<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
---------------
ON FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
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)
Issuer's Telephone Number: (619) 558-6064
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Redeemable Warrants
(Title of Class)
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
_ __
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB/A or any
amendment to this Form 10-KSB/A. [X]
The issuer's revenues for the most recent fiscal year were $755,751.
The aggregate market value of the voting stock held by non-affiliates of the
issuer on February 3, 1998 was $9,681,000.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of February 3, 1998,
10,429,094 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Definitive Proxy Statement filed March 24, 1997 pursuant to Regulation 14A with
respect to the Registrant's 1997 Annual Meeting of Stockholders (incorporated by
reference in Part III).
Transitional Small Business Disclosure Format: Yes No X
-- -
<PAGE>
PART II
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Overview
Incorporated in 1988, Protein Polymer Technologies, Inc. ("Protein" or "the
Company") has concentrated its research and development efforts on establishing
a scientific and technical leadership position in the production of unique
protein-based materials. The Company has identified biomedical market and
product opportunities for further research and development that management
believes will exploit the unique properties of the Company's technology to
competitive advantage. The Company has been unprofitable to date, and as of
December 31, 1996 has an accumulated deficit of $19,207,000.
The Company's medical product candidates for surgical repair and
regeneration of tissues are in various stages of research and development. Its
more advanced programs are in the areas of tissue adhesives and sealants, and
tissues augmentation, where the Company is devoting over 90% of its scientific
effort currently. The Company's first commercial products, ProNectin F and
SmartPlastic, are used by biologists and cell culture laboratories, principally
to grow mammalian cells for biomedical research purposes.
In 1995 the Company entered into a collaborative relationship with Ethicon
regarding its tissue adhesives and sealants program. The Company's strategy with
most of its other programs is to enter into similar collaborative development
agreements with major medical product marketing and distribution companies.
Although these relationships may provide significant near-term revenues through
up-front licensing fees, research and development reimbursements and milestone
payments, the Company expects to incur continuing operating losses for the next
several years.
On December 16, 1997, Ethicon elected to terminate the agreements with
Protein, based upon Ethicon's determination that the timelines to clinical
trials and to market were too lengthy to continue. Although Ethicon remains
interested in this product opportunity, and will monitor our continued progress,
the Company has decided to discuss the opportunity with other potential
partners. Protein's relationship with Ethicon continues to remain good, and
Johnson & Johnson subsidiaries are currently evaluating the Company's materials
regarding other product opportunities. (See Note 5 - Research and Development
Contracts and Royalties - in the Notes to Financial Statements elsewhere
herein.)
Results of Operations
Contract research revenue for the year ended December 31, 1996 was
$610,000, compared to $810,000 and $100,000 for 1995 and 1994, respectively.
During 1996 the Company received research and development reimbursements
totaling $600,000 from Ethicon related to the Company's tissue adhesives and
sealants program. In September 1995 the Company received a payment of $800,000
from Ethicon upon the signing of the various agreements related to the Company's
tissue adhesives and sealants program. The 1994 revenues were derived from
materials evaluation agreements entered into with divisions of J&J.
Interest income was $87,000 for the year ended December 31, 1996, as
compared to $59,000 for 1995 and $95,000 for 1994. The year-to-year variability
resulted from timing differences with regard to the receipt of equity capital
and the amounts of excess cash available for investment.
2
<PAGE>
Product sales for the years ended December 31, 1996 were $58,000, compared
to $118,000 and $94,000 in 1995 and 1994, respectively. Product sales consist of
ProNectin F related product revenues and licensing fees. Sales in 1995 reflect
the launch of the SmartPlastic line of ProNectin F Activated Cultureware and the
resultant distributor stocking orders. Additionally, during 1995 the Company
stopped promotional expenditures for these products.
Cost of sales was $47,000 for the year ended December 31, 1996, versus
$125,000 and $57,000 for the years 1995 and 1994, respectively. The 1996 and
1995 totals reflect certain inventory adjustments and reserves. Royalty expenses
paid to Stanford University and Telios Pharmaceuticals, Inc. aggregated $35,000
for each of the three years ended December 31, 1996, 1995 and 1994.
Research and development expenses for the year ended December 31, 1996 were
$2,021,000, compared to $1,722,000 in 1995, an increase of 17%. This increase in
1996 spending over 1995 was due to expanded activities, including the
establishment of a quality assurance department as part of the Company's efforts
to implement GLP. The 1995 expenses decreased 12% compared to $1,951,000
incurred in 1994. This decrease in 1995 spending versus 1994 resulted from the
continued focusing of the Company's research and development efforts, with fewer
programs sponsored and the consequent lowering of expenses incurred. The Company
expects its research and development expenses will increase in the future due to
the expansion of product directed research and development efforts, an increased
number of programs funded, laboratory upgrading and expansion, and increased
outside product testing.
Selling, general and administrative expenses for the year ended December
31, 1996 were $1,516,000, as compared to $1,329,000 for 1995, an increase of
14%. This increase in 1996 spending over 1995 was due to additional legal,
patent and risk insurance expenses, and increased investor relations activities.
The 1995 expenses decreased 12% compared to $1,512,000 incurred in 1994. This
decrease in 1995 spending versus 1994 was due to reduced product marketing,
legal and investor relations expenses. The Company expects its selling, general
and administrative expenses will increase in the future consistent with
supporting its research and development efforts and as business development,
patent and investor relations activities require.
For the year ended December 31, 1996, the Company recorded a net loss
applicable to common shareholders of $3,356,000, or $.51 per share, as compared
to $2,610,000, or $.45 per share for 1995, and $3,353,000, or $.58 per share for
1994. The 1996, 1995 and 1994 losses and per share calculations include
$492,000, $385,000 and $108,000, respectively, of accumulated and/or paid
dividends from the Company's Preferred Stock. The Company expects to incur
increasing operating losses for the next several years, to the extent additional
capital is raised, based upon the successful continuation of the tissue
adhesives program and the tissue augmentation program, as well as expected
increases in the Company's other research and 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 impact on its continuing operations. Effective January 1, 1994,
the Company adopted Statement No. 109, "Accounting for Income Taxes". There is
no current year or cumulative impact of the adoption of Statement No. 109. Based
upon Company earnings history, a valuation allowance of $7,363,000 is required
to reduce the Company's net deferred tax assets to the amount realizable.
