-----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, K64Y/EBnI2M2wi4dPY7IU56KN8fiBfRWVqcNCWTCdgu3B9vjj2/c/OdzyGtAheCJ iyY0QZK71zk+nSMEWJJpyg== 0001116679-02-001405.txt : 20020814 0001116679-02-001405.hdr.sgml : 20020814 20020814102811 ACCESSION NUMBER: 0001116679-02-001405 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 02732139 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 ppt10qsb.txt JUNE 30, 2002 ================================================================================ 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, 2002 [ ] 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 August 12, 2002, 27,438,759 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 - June 30, 2002 and December 31, 2001 ..................................................3 Condensed Statements of Operations - For the Three Months and Six Months ended June 30, 2002 and 2001 and the period July 6, 1988 (inception) to June 30, 2002...............................4 Condensed Statements of Cash Flows - For the Six Months ended June 30, 2002 and 2001 and the period July 6, 1988 (inception) to June 30, 2002.......................................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 4. Submission of Matters to a Vote of Security Holders..........................................13 Item 6. Exhibits and Reports on Form 8-K.............................................................13 Signature....................................................................................14
2 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Balance Sheets
June 30, December 31, 2002 2001 ----------------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 567,267 $ 234,271 Other current assets 33,986 57,520 ----------------------------------- Total current assets 601,253 291,791 Deposits 30,479 29,679 Equipment and leasehold improvements, net 142,994 205,247 ----------------------------------- $ 774,726 $ 526,717 =================================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 566,614 $ 356,942 Accrued employee benefits 111,024 118,987 Other accrued expenses 38,610 43,398 Deferred revenue 166,667 333,333 Deferred rent 24,111 24,111 ----------------------------------- Total current liabilities 907,026 876,771 Long-term portion deferred rent 36,166 48,222 Stockholders' equity: Convertible Preferred Stock, $.01 par value, 5,000,000 shares authorized, 76,121 and 88,258 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively; liquidation preference of $7,612,100 and $8,825,800 at June 30, 2001 and December 31, 2001, respectively 7,266,780 8,480,530 Common stock, $.01 par value, 60,000,000 shares authorized, 27,438,759 and 21,740,650 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively 274,399 217,418 Additional paid-in capital 35,952,780 33,794,177 Deficit accumulated during development stage (43,662,425) (42,890,401) ----------------------------------- Total stockholders' equity (168,466) (398,276) ----------------------------------- $ 774,726 $ 526,717 ===================================
See accompanying notes. 3 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Operations (unaudited)
For the period July 6, 1988 (inception) to Three months ended Six months ended June 30, June 30, June 30, 2002 2001 2002 2001 2002 ---------------------------------------------------------------------------------- Revenues: Contract revenue $ 943,764 $ 183,333 $ 1,413,342 $ 266,667 $ 7,661,357 Interest income 2,016 18,452 3,636 26,681 1,243,773 Product and other income - - 1,500 38 694,779 ------------------------------- -------------------------------- ----------------- Total revenues 945,780 201,785 1,418,478 293,386 9,599,909 Expenses: Research and development 872,719 597,619 1,523,757 1,202,521 31,211,129 Selling, general and administrative 377,898 404,831 666,745 762,643 18,102,820 ------------------------------- -------------------------------- ----------------- Total expenses 1,250,617 1,002,450 2,190,502 1,965,164 49,313,949 ------------------------------- -------------------------------- ----------------- Net loss (304,837) (800,665) (772,024) (1,671,778) (39,714,040) Undeclared, imputed and/or paid dividends on preferred stock 69,220 69,220 137,678 137,678 5,932,610 ------------------------------- -------------------------------- ----------------- Net loss applicable to common shareholders $ (374,057) $ (869,885) $ (909,702) $ (1,809,456) $ (45,646,650) ================================================================================= Basic and diluted net loss per common share $ (0.01) $ (0.04) $ (0.04) $ (0.09) ================================================================= Shares used in computing basic and diluted net loss per common share 27,000,455 21,571,994 25,566,557 20,250,395 =================================================================
See accompanying notes. 4 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows (unaudited)
