================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 10-KSB/A
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2004
OR
|_| 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
Incorporation or Organization) Identification No.)
10655 Sorrento Valley Road, San Diego, CA 92121
(Address of Principal Executive Offices)
Issuer's Telephone Number: (858) 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
(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 or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the most recent fiscal year were $457,016.
The aggregate market value of the voting common stock held by non-affiliates of
the issuer on March 28, 2005 was $31,524,218. Stock held by directors, officers
and shareholders owning 5% or more of the outstanding common stock (as reported
on Schedules 13D and 13G) were excluded as they may be deemed affiliates. This
determination of affiliate status is not a conclusive determination for any
other purpose.
The number of shares of the registrant's common stock outstanding as of March
28, 2005 was 41,847,261.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following document are incorporated by reference in Part III of
this report:
Definitive Proxy Statement to be filed with the Commission no later than April
30, 2005 with respect to the registrant's 2005 Annual Meeting of Stockholders.
Transitional Small Business Disclosure Format: Yes No X
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EXPLANATORY NOTE
Protein Polymer Technologies, Inc. is filing this Amendment No. 1 (the
"Amendment") to its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004, as filed with the Securities and Exchange Commission on March
31, 2005 (the "Annual Report") to amend and restate Item 7 to the Annual Report
due to the following:
o Reissuance of Report of Independent Registered Public Accounting Firm
o Correction of typographical errors on the Balance Sheet and Statements
of Stockholders' Equity as of December 31, 2004
o Revision to Note 1 to Financial Statements
o Inclusion of Note 10 to Financial Statements
The complete text of Item 7 is included in this Amendment pursuant to Rule
12b-15 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The consent of the independent registered public accounting
firm with respect to the financial statements contained in this Amendment is
attached to this Amendment as Exhibit 23.1.
In addition, the Amendment includes the certifications required pursuant to
Rules 13a-14(a)/15d-14(a) and Rules 13a-14(b)/15d-14(b) of the Exchange Act,
which have been re-executed and re-filed as of the date of this Amendment. The
certifications of our Chief Executive Officer (principal executive officer) and
Director of Finance, Controller (principal financial officer) are attached to
this Amendment as Exhibits 31.1, 31.2 and 32.1.
With the exception of the amended and restated financial information relative to
(i) the removal of the Going Concern and Liquidity section of Note 1 and the
inclusion of Note 10, Subsequent Events, to Financial Statements and (ii) the
correction of the above-listed typographical errors, this Amendment continues to
speak as of the date of the Annual Report and we have not updated the disclosure
contained herein to reflect events that have occurred since the filing of the
Annual Report.
1
Item 7. Financial Statements
Filed herewith are the following Audited Financial Statements for Protein
Polymer Technologies, Inc. (a Development Stage Company):
Description Page
----------- ----
Report of Independent Registered Public Accounting Firm........................ F-2
Balance Sheets at December 31, 2004 and 2003................................... F-3
Statements of Operations for the years ended December 31, 2004 and 2003
and the period July 6, 1988 (inception) to December 31, 2004................ F-4
Statements of Stockholders Equity for the period July 6, 1988 (inception)
to December 31, 2004........................................................ F-5
Statements of Cash Flows for the years ended December 31, 2004 and 2003
and the period July 6, 1988 (inception) to December 31, 2004................ F-8
Notes to Financial Statements.................................................. F-10
F-1
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
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) (the "Company") as of December 31, 2004 and
2003, and the related statements of operations, stockholders' equity (deficit),
and cash flows for the years then ended and for the period July 6, 1988
(inception) to December 31, 2004. 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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) as of December 31, 2004 and 2003, and the
results of its operations and its cash flows for the years then ended and for
the period July 6, 1988 (inception) to December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America.