3
<PAGE>
Liquidity and Capital Resources
As of December 31, 1996, the Company had cash, cash equivalents and
short-term investments totaling $1,260,000, as compared to $2,011,000 at
December 31, 1995. As of December 31, 1996, the Company had working capital of
$840,000, compared to $1,803,000 at December 31, 1995. These decreases in 1996
as compared to 1995 were due to increased operating expenses, reduced revenues
and less equity capital raised. During the first week of January 1997 the
Company received $4,760,000 before expenses of approximately $160,000 from a
private placement of common stock to institutional and qualified individual
investors. Accounting on a pro forma basis as though this capital influx had
occurred on December 31, 1996, the Company's cash, cash equivalents and
short-term investments would have totaled $6,020,000, and working capital would
have increased to $5,600,000.
The Company had no long-term debt obligations as of December 31, 1996 and
December 31, 1995. For the twelve month period ending December 31, 1996 the
Company's expenditures for capital equipment and leasehold improvements totaled
$184,000, compared with $84,000 for the same period last year. The Company
anticipates that these expenditures will increase as laboratory renovations and
additional equipment are required to meet current GLP regulations and production
requirements. The Company currently has no equipment lease lines of credit,
although it may enter into such arrangements in the future if available at
appropriate rates and terms.
The Company believes its existing available cash, cash equivalents and
short-term investments, including the equity capital received during the first
week of January 1997, will be sufficient to meet its anticipated capital
requirements until April 1998. Substantial additional capital resources will be
required to fund continuing expenditures related to the Company's research,
development, manufacturing and product marketing activities. The Company
believes there may be a number of alternatives available to meet the continuing
capital requirements of its operations, such as additional collaborative
agreements and public or private financings, and is actively pursuing all
available 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 will be
required to significantly curtail its operating plans and may have to relinquish
rights to significant portions of the Company's technology or potential
products.
4
<PAGE>
Item 7. Financial Statements
Filed herewith are the following Audited Financial Statements for Protein
Polymer Technologies, Inc. (a development stage company):
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................... F-2
Balance Sheets at December 31, 1996 and 1995................................ F-3
Statements of Operations for the years ended December 31, 1996, 1995
and 1994 and the period July 6, 1988 (inception) to December 31, 1996.... F-4
Statements of Stockholders Equity for the period July 6, 1988 (inception)
to December 31, 1996..................................................... F-5
Statements of Cash Flows for the years ended December 31, 1996, 1995
and 1994 and the period July 6, 1988 (inception) to December 31, 1996.... F-7
Notes to Financial Statements............................................... F-8
</TABLE>
F-1
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Protein Polymer Technologies, Inc.
We have audited the accompanying balance sheets of Protein Polymer
Technologies, Inc. (a Development Stage Company) as of December 31, 1996 and
1995, and the related statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996 and for
the period July 6, 1988 (inception) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Protein Polymer
Technologies, Inc. (a Development Stage Company) at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 and for the period July 6, 1988
(inception) to December 31, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, Protein Polymer
Technologies, Inc. (a Development Stage Company) has reported accumulated losses
during the development stage aggregating $19,207,237 and without additional
financing, lacks sufficient working capital to fund operations through April 30,
1998, which raises substantial doubt about its ability to continue as a going
concern. Management's plans as to these matters are described in Note 1. The
1996 financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
ERNST & YOUNG LLP
San Diego, California
January 30, 1997, except for paragraph 2 of Note 1,
as to which the date is January 30, 1998
F-2
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Note 2) $ 267,357 $ 471,296
Short-term investments (Note 2) 993,042 1,540,000
Inventory, net 20,694 54,534
Other current assets 56,561 48,277
--------------------------
Total current assets 1,337,654 2,114,107
Deposits 22,257 22,257
Deferred offering costs 17,356 -
Equipment and leasehold improvements, net (Note 1) 369,314 302,795
--------------------------
$ 1,746,581 $ 2,439,159
==========================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 251,321 $ 157,971
Accrued employee benefits 117,612 101,284
Other accrued expenses 53,525 51,598
Deferred revenue 75,000 -
--------------------------
Total current liabilities 497,458 310,853
Commitments (Note 4) - -
Stockholders' equity (Note 3):
Series D convertible preferred stock, $.01 par value, 71,600 shares
authorized, 49,187 shares issued and outstanding at December 31,
1996 and 1995, respectively - liquidation preference $4,918,700 4,764,745 4,764,745
Common stock, $.01 par value, 25,000,000 shares authorized,
7,233,228 and 5,832,925 shares issued and outstanding at
December 31, 1996 and 1995, respectively 72,333 58,330
Additional paid-in capital 15,619,282 13,648,036
Deficit accumulated during development stage (19,207,237) (16,342,805)
--------------------------
Total stockholders' equity 1,249,123 2,128,306
--------------------------
$ 1,746,581 $ 2,439,149
==========================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
For the period
July 6, 1988
(inception) to
Years ended December 31, December 31,
1996 1995 1994 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Contract revenue (Note 5) $ 610,000 $ 810,000 $ 100,000 $ 3,845,455
Interest income 87,317 58,702 94,941 759,420
Product and other income 58,434 117,991 114,294 482,251
---------------------------------------------------------
Total revenues 755,751 986,693 309,235 5,087,126
Expenses:
