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, 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
April 30, 1996, 6,466,905 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___
No _X_
<PAGE> PROTEIN POLYMER TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
Page No.
________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets -
March 31, 1996 and December 31, 1995 1
Condensed Statements of Operations -
For the Three Months ended
March 31, 1996 and 1995 2
Condensed Statements of Cash Flows -
For the Three Months ended
March 31, 1996 and 1995 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signature 9
Exhibit Index 10
i
<PAGE> PROTEIN POLYMER TECHNOLOGIES, INC.
Condensed Balance Sheets
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 634,988 $ 471,296
Short-term investments 890,000 1,540,000
Accounts receivable 28,545 28,099
Inventory 52,599 54,534
Other current assets 43,549 20,178
_____________ _____________
Total current assets 1,649,681 2,114,107
Deposits 23,407 22,257
Equipment and leasehold
improvements, net 337,851 302,795
_____________ _____________
$ 2,010,939 $ 2,439,159
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 204,808 $ 157,971
Accrued employee benefits 108,351 101,284
Other accrued expenses 31,820 51,598
_____________ _____________
Total current liabilities 344,979 310,853
Stockholders' equity:
Series D convertible preferred
stock, $.01 par value, 71,600
shares authorized, 49,187
shares issued and outstanding
at March 31, 1996 4,764,745 4,764,745
Common stock, $.01 par value,
25,000,000 shares authorized,
6,062,425 and 5,832,925 shares
issued and outstanding at
March 31, 1996 and December 31,
1995, respectively 60,625 58,330
Additional paid-in capital 13,926,901 13,648,036
Accumulated deficit (17,086,311) (16,342,805)
_____________ _____________
Total stockholders' equity 1,665,960 2,128,306
_____________ _____________
$ 2,010,939 $ 2,439,159
See accompanying notes.
1
<PAGE> PROTEIN POLYMER TECHNOLOGIES, INC.
Condensed Statements of Operations
Three Months
Ended March 31,
1996 1995
(unaudited)
Revenues:
Product sales $ 15,514 $ 34,583
Contract revenue - 10,000
Interest income 20,955 15,518
_____________ _____________
Total revenues 36,469 60,101
Expenses:
Cost of goods sold 6,214 23,933
Research and development 447,162 470,925
Selling, general and
administrative 310,349 385,683
Royalties 16,250 16,250
_____________ _____________
Total expenses 779,975 896,791
_____________ _____________
Net loss $ (743,506) $ (836,690)
Undeclared cumulative dividends
on preferred stock 122,295 54,000
_____________ _____________
Net loss applicable to
common shareholders $ (865,801) $ (890,690)
Net loss per common share $ (0.15) $ (0.15)
Shares used in computing net
loss per common share 5,866,898 5,830,925
See accompanying notes.
2
<PAGE> PROTEIN POLYMER TECHNOLOGIES, INC.
Condensed Statements of Cash Flows
Three Months
Ended March 31,
1996 1995
(unaudited)
OPERATING ACTIVITIES
Net loss $ (743,506) $ (836,690)
Adjustments to reconcile net
loss to net cash used for
operating activities:
Depreciation and amortization 28,101 38,975
Changes in assets and liabilities:
Accounts receivable (446) (24,074)
Inventory 1,935 (69,089)
Deposits (1,150) 1,300
Other current assets (23,371) (12,969)
Accounts payable 46,837 18,199
Accrued employee benefits 7,067 5,072
Other accrued expenses (19,778) (56,375)
Deferred revenue - 3,750
_____________ _____________
Net cash used for operating
activities (704,311) (931,901)
INVESTING ACTIVITIES
Purchase of equipment and
improvements (63,157) (22,738)
Short-term investments 650,000 -
_____________ _____________
Net cash provided by (used for)
investing activities 586,843 (22,738)
FINANCING ACTIVITIES
Net proceeds from issuance of warrants
and sale of common stock 281,160 -
_____________ _____________
Net cash provided by financing
activities 281,160 -
_____________ _____________
Net increase (decrease) in cash
and cash equivalents 163,692 (954,639)
Cash and cash equivalents at
beginning of the period 471,296 1,848,391
_____________ _____________
Cash and cash equivalents at
end of the period $ 634,988 $ 893,752
See accompanying notes.
3
<PAGE> PROTEIN POLYMER TECHNOLOGIES, INC.