/s/ PETERSON & CO., LLP
San Diego, California
February 28, 2005, except for
Note 10, as to which the date
is May 13, 2005
F-2
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Balance Sheets
December 31,
2004 2003
-------------------------------
Assets
Current assets:
Cash and cash equivalents $ 82,222 $ 1,085,314
Contracts receivable - 252,026
Current portion of rent receivable 60,000 184,527
Prepaid expenses 12,770 25,799
-------------------------------
Total current assets 154,992 1,547,666
Deposits 29,679 29,679
Rent receivable, net of current portion and reserve of $157,296 and
$0 at 2004 and 2003 respectively 104,527 -
Equipment and leasehold improvements, net 84,580 114,411
-------------------------------
$ 373,778 $ 1,691,756
===============================
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 315,357 $ 168,659
Deposits payable 33,000 -
Notes payable, related party 1,032,842 -
Accrued expenses 201,910 162,609
Deferred revenue 102,784 -
Deferred rent - 24,111
-------------------------------
Total current liabilities 1,685,893 355,379
Commitments (Notes 5 and 7)
Stockholders' equity:
Convertible Preferred Stock, $.01 par value, 5,000,000 shares
authorized, 82,945 and 86,095 shares issued and outstanding at
December 31, 2004 and 2003, respectively - liquidation
preference of $8,294,500 and $8,609,500 at December 31, 2004
and December 31, 2003, respectively 7,749,917 8,064,917
Common stock, $.01 par value, 120,000,000 shares authorized,
39,651,123 and 36,830,857 shares issued and outstanding at
December 31, 2004 and 2003, respectively 396,523 368,319
Additional paid-in capital 43,278,106 41,587,518
Deficit accumulated during development stage (52,736,661) (48,684,377)
-------------------------------
Total stockholders' equity (deficit) (1,312,115) 1,336,377
-------------------------------
$ 373,778 $ 1,691,756
===============================
The accompanying notes are an integral part of these financial statements.
F-3
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Statements of Operations
For the period
July 6, 1988
(inception) to
Years ended December 31, December 31,
-------------------------------------------------
2004 2003 2004
-------------------------------------------------
Revenues:
Contract and licensing revenue $ 453,038 $ 1,597,415 $ 11,309,039
Interest income, net 3,973 19,903 1,270,823
Product and other income 5 - 694,784
-------------------------------------------------
Total revenues 457,016 1,617,318 13,274,646
Expenses:
Research and development 2,283,820 2,359,643 37,029,568
Selling, general and 1,738,401 1,450,914 21,961,696
administrative
-------------------------------------------------
Total expenses 4,022,221 3,810,557 58,991,264
-------------------------------------------------
Net loss (3,565,205) (2,193,239) (45,716,618)
Undeclared and/or paid dividends on
preferred stock 764,718 2,862,219 9,699,508
-------------------------------------------------
Net loss applicable to common
shareholders $ (4,329,923) $ (5,055,458) $ (55,416,126)
=================================================
Net loss per common share - basic
and diluted $ (.11) $ (.15)
=================================
Shares used in computing net loss
per common share - basic and
diluted 38,212,119 34,362,427
=================================
The accompanying notes are an integral part of these financial statements.
F-4
Protein Polymer Technologies, Inc
(A Development Stage Company)
Statements of Stockholders' Equity
For the period July 6, 1988 (inception) to December 31, 2004
Common stock Preferred stock
----------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------
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 - -
Receivables from sale of common stock - - - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1988 1,516,245 15,162 - -
Repayment of receivables from sale of common stock - - - -
Issuance of common stock at $.62 per share 359,136 3,594 - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1989 1,875,381 18,756 - -
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 - -
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 - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1990 1,940,381 19,406 - -
Exercise of common stock options at $.68 per share for cash 5,000 50 - -
Exercise of warrants for common stock 483,755 4,837 - -
Conversion of notes payable to common stock 339,230 3,391 - -
Conversion of notes payable to preferred stock - - 278,326 2,783
Issuance of preferred stock at $2.00 per share for cash, net of
issuance costs - - 400,000 4,000
Issuance of warrants for cash - - - -
Issuance of warrants in connection with convertible notes payable - - - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1991 2,768,366 27,684 678,326 6,783
Initial public offering at $6.50 per unit, net of issuance costs 1,667,500 16,676 - -
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 - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1992 5,827,925 58,280 - -
Exercise of common stock options at $.68 per share 3,000 30 - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1993 5,830,925 58,310 - -