Cost of sales 47,364 124,824 56,843 249,380
Research and development 2,021,413 1,721,776 1,951,120 14,120,011
Selling, general and administrative 1,516,406 1,329,497 1,511,631 9,440,926
Royalties 35,000 35,000 35,000 230,171
---------------------------------------------------------
Total expenses 3,620,183 3,211,097 3,554,594 24,040,488
---------------------------------------------------------
Net loss (2,864,432) (2,224,404) (3,245,359) (18,953,362)
Undeclared and/or paid dividends on
preferred stock (491,867) (385,143) (108,000) (985,010)
---------------------------------------------------------
Net loss applicable to common
shareholders $(3,356,299) $(2,609,547) $(3,353,359) $(19,938,372)
=========================================================
Net loss per common share $ (.51) $ (.45) $ (.58)
=========================================
Shares used in computing net loss
per common share 6,638,814 5,831,446 5,830,925
=========================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
For the period July 6, 1988 (inception) to December 31, 1996
<TABLE>
<CAPTION>
Common stock Preferred stock
------------------- ------------------- Additional
Shares Amount Shares Amount paid-in capital
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock at $.01 per share for cash 400,000 $ 4,000 -- $ -- $ --
Issuance of common stock at $.62 per share for cash and receivables 1,116,245 11,162 -- -- 681,838
Receivables from sale of common stock -- -- -- -- --
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1988 1,516,245 15,162 -- -- 681,838
Repayment of receivables from sale of common stock -- -- -- -- --
Issuance of common stock at $.62 per share 359,136 3,594 -- -- 219,358
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1989 1,875,381 18,756 -- -- 901,196
Exercise of common stock options at $.01 per share for cash 60,000 600 -- -- --
Issuance of common stock at $.68 per share for cash and compensation 5,000 50 -- -- 3,350
Common stock repurchased at $.01 per share for cash (25,000) (250) -- -- --
Common stock issued at $.68 per share for cash and compensation 25,000 250 -- -- 16,750
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1990 1,940,381 19,406 -- -- 921,296
Exercise of common stock options at $.68 per share for cash 5,000 50 -- -- 3,350
Exercise of warrants for common stock 483,755 4,837 -- -- 295,493
Conversion of notes payable to common stock 339,230 3,391 -- -- 508,414
Conversion of notes payable to preferred stock -- -- 278,326 2,783 553,869
Issuance of preferred stock at $2.00 per share for cash, net of
issuance costs -- -- 400,000 4,000 703,475
Issuance of warrants for cash -- -- -- -- 3,000
Issuance of warrants in connection with convertible notes payable -- -- -- -- 28,000
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1991 2,768,366 27,684 678,326 6,783 3,016,897
Initial public offering at $6.50 per unit, net of issuance costs 1,667,500 16,676 -- -- 8,911,024
Conversion of Series B preferred stock into common stock in connection
with initial public offering 678,326 6,783 (678,326) (6,783) --
Conversion of Series A preferred stock into common stock at 1.13342
per share 713,733 7,137 -- -- 1,717,065
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1992 5,827,925 58,280 -- -- 13,644,986
Exercise of common stock options at $.68 per share 3,000 30 -- -- 2,010
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1993 5,830,925 58,310 -- -- 13,646,996
Issuance of preferred stock at $100 per share for cash, net of
issuance costs -- -- 21,600 2,073,925 --
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1994 5,830,925 58,310 21,600 2,073,925 13,646,996
Issuance of preferred stock at $100 per share for cash, net of
issuance costs -- -- 25,000 2,432,150 --
Series C dividends paid in Series D preferred stock -- -- 2,539 253,875 --
Interest paid in Series D stock -- -- 48 4,795 --
Exercise of common stock options at $.53 per share 2,000 20 -- -- 1,040
Net loss -- -- -- -- --
--------- ------- ------- ---------- -----------
Balance at December 31, 1995 5,832,925 58,330 49,187 4,764,745 13,648,036
</TABLE>
<TABLE>
<CAPTION>
Deficit
accumulated
during Receivables from
development sale of common Total stockholders'
stage stock equity
----------- --------------- -----------------
<S> <C> <C> <C>
Issuance of common stock at $.01 per share for cash $ -- -- 4,000
Issuance of common stock at $.62 per share for cash and receivables -- -- 693,000
Receivables from sale of common stock -- (86,000) (86,000)
Net loss (322,702) -- (322,702)
----------- --------- -----------
Balance at December 31, 1988 (322,702) (86,000) 288,298
Repayment of receivables from sale of common stock -- 86,000 86,000
Issuance of common stock at $.62 per share -- -- 222,952
Net loss (925,080) -- (925,080)
----------- --------- -----------
Balance at December 31, 1989 (1,247,782) -- (327,830)
Exercise of common stock options at $.01 per share for cash -- -- 600
Issuance of common stock at $.68 per share for cash and compensation -- -- 3,400
Common stock repurchased at $.01 per share for cash -- -- (250)
Common stock issued at $.68 per share for cash and compensation -- -- 17,000
Net loss (1,501,171) -- (1,501,171)
----------- --------- -----------
Balance at December 31, 1990 (2,748,953) -- (1,808,251)
Exercise of common stock options at $.68 per share for cash -- -- 3,400
Exercise of warrants for common stock -- -- 300,330
Conversion of notes payable to common stock -- -- 511,805
Conversion of notes payable to preferred stock -- -- 556,652
Issuance of preferred stock at $2.00 per share for cash, net of
issuance costs -- -- 707,475
Issuance of warrants for cash -- -- 3,000
Issuance of warrants in connection with convertible notes payable -- -- 28,000
Net loss (1,143,119) -- (1,143,119)
----------- --------- -----------
Balance at December 31, 1991 (3,892,072) -- (840,708)
Initial public offering at $6.50 per unit, net of issuance costs -- -- 8,927,700
Conversion of Series B preferred stock into common stock in connection
with initial public offering -- -- --
Conversion of Series A preferred stock into common stock at 1.13342
per share -- -- 1,724,202
Net loss (3,481,659) -- (3,481,659)
----------- --------- -----------
Balance at December 31, 1992 (7,373,731) -- 6,329,535
Exercise of common stock options at $.68 per share -- -- 2,040
Net loss (3,245,436) -- (3,245,436)
----------- --------- -----------
Balance at December 31, 1993 (10,619,167) -- 3,086,139
Issuance of preferred stock at $100 per share for cash, net of