For the period July 6, 1988 Six months ended (inception) to June 30, June 30, 2002 2001 2002 ----------------------------------------------------- Operating activities Net loss $ (772,024) $ (1,671,778) $ (39,714,040) Adjustments to reconcile net loss to net cash used for operating activities: Stock issued for compensation and interest - - 472,676 Depreciation and amortization 87,534 68,428 2,290,033 Write-off of purchased technology - - 503,500 Changes in assets and liabilities: Deposits (800) (2,800) (30,479) Other current assets 23,533 (2,898) (33,987) Accounts payable 209,672 (1,805) 566,614 Accrued employee benefits (7,963) 30,562 111,024 Accrued interest payable - 14,575 - Other accrued expenses (4,787) (8,349) 38,610 Deferred revenue (166,667) (166,667) 166,667 Deferred rent (12,056) 2,312 60,277 ----------------------------------------------------- Net cash used for operating activities (643,558) (1,738,420) (35,569,105) Investing activities Purchase of technology - - (570,000) Purchase of equipment and improvements (25,280) (41,636) (1,991,000) Purchases of short-term investments - - (16,161,667) Sales of short-term investments - - 16,161,667 ----------------------------------------------------- Net cash used for investing activities $ (25,280) $ (41,636) $ (2,561,000)
See accompanying notes. 5 PROTEIN POLYMER TECHNOLOGIES, INC. (A Development Stage Company) Condensed Statements of Cash Flows (unaudited)
For the period July 6, 1988 Six months ended (inception) to June 30, June 30, 2002 2001 2002 ----------------------------------------------------- Financing activities Net proceeds from exercise of options and warrants, and sale of common stock $ 1,001,834 $ 1,252,898 $ 23,381,444 Net proceeds from issuance and conversion of preferred stock - - 14,294,668 Net proceeds from convertible notes and detachable warrants - - 1,068,457 Payment on capital lease obligations - (25,088) (288,770) Payment on note payable - - (242,750) Proceeds from note payable - 800,000 484,323 -------------------------------------------------- Net cash provided by financing activities 1,001,834 2,027,810 38,697,372 -------------------------------------------------- Net increase in cash and cash equivalents 332,996 247,754 567,267 Cash and cash equivalents at beginning of period 234,271 866,220 - -------------------------------------------------- Cash and cash equivalents at end of period $ 567,267 $ 1,113,974 $ 567,267 ================================================== Supplemental disclosures of cash flow information Equipment purchased by capital leases $ - $ - $ 288,772 Interest paid 723 509 145,328 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 643,750 200,000 3,356,300 Conversion of Series G preferred stock to common stock 570,000 - 570,000 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) June 30, 2002 1. Basis of Presentation The condensed financial statements of Protein Polymer Technologies, Inc. (the "Company") for the three months and the six months ended June 30, 2002 and 2001 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, 2002 and the results of operations for the three months and the six months ended June 30, 2002 and 2001. The results of operations for the six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the year ended December 31, 2002. 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, 2001, 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 six months ended June 30, 2002 and 2001 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. 5. Expanded Spine Wave, Inc. Relationship On March 17, 2002, we executed additional agreements with Spine Wave that expanded our contractual research and development relationship, and that provided us with additional equity incentives in the form of Spine Wave common stock and warrants. In a related transaction, Spine Wave raised approximately $18 million through the sale of Series A Preferred Stock, and also completed the acquisition of VERTx, Inc. Under the amended Supply and Services Agreement, PPTI, on behalf of Spine Wave, is proceeding with pre-clinical safety and performance studies of the device to support Spine Wave's filing of an Investigational Device Exemption with the FDA to obtain approval to initiate human clinical testing. During the subsequent period leading to regulatory marketing approvals, our contractual responsibilities include the supply of product to be used in clinical testing and preparation for commercial manufacturing operations. Spine Wave is responsible for clinical testing, regulatory approvals, and commercialization. 7 6. Liquidity We believe our existing available cash and cash equivalents as of June 30, 2002, plus contractual amounts receivable, is sufficient to meet our anticipated capital requirements until September 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 and tissue engineering technology. Since 1992, we have focused primarily on developing 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 June 30, 2002 had an accumulated deficit of $(43,662,425). 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. 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 joined with Windamere Venture Partners to establish a new company, Spine Wave, 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 capital 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. 