Notes to Condensed Financial Statements
(Unaudited)
March 31, 1996
1. Basis of Presentation
The condensed financial statements of Protein Polymer
Technologies, Inc. (the "Company") for the three months ended
March 31, 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 March 31, 1996 and the
results of operations for the three months ended March 31, 1996
and 1995. The results of operations for the three months ended
March 31, 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.
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 March 31, 1996, along with capital received
during April 1996 from the exercise of outstanding warrants, will
be sufficient to meet its anticipated capital requirements through
1996. Substantial additional capital resources will be required
to fund continuing expenditures related to the Company's research,
development and product marketing activities.
4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
Protein Polymer Technologies, Inc. (the "Company") 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 $17,086,000.
In 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.
The Company's strategy with most of its other programs is to enter
into similar agreements with major medical product marketing and
distribution companies. Although these relationships 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
Sales and license fees from the Company's ProNectin(R) F
product line for the three months ended March 31, 1996 and 1995
were $16,000 and $35,000, respectively. This decrease was due to
the launch in 1995 of the Company's SmartPlastic(tm) Activated
Plasticware(tm) product line which included sales into the
distributor pipeline. There was no contract research revenue for
the three months ended March 31, 1996, versus $10,000 for the same
period in 1995. The revenue in 1995 was derived from a materials
evaluation agreement with Ethicon.
Interest income was $21,000 for the three months ended March
31, 1996, compared to $16,000 for the same period in 1995. The
increase resulted primarily from an increase in cash available for
investing from the sale of preferred stock in September and
October 1995.
Cost of goods sold was $6,000 for the three months ended
March 31, 1996, compared to $24,000 for the same period last year.
The decrease in costs related primarily to the 1995 launching and
start-up costs of the Company's SmartPlastic product line.
Separately, royalty expenses paid to Stanford University and
Telios Pharmaceuticals, Inc. aggregated $16,000 for each of the
three month periods ended March 31, 1996 and 1995.
5
<PAGE>
Research and development expenses for the three months ended
March 31, 1996 were $447,000, compared to $471,000 for the same
period in 1995, a 5% decrease. The Company expects that its
research and development expenses will again 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 March 31, 1996 were $310,000, as compared to $386,000
the same period in 1995, a 20% decrease. This decrease was
primarily due to additional product marketing and business
development expenses incurred in 1995 related to the launch of the
SmartPlastic product line. The Company expects that its selling,
general and administrative expenses will again increase as support
for its research, development and product marketing efforts
require and to the extent additional capital is raised.
During the three months ended March 31, 1996, the Company
recorded a net loss applicable to common shareholders of $866,000,
$.15 per share compared to $891,000, or $.15 per share for the
same period in 1995, a 3% decrease. Included in the three month
periods of 1996 and 1995 were $122,000 and $54,000 for undeclared
cumulative dividends on 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
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.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had cash, cash equivalents
and short-term investments of $1,525,000 as compared to $2,011,000
at December 31, 1995. As of March 31, 1996, the Company had
working capital of $1,305,000, compared to $1,803,000 at December
31, 1995. These decreases resulted from the funding of losses
from operations and additional capital expenditures.
The Company had no long-term debt obligations as of March 31,
1996 and December 31, 1995. For the three months ending March 31,
1996, the Company's expenditures for capital equipment and
leasehold improvements totaled $63,000, compared with $23,000 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 "good
laboratory practices" compliance as certified by the Food and Drug
Administration.
The Company believes its existing available cash and short-
term investments as of March 31, 1996, along with capital received
during April 1996 from the exercise of outstanding warrants, will
be sufficient to meet its anticipated capital requirements through
1996. In addition, if payments from the Company's agreements with
Ethicon are received on a timely basis, there would be sufficient
funding for continuing operations until the fourth quarter of
1997. Nevertheless, 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 additional alternatives to meet
its continuing capital needs of its operations, such as
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
products.
7
<PAGE> 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.
8
<PAGE> SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROTEIN POLYMER TECHNOLOGIES, INC.
(Registrant)
Date: May 9, 1996 By: J. Thomas Parmeter
(Signature)
Chairman of the Board, Chief
Executive Officer, President
Date: May 9, 1996 By: Aron P. Stern
(Signature)
Vice President, Finance and
Administration, and Chief
Financial Officer
9
<PAGE> EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
_______ ________________________________ _____________
27 Financial Data Schedule 11
10
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