exposure related to the interruption of business practice and financial misinformation resulting from the application of computer programs which have been written using two digits, rather than four, to define the applicable year of business transactions. The Company has undertaken initiatives to ensure that its computer systems are Year 2000 compliant. To date, the Company has not incurred any material costs in connection with its Year 2000 plan. Based on its assessments to date, the Company does not expect to incur any further significant costs, or anticipate any significant problems or uncertainties associated with becoming Year 2000 compliant. The following is a breakdown by phase of the progress the Company has made to date on its Year 2000 plan: Phase Timeframe % Complete ----- --------- ----------- Initial identification and assessment Q-4 1998 95% Remediation Q-4 1998 95% Testing Q-2 1999 80% Contingency planning Q-2 1999 60% The Company is reliant on its vendors and suppliers and may be reliant on strategic partners to provide Year 2000 compliant systems prior to December 31, 1999. The Company is in the process of surveying all of its major vendors and suppliers to determine whether their systems are Year 2000 compliant. At this time, the impact on the Company of significant vendors and suppliers not being in full compliance cannot be reasonably estimated. However, the Company believes that any of its vendors and suppliers can be replaced with minimal cost impact. The Company is developing a plan to mitigate the impact of vendors and suppliers who are not in compliance with issues related to the Year 2000. 12 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. 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 May 14, 1999 By /s/ J. THOMAS PARMETER ------------ -------------------------------- J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date May 14, 1999 By /s/ JANIS Y. NEVES ------------ ------------------------------- Janis Y. Neves Director of Finance, Controller and Assistant Secretary 14 EXHIBIT INDEX Exhibit Sequentially Number Description Numbered Page - ------ ----------- ------------- 27 Financial Data Schedule. 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 305,113 0 52,482 0 0 382,091 2,095,768 1,559,631 1,095,205 819,398 0 0 7,400,226 110,236 26,774,032 1,095,205 22,649 35,651 (195) 6,055 1,135,695 0 0 1,106,100 0 1,106,100 0 68,459 0 1,174,559 0.11 0.11
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