issuance costs -- -- 2,073,925
Net loss (3,245,359) -- (3,245,359)
----------- --------- -----------
Balance at December 31, 1994 (13,864,526) -- 1,914,705
Issuance of preferred stock at $100 per share for cash, net of
issuance costs -- -- 2,432,150
Series C dividends paid in Series D preferred stock (253,875) -- --
Interest paid in Series D stock -- -- 4,795
Exercise of common stock options at $.53 per share -- -- 1,060
Net loss (2,224,404) -- (2,224,404)
----------- --------- -----------
Balance at December 31, 1995 (16,342,805) -- 2,128,306
</TABLE>
F-5
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
For the period July 6, 1988 (inception) to December 31, 1996
<TABLE>
<CAPTION>
Common stock Preferred stock
----------------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------------
<S> <C> <C> <C> <C>
Exercise of common stock warrants at $1.25 per share 932,960 $ 9,330 - $ -
Exercise of common stock warrants at $2.50 per share, net of
issuance costs of $24,020 322,663 3,226 - -
Exercise of common stock warrants at $1.00 per share 25,000 250 - -
Exercise of common stock options 136,000 1,360 - -
Stock repurchases (16,320) (163) - -
Net loss - - - -
----------------------------------------------------------
Balance at December 31, 1996 7,233,228 $72,333 49,187 $4,764,745
==========================================================
<CAPTION>
Deficit
accumulated
during Receivables from
Additional development sale of common Total stockholders'
paid-in capital stage stock equity
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Exercise of common stock warrants at $1.25 per share $ 1,156,870 $ - $ _ $ 1,166,200
Exercise of common stock warrants at $2.50 per share, net of
issuance costs of $24,020 779,413 - - 782,639
Exercise of common stock warrants at $1.00 per share 24,750 - - 25,000
Exercise of common stock options 91,650 - - 93,010
Stock repurchases (81,437) - - (81,600)
Net loss - (2,864,432) - (2,864,432)
-----------------------------------------------------------------
Balance at December 31, 1996 $15,619,282 $(19,207,237) $ - $ 1,249,123
=================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the period
July 6, 1988
(inception) to
Years ended December 31, December 31,
1996 1995 1994 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities
Net loss $(2,864,432) $(2,224,404) $(3,245,359) $(18,953,362)
Adjustments to reconcile net loss to net cash
used for operating activities:
Stock issued for compensation - - - 20,100
Stock issued for interest - 4,795 - 4,795
Increase in inventory reserve 20,717 50,805 - 71,522
Depreciation and amortization 117,203 138,866 171,588 1,075,419
Write-off of purchased technology - - - 503,500
Changes in assets and liabilities:
Inventory 13,123 (63,173) (36,006) (92,216)
Deposits - 6,300 (6,300) (22,257)
Other current assets (8,284) (8,770) (3,061) (56,561)
Accounts payable 93,350 (75,189) 82,052 251,321
Accrued employee benefits 16,328 21,977 18,361 117,612
Other accrued expenses 1,927 (32,320) 56,661 53,525
Deferred revenue 75,000 (5,000) 834 75,000
---------------------------------------------------------------------
Net cash used for operating activities (2,535,068) (2,186,113) (2,961,230) (16,951,602)
Investing activities
Purchase of technology - - - (570,000)
Purchase of equipment and improvements (183,722) (84,192) (209,320) (1,291,476)
Short-term investments 546,958 (1,052,972) (1,011,575) (993,042)
---------------------------------------------------------------------
Net cash provided by (used for) investing
activities 363,236 (1,137,164) 802,255 (2,854,518)
Financing activities
Net proceeds from issuance of warrants and
sale of common stock 1,985,249 1,060 - 11,843,051
Net proceeds from issuance and conversion
of preferred stock - 2,432,150 2,073,925 6,937,752
Proceeds from convertible notes and
detachable warrants - - - 1,068,457
Payment on note payable - - - (92,750)
Proceeds from note payable - - - 334,323
Deferred offering costs (17,356) - - (17,356)
---------------------------------------------------------------------
Net cash provided by financing activities 1,967,893 2,433,210 2,073,925 20,073,477
Net increase (decrease) in cash and cash
equivalents (203,939) (890,067) (85,050) 267,357
Cash and cash equivalents at beginning of
the period 471,296 1,361,363 1,446,413 -
---------------------------------------------------------------------
Cash and cash equivalents at end of the
period $ 267,357 $ 471,296 $ 1,361,363 $ 267,357
=====================================================================
Supplemental disclosures of cash flow
information
Interest paid $ - $ - $ - $ 63,473
Series D stock issued for Series C stock $ - $ 2,073,925 $ - $ 2,073,925
Series C dividends paid with Series D stock $ - $ 253,875 $ - $ 253,875
=====================================================================
</TABLE>
See accompanying notes.
F-7
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
1. Organization and Significant Accounting Policies
Organization and business activities
Protein Polymer Technologies, Inc. (the "Company") was incorporated in Delaware
on July 6, 1998. The Company was established for the purpose of designing,
producing and marketing genetically engineered protein polymers for a variety of
biomedical and specialty materials applications. For the period from its
inception to date, the Company has been a development stage enterprise, and
accordingly, the Company's operations have been directed primarily toward
developing business strategies, raising capital, exploring marketing channels,
recruiting personnel, and research and development activities.
Liquidity
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. In January 1997 the Company received
$4.76 million, before expenses of approximately $160,000, from a private
placement of common stock to certain qualified institutions and individuals (see
Note 8. Subsequent Event, below). The Company believes that these funds,
combined with its cash, cash equivalents and short-term investments of $1.26
million as of December 31, 1996, and anticipated contract revenues and interest
income, will be sufficient to meet its anticipated capital requirements until
April 1998. 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 available 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 will be required to significantly curtail its
operating plans and relinquish rights to significant portions of the Company's
technology or potential products.