9 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 23 patents to us. In addition, we have filed corresponding patent applications in other relevant commercial jurisdictions. During January 2002, 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, 2002. The original exercise price was $0.50 per share. As an inducement to exercise the warrant early, we offered to reduce the exercise price to $0.25 and offered each holder a new eighteen month warrant for a similar number of shares at an exercise price of $0.40 per share. As a result we raised $990,000 (less expenses). The newly issued warrants will expire on the last day of August 2003. In April 2001, we joined with Windamere Venture Partners and affiliates to form a new orthopedic company, Spine Wave, 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. Back pain is the leading cause for healthcare expenditures in the United States. According to a 2000 Viscogliosi Bros., LLC, Spine Industry report, back pain results in more than $50 billion in direct and indirect medical expense. Despite the invasive surgery associated with many spinal procedures, such as spinal fusion, the worldwide spinal market represents more than $2 billion in revenues, growing at a rate of over 25% annually. It is the fastest growing major segment of the orthopedic industry. In many instances, spinal fusion is a procedure of last resort, since it destroys the natural function and mobility of the spine by replacing the shock absorbing intervertebral disc with metal and/or bone. Currently, there are no approved products to replace or restore the function of the invertebral disc that has degenerated, or to intervene in the degenerative process. Using our patented technology, we are developing a product (the Injectable Disc Nucleus) designed to restore natural disc function by replacing or augmenting the natural disc nucleus that has degenerated or that has been surgically removed in a discectomy procedure. The product has the potential to be used independently in minimally invasive outpatient procedures as well as in combination with traditional open procedures. As a result of the agreements we executed, Spine Wave 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 Spine Wave 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 Spine Wave with a variety of research and development services, and to supply materials to Spine Wave 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 Spine Wave as specified in a separate Escrow Agreement. Spine Wave is responsible for clinical testing, regulatory approvals, and commercialization. On March 17, 2002, we executed additional agreements with Spine Wave that expanded our contractual research and development relationship, and that provided us with additional equity incentives in the form of Spine Wave common stock and warrants. Under the amended Supply and Services Agreement, PPTI, on behalf of Spine Wave, is proceeding with pre-clinical safety and performance studies of the device to support Spine Wave's filing of an Investigational Device Exemption with the FDA to obtain approval to initiate human clinical testing. We now project we will receive from Spine Wave approximately $2.0 million in research and development payments in 2002, exclusive of the pre-clinical study costs. During the subsequent period leading to regulatory marketing approvals, our contractual responsibilities include the supply of product to be used in clinical testing and preparation for commercial manufacturing operations. Spine Wave is responsible for clinical testing, regulatory approvals, and commercialization. As of June 30, 2002, we had cash and cash equivalents totaling $567,267. 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 September 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. 10 Results of Operations We received $943,764 in contract and licensing revenue for the three months ended June 30, 2002 as compared to $183,333 for the three months ended June 30, 2001. For the six months ended June 30, 2002, we received $1,413,342 as compared to $266,667 for the same period in 2001. 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. The contract and licensing revenue also includes payments from our affiliate, Spine Wave, Inc., for research and development associated with the development of a product for the repair of spinal disks for the treatment of lower back pain. The increase in contract and licensing revenue over the six month period primarily reflects a March 17, 2002 revision in our Supply and Services Agreement with Spine Wave, that provides for an increase in research and development services and payments in support of the pre-clinical development of the spinal disc nucleus replacement product currently under development. Interest income was $2,016 and $3,636, respectively, for the three months and six months ended June 30, 2002 versus $18,452 and $26,681 for the same periods in 2001. Research and development expenses for the three months ended June 30, 2002 were $872,719, compared to $597,619 for the same period in 2001. Research and development expenses for the six-month period ended June 30, 2002 were $1,523,757 as compared to $1,202,521 for the same period in 2001. The increase in research and development expenditures primarily reflects increased pre-clinical costs associated with the development of the spinal disc nucleus replacement product. This is in preparation for Spine Wave's filing of an Investigational Device Exemption for the spinal product with the Food and Drug Administration requesting approval to begin human clinical testing. We expect, in general, that our research and 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 six months ended June 30, 2002 were $377,898 and $666,745, respectively, as compared to $404,831 and $762,643 for the same periods in 2001. 