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
Issuance of preferred stock at $100 per share for cash and cancellation of
bridge loan, 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 preferred stock - - 48 4,795
Exercise of common stock options at $.53 per share 2,000 20 - -
Net loss - - - -
---------------------------------------------------
Balance at December 31, 1995 5,832,925 $ 58,330 49,187 $ 4,764,745
Deficit Receivables
accumulated from sales
during of common Total
Additional development common Stockholders
paid-in capital stage stock equity
----------------------------------------------------
Issuance of common stock at $.01 per share for cash $ - $ - $ - $ 4,000
Issuance of common stock at $.62 per share for cash and receivables 681,838 - - 693,000
Receivables from sale of common stock - - (86,000) (86,000)
Net loss - (322,702) - (322,702)
----------------------------------------------------
Balance at December 31, 1988 681,838 (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 219,358 - - 222,952
Net loss - (925,080) - (925,080)
----------------------------------------------------
Balance at December 31, 1989 901,196 (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 3,350 - - 3,400
Common stock repurchased at $.01 per share for cash - - - (250)
Common stock issued at $.68 per share for cash and compensation 16,750 - - 17,000
Net loss - (1,501,171) - (1,501,171)
----------------------------------------------------
Balance at December 31, 1990 921,296 (2,748,953) - (1,808,251)
Exercise of common stock options at $.68 per share for cash 3,350 - - 3,400
Exercise of warrants for common stock 295,493 - - 300,330
Conversion of notes payable to common stock 508,414 - - 511,805
Conversion of notes payable to preferred stock 553,869 - - 556,652
Issuance of preferred stock at $2.00 per share for cash, net of
issuance costs 703,475 - - 707,475
Issuance of warrants for cash 3,000 - - 3,000
Issuance of warrants in connection with convertible notes payable 28,000 - - 28,000
Net loss - (1,143,119) - (1,143,119)
----------------------------------------------------
Balance at December 31, 1991 3,016,897 (3,892,072) - (840,708)
Initial public offering at $6.50 per unit, net of issuance costs 8,911,024 - - 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
1,717,065 - - 1,724,202
Net loss - (3,481,659) - (3,481,659)
----------------------------------------------------
Balance at December 31, 1992 13,644,986 (7,373,731) - 6,329,535
Exercise of common stock options at $.68 per share 2,010 - - 2,040
Net loss - (3,245,436) - (3,245,436)
----------------------------------------------------
Balance at December 31, 1993 13,646,996 (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 13,646,996 (13,864,526) - 1,914,705
Issuance of preferred stock at $100 per share for cash and cancellation of
bridge loan, net of issuance costs
- - - 2,432,150
Series C dividends paid in Series D preferred stock - (253,875) - -
Interest paid in Series D preferred stock - - - 4,795
Exercise of common stock options at $.53 per share 1,040 - - 1,060
Net loss - (2,224,404) - (2,224,404)
----------------------------------------------------
Balance at December 31, 1995 $ 13,648,036 $(16,342,805) - $ 2,128,306
The accompanying notes are an integral part of these financial statements.
F-5
Protein Polymer Technologies, Inc
(A Development Stage Company)
Statements of Stockholders' Equity
For the period July 6, 1988 (inception) to December 31, 2004
Common stock Preferred stock
----------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------
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 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
Issuance of common stock at $2.50 per share, net of issuance costs 1,904,000 19,040 - -
Exercise of common stock options 28,000 280 - -
Issuance of common stock under stock purchase plan 15,036 151 - -
Conversion of Series D preferred stock into common stock 1,032,537 10,325 (20,973) (2,097,342)
Series D dividends paid in common stock 207,921 2,079 - -
Net loss - - - -
----------------------------------------------------
Balance at December 31, 1997 10,420,722 104,208 28,214 2,667,403
Issuance of common stock under stock purchase plan 36,715 368 - -
Exercise of common stock options 12,000 120 - -
Issuance of common stock at $1.60 per share, net of issuance costs 23,439 234 - -
Issuance of Series E preferred stock, net of issuance costs - - 54,438 5,277,813
Grant of stock to finder 64,000 640 - -
Conversion of Series D and E preferred stock into common stock 270,364 2,704 (3,450) (344,990)
Net Loss - - - -
----------------------------------------------------
Balance at December 31, 1998 10,827,240 108,274 79,202 7,600,226
Issuance of common stock under stock purchase plan 19,429 194 - -
Issuance of common stock and warrants for services rendered and
debt issued 16,941 180 - -
Issuance of Series G preferred stock, net of issuance costs - - 21,000 2,074,596
Conversion of Series E preferred stock into common stock 731,000 7,310 (9,138) (913,750)
Exercise of common stock and Series E warrants at $.50 per share 1,848,900 18,489 - -