Net loss per common share
Net loss per common share is computed using the weighted average number of
common shares outstanding during the period as adjusted for the effects of
certain rules of the Securities and Exchange Commission for the period prior to
the Company's initial public offering. For purposes of this calculation, net
loss in 1996 and 1995 have been adjusted for cumulative dividends on the Series
C and D Preferred Stock.
Research and development revenues and expenses
Research and development contract revenues are recorded as earned based on the
performance requirements of the contracts. Payments received in advance of
amounts earned are recorded as deferred revenue. Research and development costs
are expensed as incurred.
Product revenue recognition
Revenue from product sales are recognized when orders are shipped.
F-8
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilites, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the amount of revenue and expense reported during the period. Actual results
could differ form those estimates.
Cash equivalents and short-term investments
Short-term investments consist primarily of commercial paper, notes and short-
term U.S. Government securities with original maturities beyond three months and
are stated at estimated fair value. Similar items with original maturities of
three months or less are considered cash equivalents. The Company has
established guidelines relative to diversification and maturities that maintain
safety and liquidity. The Company has not experienced any losses on its short-
term investments.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Equipment and leasehold improvements
Equipment and leasehold improvements are stated at cost. Equipment is
depreciated over the estimated useful life of the asset, typically one to seven
years, using the straight-line method.
Leasehold improvements are amortized over the shorter of the lease term or life
of the asset. Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
----------------------
<S> <C> <C>
Laboratory equipment $1,079,945 $ 917,080
Office equipment 131,801 128,440
Leasehold Improvements 79,730 62,234
----------------------
1,291,476 1,107,754
Less accumulated depreciation and amortization 922,162 804,959
----------------------
$ 369,314 $ 302,795
======================
</TABLE>
F-9
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
2. Investments
The following is a summary of the estimated fair value of available-for-sale
securities by balance sheet classification:
<TABLE>
<CAPTION>
December 31,
1996 1995
------------------------
<S> <C> <C>
Cash and cash equivalents:
Commercial paper $250,000 $ -
Money market funds 17,357 471,296
-------------------------
$267,357 $ 471,296
=========================
Short-term investments:
Commercial paper $908,042 $1,200,000
U.S. Treasury obligations 85,000 340,000
-------------------------
$993,042 $1,540,000
=========================
</TABLE>
All of the available-for-sale securities are due in one year or less.
The estimated fair value of each investment approximates the amortized cost, and
therefore, there are no unrealized gains or losses as of December 31, 1996.
3. Stockholders' Equity
Series D Preferred Stock
During 1995 a total of 49,187 shares of Series D Stock were issued, including
the exchange of Series C Stock for Series D Stock (see "Series C Preferred
Stock" below). Each share of Series D Stock earns a cumulative dividend at the
annual rate of $10 per share payable as and when declared by the Company in the
form of cash, common stock or any combination thereof. The Series D Stock is
convertible into common stock after two years at the stockholder's option. The
conversion price at the time of conversion is the lesser of $3.75 or the market
price. The Series D Stock is redeemable at the Company's option after four
years. Automatic conversion of all of the Series D Stock will occur if: (a) the
Company completes a public offering of common stock at a price of $2.50 or
higher; or (b) a majority of stockholders decide to convert their stock. The
Company has the option to demand conversion of the Series D Stock if the average
market price of its common stock equals or exceeds $5.00 per share over a period
of twenty business days. The Series D Stock has a liquidation preference value
of $100.00 per share.
F-10
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. Stockholders' Equity (continued)
In addition, the Series D stockholders received warrants to purchase, at an
exercise price of $1.25 per share, twenty shares of the Company's common stock
for each share of Series D Stock acquired. Warrants to acquire a total of
500,960 shares of common stock were issued. All of the warrants have been
exercised during 1996.
The Series D stockholders were granted certain registration rights relating to
their shares of common stock issuable upon conversion of the Series D Stock or
upon exercise of their warrants.
Series C Preferred Stock
In July 1994 the Company received $2,160,000 form the sale of 21,600 shares of
unregistered Series C Convertible Preferred Stock ("Series C Stock") to JJDC and
certain investors. The terms of the sale were similar to those of the Company's
Series D Stock.
At the time of the sale of the Series D Stock, JJDC and these investors
exchanged 21,600 shares of Series C Stock, plus accumulated dividends, for
24,139 shares of Series D Stock. There are currently no remaining shares of
Series C Stock outstanding.
In connection with the Series C offering, warrants were also issued to acquire a
total of 432,000 shares of the Company's common stock at an exercise price of
$1.25 per share. All of the warrants have been exercised during 1996.
Stock option plans
The Company has elected to follow APB 25 and related accounting Interpretations.
Under APB 25 whenever the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant no
compensation expense is recognized. The effects of using the fair value
accounting method, as described in FASB Statement No. 123, "Accounting for
Stock-Based Compensation", are described below under its own subheading to
Note 3.
The Company adopted the 1989 Stock Option Plan which provides for the issuance
of incentive and non-statutory stock options for the purchase of up to 500,000
shares of common stock to key employees and certain other individuals. The
options will expire ten years from their respective dates of grant. Options
become exercisable ratably over periods of up to five years from the date of
grant. At December 31, 1996, options for 310,500 shares were exercisable, and
179,500 shares were available for future grant.
F-11
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. Stockholders' Equity (continued)
The Company adopted the 1992 Stock Option Plan which provides for the issuance
of incentive and non-statutory stock options for the purchase of up to 1,000,000
shares of common stock to its key employees and certain other individuals. The
options will expire ten years from their respective dates of grant. Options
become exercisable ratably over periods of up to five years from the dates of
grant. At December 31, 1996, options for 93,500 shares were exercisable, and
279,000 shares were available for future grant.