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 and manufacturing efforts require additional resources and to the extent additional capital is obtained. For the three months ended June 30, 2002, we recorded a net loss applicable to common shareholders of $374,057, or $0.01 per share as compared to a loss of $869,885 or $0.04 per share for the same period in 2001. For the six-month period ended June 30, 2002, our net loss applicable to common shareholders was $909,702, or $0.04 per share as compared to $1,809,456, or $0.09 per share for the same period in 2001. Also included in each of the three month periods of 2002 and 2001 were $69,220 and $137,678 for each of the six-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 a greater impact in the future. Liquidity and Capital Resources As of June 30, 2002, we had cash and cash equivalents of $567,267 as compared to $234,271 at December 31, 2001. As of June 30, 2002, we had working capital of ($305,773) as compared to ($584,980) at December 31, 2001. We had no long-term debt obligations as of June 30, 2002 or as of December 31, 2001. We had $25,280 in expenditures for capital equipment and leasehold improvements for the six months ending June 30, 2002, compared to $41,636 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. 11 Due to increases in contractual research and development payments, we have been able over the past six months to substantially reduce our cash burn rate. As a result our predicted cash requirements for the remainder of 2002 are lower than in previous periods. 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 September 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. There can be no assurance, however, 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. 12 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on May 17, 2002. Proposals I, II and III were approved. The results are as follows: Proposal I The following directors were elected at the meeting to serve a one-year term as directors: Authority For Withheld ---------------------------------------------------------------------------- J. Thomas Parmeter 20,842,024 84,500 Edward E. David 20,842,024 84,500 George R. Walker 20,842,024 84,500 Richard Adelson 20,596,024 330,500 J. Paul Jones 20,842,024 84,500 Philip J. Davis 20,842,024 84,500 Edward J. Hartnett 20,842,024 84,500 Kerry L. Kuhn 20,596,024 330,500 Proposal II Ratification of appointment of Peterson & Co. as the Company's independent auditors for fiscal year 2002. For Against Abstained ---------------------------------------------------------------------------- 20,584,115 323,483 18,926 Proposal III Approval and adoption of the 2002 Stock Option Plan. For Against Abstained ---------------------------------------------------------------------------- 16,247,321 623,012 14,500 Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Director of Finance (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 b. Reports on Form 8-K Current Report on Form 8-K filed with the Securities and Exchange Commission on May 1, 2002. 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: August 14, 2002 By /s/ J. Thomas Parmeter ------------------------------- J. Thomas Parmeter Chairman of the Board, Chief Executive Officer, President Date: August 14, 2002 By /s/ Janis Y. Neves ------------------- Janis Y. Neves Director of Finance, Controller and Assistant Secretary 14 EXHIBIT INDEX
Exhibit Sequentially Number Description Numbered Page - ------ ----------- ------------- 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 16 Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Director of Finance (Principal Financial Officer) 17 pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15 EX-99 3 ex99-1.txt EXHIBIT 99.1 CERTIFICATION OF CEO Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Protein Polymer Technologies, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ J. Thomas Parmeter - ----------------------- J. Thomas Parmeter President and Chief Executive Officer August 14, 2002 16 EX-99 4 ex99-2.txt EXHIBIT 99.2 CERIFICATION OF CFO Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Protein Polymer Technologies, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Janis Y. Neves - ------------------- Janis Y. Neves Director of Finance and Assistant Secretary August 14, 2002 17 -----END PRIVACY-ENHANCED MESSAGE-----