Net Loss and comprehensive loss - - - -
----------------------------------------------------
Balance at December 31, 1999 13,443,510 134,447 91,064 8,761,072
Issuance of common stock under stock purchase plan 287,303 2,873 - -
Issuance of warrants and stock options for services rendered - - - -
Exercise of common stock options 85,500 855 - -
Exercise of common stock warrants at $.50 per share 4,215,000 42,150 - -
Conversion of Series E preferred stock into common stock 879,000 8,790 (10,988) (1,098,800)
Net Loss and comprehensive loss - - - -
----------------------------------------------------
Balance at December 31, 2000 18,910,313 $ 189,115 80,076 $ 7,662,272
Deficit Receivables
accumulated from sales
during of common Total
Additional development common Stockholder
paid-in capital stage stock equity
----------------------------------------------------
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 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
Issuance of common stock at $2.50 per share, net of issuance costs 4,601,322 - - 4,620,362
Exercise of common stock options 20,200 - - 20,480
Issuance of common stock under stock purchase plan 29,950 - - 30,101
Conversion of Series D preferred stock into common stock 2,087,017 - - -
Series D dividends paid in common stock 420,262 (422,341) - -
Net loss - (4,453,933) - (4,453,933)
----------------------------------------------------
Balance at December 31, 1997 22,778,033 (24,083,511) - 1,466,133
Issuance of common stock under stock purchase plan 38,010 - - 38,378
Exercise of common stock options 7,920 - - 8,040
Issuance of common stock at $1.60 per share, net of issuance costs 37,266 - - 37,500
Issuance of Series E preferred stock, net of issuance costs 3,266,250 (3,266,250) - 5,277,813
Grant of stock to finder 79,360 - - 80,000
Conversion of Series D and E preferred stock into common stock 342,286 - - -
Net Loss - (5,638,203) - (5,638,203)
----------------------------------------------------
Balance at December 31, 1998 26,549,125 (32,987,964) - 1,269,661
Issuance of common stock under stock purchase plan 15,111 - - 15,305
Issuance of common stock and warrants for services rendered and
debt issued 26,440 - - 26,620
Issuance of Series G preferred stock, net of issuance costs - - - 2,074,596
Conversion of Series E preferred stock into common stock 906,440 - - -
Exercise of common stock and Series E warrants at $.50 per share 905,961 - - 924,450
Net Loss and comprehensive loss - (4,257,531) - (4,257,531)
----------------------------------------------------
Balance at December 31, 1999 28,403,077 (37,245,495) - 53,101
Issuance of common stock under stock purchase plan 186,096 - - 188,969
Issuance of warrants and stock options for services rendered 345,244 - - 345,244
Exercise of common stock options 73,240 - - 74,095
Exercise of common stock warrants at $.50 per share 2,065,350 - - 2,107,500
Conversion of Series E preferred stock into common stock 1,090,010 - - -
Net Loss and comprehensive loss - (2,498,077) - (2,498,077)
----------------------------------------------------
Balance at December 31, 2000 $ 32,163,017 $(39,743,572) $ - $ 270,832
The accompanying notes are an integral part of these financial statements.
F-6
Protein Polymer Technologies, Inc
(A Development Stage Company)
Statements of Stockholders' Equity
For the period July 6, 1988 (inception) to December 31, 2004
Common stock Preferred stock
----------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------
Issuance of Series H preferred stock, net of issuance costs - - 12,182 1,218,258
Issuance of common stock under stock purchase plan 14,837 148 - -
Issuance of stock options for services rendered - - - -
Exercise of common stock options 3,500 35 - -
Exercise of common stock warrants at $.50 per share 2,492,000 24,920 - -
Conversion of Series E preferred stock into common stock 320,000 3,200 (4,000) (400,000)
Net Loss and comprehensive loss - - - -
----------------------------------------------------
Balance at December 31, 2001 21,740,650 $ 217,418 88,258 $ 8,480,530
Conversion of Series E preferred stock into common stock 515,000 5,150 (6,438) (643,750)
Conversion of Series G preferred stock into common stock 1,140,000 11,400 (5,700) (570,000)
Exercise of common stock warrants, net of associated costs 6,260,000 62,600 - -
Issuance of common stock under stock purchase plan 47,385 474 - -
Exercise of common stock options 28,500 285 - -
Net Loss and comprehensive loss - - - -
------------------------------------------------
Balance at December 31, 2002 29,731,535 $ 297,327 76,120 $ 7,266,780
Issuance of Series I preferred stock, net of issuance costs - - 32,550 2,889,650
Conversion of Series E preferred stock into common stock 4,175,000 41,750 (20,875) (1,921,513)
Conversion of Series G preferred stock into common stock 30,000 300 (150) (15,000)
Conversion of Series I preferred stock into common stock 281,818 2,818 (1,550) (155,000)
Exercise of common stock warrants at $.10 and $.40 per share 2,590,000 25,900 - -
Imputed dividend associated with issuance of warrants - - - -
Issuance of common stock under stock purchase plan 20,504 204 - -