Since inception, the Company has granted non-qualified options outside the Plan
to purchase a total of 525,100 shares of common stock (net of options cancelled)
to employees, directors and consultants of the Company. At December 31, 1996,
options for 293,100 shares were exercisable.
In June 1996 the Company adopted the 1996 Non-Employee Directors Stock Option
Plan ("Plan"), which provides for the granting of nonqualified options to
purchase up to 250,000 shares of common stock to directors of the Company. Such
grants shall be awarded automatically on the first business day of June during
each calendar year to every Participating Director then in office, and consist
of 5,000 shares of common stock, subject to certain adjustments. No
Participating Director shall receive more than one grant per year. The purchase
price of each option shall be the fair market value of the common stock on the
date of grant. Each option has a duration of ten years, and is exercisable six
months after the grant date. The Board (or a designated committee of the Board)
shall administer the Plan. On June 3, 1996, an initial grant of 35,000 shares
was made to all non-employee directors then eligible.
In September 1996 the Board of Directors approved, subject to stockholder
approval at the 1997 Annual Meeting of Stockholders, the Protein Polymer
Technologies, Inc. Employee Stock Purchase Plan ("Plan"). The Plan commences
January 2, 1997, and allows for offering periods of up to two years with
quarterly purchase dates occurring the last business day of each quarter. The
purchase price per share is generally calculated at 85% of the lower of the fair
market value on an eligible employee's entry date or the quarterly purchase
date. The maximum number of shares available for issuance under the Plan is
500,000; an eligible employee may purchase up to 5,000 shares per quarter. The
Plan Administrator consists of a committee of at least two non-employee
directors of the Company. The Board may modify the Plan at any time.
In November 1993 the Company repriced a total of 272,500 outstanding stock
options to $1.00 per share, the then current fair market value.
F-12
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. Stockholders' Equity (continued)
The following table summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------------------------------
1996 1995 1994
----------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
beginning of
year 1,064,600 $ 0.90 910,600 $ 0.91 885,600 $ 1.40
Granted 465,000 $ 2.27 183,500 $ 0.86 90,000 $ 0.82
Exercised (136,000) $(0.68) (2,000) $(0.53) - -
Forfeited - - (27,500) $(0.93) (65,000) $(0.96)
---------- ------- ---------- ------- -------- ------
Outstanding -
end of year 1,393,600 $ 1.38 1,064,600 $ 0.90 910,600 $0.91
========== ======= ========== ======= ======== ======
Exercisable -
end of year 732,100 $ 1.08 714,500 $ 0.87 612,880 $ 0.84
========== ======= ========== ======= ======== ======
</TABLE>
The exercise prices for options outstanding as of December 31, 1996 range from
$0.53 to $3.75. The weighted average remaining contractual life of these options
is approximately 6.5 years.
Statement 123 pro forma information
Pro forma information regarding net income and net income per share is required
by Statement 123. This information has been calculated as if the Company has
accounted for its stock options granted under the fair value method as described
in this Statement, using the Black-Scholes option pricing model. The following
were the weighted average assumptions used for 1996 and 1995: risk-free interest
rates of 5.6% to 7.1% for 1996 and 5.7% to 7.7% for 1995; a volatility factor of
the expected market price of the Company's common stock of 110%; expected option
lives of 7.9 years; and dividend yields of 0% for both years.
The Black-Scholes option valuation model was originally developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-13
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. Stockholders' Equity (continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the expected life of the options. The
Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------
<S> <C> <C>
Net loss as reported $(3,356,299) $(2,609,547)
Net loss per share as reported $ (0.51) $ (0.45)
Net loss pro forma $(3,492,030) $(2,632,144)
Net loss per share pro forma (0.53) $ (0.45)
Weighted average fair value per share
of options granted during the year $ 2.06 $ 0.84
</TABLE>
The pro forma effect on net loss for 1996 and 1995 is not representative of
the pro forma effect on net loss in future years because it does not take
into consideration pro forma compensation expense from option grants made
prior to 1995.
Common stock warrants
As a result of the Company's initial public offering, unit holders were
granted redeemable warrants for 1,667,500 shares of common stock, which are
exercisable at $8.00 per share until January 21, 1997, and are redeemable
at the option of the Company at a redemption price of $.10 at any time
after January 21, 1993, based on the price of the common stock and other
requirements. In November 1996 the Company extended the expiration date of
these warrants one year, to January 21, 1998. The underwriter was granted
warrants to purchase 145,000 units at $8.06 per unit, subject to certain
antidilution adjustments.
At December 31, 1996, including the unit and underwriter warrants, there
were outstanding warrants to purchase a total of 2,007,500 shares of common
stock at a weighted average exercise price of $7.95 per share. All of
these warrants were exercisable at December 31, 1996, and as of January
21, 1997 the underwriter warrants expired.
4. Commitments
The Company leases its office and research facilities under two operating
leases that expire in December 1998. During 1996 the Company leased
additional laboratory space.
F-14
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
4. Commitments (continued)
Future minimum payments under operating leases as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997 $412,200
1998 412,200
--------
$824,400
========
</TABLE>
Rent expense was approximately $320,000, $306,000, $300,000 and $2,366,000 for
the years ended December 31, 1996, 1995 and 1994 and for the period July 6, 1988
(inception) through December 31, 1996, respectively.
5. Research and Development Contracts and Royalties
On September 14, 1995, the Company signed supply, licensing and development
agreements with Ethicon, Inc., a subsidiary of the Johnson & Johnson Company,
whose affiliate is a preferred stockholder, related to the Company's tissue
adhesives and sealants program. The licensing and development agreement calls
for Ethicon to make licensing, milestone and contract revenue payments to the
Company as certain scientific progress is achieved. Such payments could total
almost $11 million over the next several years if all milestones are met. In
1996 and 1995, the Company recognized $600,000 and $800,000 of revenue
respectively, related to these agreements. In December 1996 Ethicon extended
the research phase of these agreements for one year, until December 1997, and
will pay the Company $75,000 every three months for one year in advance of the
research work to be performed. The Company received its first installment in
December 1996, and classified it as deferred revenue.
On December 16, 1997 Ethicon elected to terminate the agreements with the
Company, based upon Ethicon's determination that the timelines to clinical
trials and to market were too lengthy to continue. Although Ethicon remains
interested in this product opportunity, and will monitor our continued progress,
the Company has decided to discuss the opportunity with other potential
partners. The Company's relationship with Ethicon continues to remain good, and
Johnson & Johnson subsidiaries are currently evaluating the Company's materials
regarding other product opportunities.
The management of the Company believes the technology is sufficiently advanced
to be of interest to other potential partners, and has begun the process of
determining which potential applications make the most sense to pursue. However,
until the program is partnered, continued development efforts will be slowed to
conserve available cash.
In 1994 the Company entered into agreements with subsidiaries of the Johnson &
Johnson Company. These agreements concluded in the first quarter of 1995.
Total contract revenue recognized from these agreements was $100,000 for the
year ended December 31, 1994.
Under an agreement completed in October 1991 with Telios Pharmaceuticals, Inc.,
("Telios"), now a wholly-owned subsidiary of Integra Life Sciences Corp., Telios
granted the Company a worldwide, exclusive sublicense to use Telios patent
rights to develop and sell protein polymers containing RGD amino acid sequence
in two or more polymer segments for the purpose of in vitro cell culture. In
exchange for this sublicense, the Company has agreed to pay Telios royalties on
net revenues derived by the Company from its sales of RGD containing polymers at
a rate equal to 5% of net revenues, until such net revenues reach $500,000, and
3.5% of net revenues in excess of $500,000. There is a required minimum royalty
payment by the Company of $25,000 per year.
F-15
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
5. Research and Development Contracts and Royalties (continued)
In 1992 Stanford University granted the Company a non-exclusive, non-
transferable right to use their recombinant DNA technology patents to develop
and sell protein polymers. In exchange for this license, the Company has agreed
to pay royalties on products sold employing this technology ranging from 1/2% to
10%, depending on the product. There is a required minimum royalty payment by
the Company of $10,000 per year.
6. Income Taxes
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $17,090,000 for federal income tax purposes, which may be applied
against future income, if any, and will begin expiring in 2004 unless previously
utilized. In addition, the Company has California net operating loss
carryforwards of approximately $7,891,000 for California tax purposes which have
begun expiring in 1996. The difference between the tax loss carryforwards for
federal and California purposes is attributable to the capitalization of
research and development expenses for California tax purposes and a required 50%
limitation in the utilization of California loss carryforwards.
The Company also has federal and California research and development tax credit
carryforwards of approximately $496,000 and $200,000, respectively, which will
begin expiring in 2004 unless previously utilized.
Because of the ownership change that occurred in January 1992 as a result of the
Company's initial public offering, approximately $2,700,000 of the Company's
federal net operating loss carryforwards will be subject to an annual limitation
regarding utilization against taxable income in future periods. However, the
Company believes that such limitations will not have a material impact upon the
utilization of the carryforwards.
Significant components of the Company's deferred tax assets as of December 31,
1996 are shown below. A valuation allowance of $7,363,000 has been recognized to
offset the deferred tax assets as realization of such assets is uncertain.
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 6,455,000 $ 5,343,000
Research and development credits 626,000 597,000
Other 282,000 445,000
----------------------------
Total deferred tax assets 7,363,000 6,385,000
Valuation allowance for deferred tax assets (7,363,000) (6,385,000)
----------------------------
Net deferred tax assets $ - $ -
============================
</TABLE>
F-16
<PAGE>
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
7. Employee Benefits Plan
On January 1, 1993, the Company established a 401(k) Savings Plan for
substantially all employees who meet certain service and age requirements.
Participants may elect to defer up to 20% of their compensation per year. Each
year the Company may provide a discretionary matching contribution. As of
December 31, 1996, the Company had not made a contribution to the Savings Plan.
8. Subsequent Event
During the first week of January 1997 the Company received $4.76 million, less
estimated expenses of approximately $160,000, from a private placement of the
Company's common stock with a number of institutional and qualified individual
investors, consisting of 1,904,000 shares at $2.50 per share. The Company agreed
to register the shares with the Securities and Exchange Commission promptly
after the closing. The registration was declared effective on January 24, 1997.
F-17
<PAGE>
PART III
Items 9, 10, 11 and 12 are incorporated by reference from the Company's
definitive Proxy Statement to be filed by the Company with the Commission no
later than April 30, 1997.
Item 13. Exhibits, Financial Statements and Reports on Form 8-K
(a)(1) and (2) Financial Statements and Schedules
The Financial Statements are incorporated herein as a part of
Item 7.
(a)(3) Exhibits
The following documents are included or incorporated by
reference:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 (6) Certificate of Incorporation of the Company, as
amended.
3.2 (6) Bylaws of the Company, as amended.
4.1 (4) Warrant Agreement, dated January 21, 1992, between the
Company and Continental Stock Transfer and Trust
Company.
4.2 (1) Revised Form of Redeemable Warrant.
10.1 (2) Lease, with exhibits, dated October 16, 1991, between
the Company and Sycamore/San Diego Investors, together
with an amendment thereto dated April 21, 1992.
10.2 (3) Amendment to lease, between the Company and
Sycamore/San Diego Investors, dated June 22, 1992.
10.3 (1) Sublicense Agreement for RGD-Containing Engineered
Protein Polymers, with exhibit attached, dated
October 1, 1991, between the Company and Telios
Pharmaceuticals, Inc.
10.4 (1) 1989 Stock Option Plan, together with forms of
Incentive Stock Option Agreement and Nonstatutory
Option Agreement.
10.5 (4) 1992 Stock Option Plan of the Company, together with
forms of Incentive Stock Option Agreement and
Nonstatutory Option Agreement.
</TABLE>
18
<PAGE>
10.6 (1) Form of Employee's Proprietary Information and Inventions
Agreement.
10.7 (1) Form of Consulting Agreement.
10.8 (1) Form of Indemnification Agreement.
10.9 (4) License Agreement, dated as of April 15, 1992, between the Board
of Trustees of the Leland Stanford Junior University and the
Company.
10.10 (5) Replacement ProNectin F License Agreement between Cellco, Inc.
and the Company, dated February 15, 1995.
10.11 (6) License and Development Agreement between the Company and
Ethicon, Inc. dated September 14, 1995.
10.12 (6) Supply Agreement between the Company and Ethicon, Inc., dated
September 14, 1995.
10.13 (6) Escrow Agreement between Protein Polymer Technologies, Inc. and
Ethicon, Inc., dated September 14, 1995.
10.14 (6) Amended and Restated Registration Rights Agreement dated
September 14, 1995 among the Company and the holders of its
Series D Preferred Stock.
10.15 (6) Securities Purchase Agreement related to the sale of the
Company's Series D Preferred Stock.
10.16 (6) Form of Warrant to Purchase Common Stock issued in connection
with the Series D Preferred Stock.
10.17 (7) Letter Agreement dated as of October 4, 1996 between the Company
and MBF I, LLC ("MBF") relating to the provision of consulting
and advisory services.
10.18 (7) Form of Warrant with respect to a warrant for 50,000 shares
issued to MBF, and to be used with respect to additional warrants
which may be issued to MBF.
10.19 (7) Registration Rights Agreement dated as of October 4, 1996 between
the Company and MBF.
10.20 (7) Letter Agreement dated December 9, 1996 between the Company and
Ethicon, Inc. with respect to an extension of the License and
Development Agreement between them dated September 14, 1995.
10.21 (7) Securities Purchase Agreement dated as of January 6, 1997 among
the Company and the investors named therein relating to the sale
and purchase of 1,904,000 shares of the Company's common stock.
10.22 (8) Lease, with exhibits, dated March 1, 1996 between the Company and
Sycamore/San Diego Investors.
19
<PAGE>
10.23(8) Second Amendment to Lease between the Company and
Sycamore/San Diego Investors, dated March 1, 1996.
10.24(8) 1996 Non-Employee Directors' Stock Option Plan.
10.25(8) Employment Agreement, dated as of November 1, 1996, between
the Company and J. Thomas Parmeter.
10.26(8) Employment Agreement, dated as of November 1, 1996, between
the Company and John E. Flowers.
10.27(8) Employment Agreement, dated as of November 1, 1996, between
the Company and Joseph Cappello.
10.28(8) Employment Agreement, dated as of November 1, 1996, between
the Company and Franco A. Ferrari.
10.29(8) Employment Agreement, dated as of November 1, 1996, between
the Company and Erwin R. Stedronsky.
10.30(8) Employment Agreement, dated as of November 1, 1996, between
the Company and Aron P. Stern.
23.1* Consent of Ernst & Young LLP, Independent Auditors.
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-43875) filed with the Commission on November 12, 1991, as
amended by Amendments Nos. 1, 2, 3 and 4 thereto filed on November 25,
1991, December 23, 1991, January 17, 1992 and January 21, 1992,
respectively.
(2) Incorporated by reference to Registrant's Report on Form 10-Q for the
quarter ended March 31, 1992, as filed with the Commission on May 14, 1992.
(3) Incorporated by reference to Registrant's Report on Form 10-Q for the
quarter ended September 30, 1992, as filed with the Commission on November
13, 1992.
(4) Incorporated by reference to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1992, as filed with the Commission on March
31, 1993.
(5) Incorporated by reference to Registrant's Report on Form 10-KSB for the
fiscal year ended December 31, 1994, as filed with the Commission on March
30, 1995.
(6) Incorporated by reference to Registrant's Report on Form 10-Q for the
quarter ended September 30, 1995, as filed with the Commission on October
24, 1995.
(7) Incorporated by reference to Registrant's current Report on Form 8-K, as
filed with the Commission on January 7, 1997.
(8) Previously filed.
* Filed herewith.
(b) Reports on Form 8-K.
None.
20
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PROTEIN POLYMER TECHNOLOGIES, INC.
February 5, 1998 By /s/ J. THOMAS PARMETER
---------------------------------
J. Thomas Parmeter
Chairman of the Board, Chief
Executive Officer, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ J. THOMAS PARMETER Chairman of the Board, Chief February 5, 1998
- ------------------------ Executive Officer, President
J. Thomas Parmeter
/s/ ARON P. STERN Vice President, Chief Financial February 5, 1998
- ------------------------ Officer (Principal Accounting
Aron P. Stern Officer)
/s/ PATRICIA J. CORNELL Director February 5, 1998
- ------------------------
Patricia J. Cornell
/s/ EDWARD E. DAVID Director February 5, 1998
- ------------------------
Edward E. David
/s/ PHILIP J. DAVIS Director February 5, 1998
- ------------------------
Philip J. Davis
/s/ EDWARD J. HARTNETT Director February 5, 1998
- ------------------------
Edward J. Hartnett
/s/ BRENT R. NICKLAS Director February 5, 1998
- ------------------------
Brent R. Nicklas
/s/ BERTRAM I. ROWLAND Director February 5, 1998
- ------------------------
Bertram I. Rowland
/s/ GEORGE R. WALKER Director February 5, 1998
- ------------------------
George R. Walker
21
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated January 30, 1997, (except for
paragraph 2 of Note 1, as to which the date is January 30, 1998), included in
the Annual Report on Form 10-KSB of Protein Polymer Technologies, Inc. for the
year ended December 31, 1996 with respect to the financial statements, as
amended, included in this Form 10-KSB/A.
ERNST & YOUNG LLP
San Diego, California
February 2, 1998