Exercise of common stock options 2,000 20 - -
Net Loss and comprehensive loss - - - -
----------------------------------------------------
Balance at December 31, 2003 36,830,857 $ 368,319 86,095 $ 8,064,917
Conversion of Series G preferred stock into common stock 530,000 5,300 (2,650) (265,000)
Conversion of Series I preferred stock into common stock 90,909 909 (500) (50,000)
Exercise of Series G warrants at $.25 per share 2,075,312 20,753 - -
Financing related fees - - - -
Warrants issued in connection with notes payable - - - -
Imputed dividend associated with repricing and issuance of warrants - - - -
Issuance of common stock under stock purchase plan 20,545 207 - -
Exercise of common stock options 103,500 1,035 - -
Net Loss and comprehensive loss - - - -
----------------------------------------------------
Balance at December 31, 2004 39,651,123 $ 396,523 82,945 $ 7,749,917
====================================================
Deficit Receivables
accumulated from sales
during of common Total
Additional development common Stockholder
paid-in capital stage stock equity
----------------------------------------------------
Issuance of Series H preferred stock, net of issuance costs - - - 1,218,258
Issuance of common stock under stock purchase plan 9,836 - - 9,984
Issuance of stock options for services rendered 1,834 - - 1,834
Exercise of common stock options 1,610 - - 1,645
Exercise of common stock warrants at $.50 per share 1,221,080 - - 1,246,000
Conversion of Series E preferred stock into common stock 396,800 - - -
Net Loss and comprehensive loss - (3,146,829) - (3,146,829)
----------------------------------------------------
Balance at December 31, 2001 $ 33,794,177 $(42,890,401) $ - (398,276)
Conversion of Series E preferred stock into common stock 638,600 - - -
Conversion of Series G preferred stock into common stock 558,600 - - -
Exercise of common stock warrants, net of associated costs 1,601,950 - - 1,664,550
Issuance of common stock under stock purchase plan 15,103 - - 15,577
Exercise of common stock options 9,805 - - 10,090
Net Loss and comprehensive loss - (1,016,158) - (1,016,158)
----------------------------------------------------
Balance at December 31, 2002 $ 36,618,235 $(43,906,559) $ - 275,783
Issuance of Series I preferred stock, net of issuance costs 1,928,237 (1,928,237) - 2,889,650
Conversion of Series E preferred stock into common stock 1,879,763 - - -
Conversion of Series G preferred stock into common stock 14,700 - - -
Conversion of Series I preferred stock into common stock 152,182 - - -
Exercise of common stock warrants at $.10 and $.40 per share 327,600 - - 353,500
Imputed dividend associated with issuance of warrants 656,342 (656,342) - -
Issuance of common stock under stock purchase plan 9,879 - - 10,083
Exercise of common stock options 580 - - 600
Net Loss and comprehensive loss - (2,193,239) - (2,193,239)
----------------------------------------------------
Balance at December 31, 2003 $ 41,587,518 $(48,684,377) $ - 1,336,377
Conversion of Series G preferred stock into common stock 259,700 - - -
Conversion of Series I preferred stock into common stock 49,091 - - -
Exercise of Series G warrants at $.25 per share 770,653 - - 791,406
Financing related fees (50,000) - - (50,000)
Warrants issued in connection with notes payable 132,499 - - 132,499
Imputed dividend associated with repricing and issuance of warrants 487,079 (487,079) - -
Issuance of common stock under stock purchase plan 7,606 - - 7,813
Exercise of common stock options 33,960 - - 34,995
Net Loss and comprehensive loss - (3,565,205) - (3,565,205)
----------------------------------------------------
Balance at December 31, 2004 $ 43,278,106 $(52,736,661) $ - $ (1,312,115)
====================================================
The accompanying notes are an integral part of these financial statements.
F-7
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the period
July 6, 1988
(inception) to
Years ended December 31, December 31,
2004 2003 2004
-------------------------------------------------
Operating activities
Net loss $ (3,565,205) $ (2,193,239) $ (45,716,618)
Adjustments to reconcile net loss to net cash used
for operating activities:
Stock and warrants issued for services
rendered and debt interest - - 472,676
Depreciation and amortization 31,350 56,576 2,446,310
Amortization of discounts on notes payable 115,342 - 115,342
Write-off of purchased technology - - 503,500
Changes in assets and liabilities:
Contracts receivable 184,527 (252,026) -
Rent receivable 87,499 (184,527) (164,527)
Prepaid expenses 13,029 4,974 (12,770)
Deposits - - (29,679)
Accounts payable 146,698 (220,450) 315,357
Deposits payable 33,000 - 33,000
Accrued expenses 39,301 364 201,910
Deferred revenue 102,784 - 102,784
Deferred rent (24,111) (24,111) -
-------------------------------------------------
Net cash used for operating activities (2,835,786) (2,812,439) (41,732,715)
Investing activities
Purchase of technology - - (570,000)
Purchase of equipment and improvements (1,518) (90,058) (2,088,862)
Purchases of short-term investments - - (16,161,667)
Sales of short-term investments - - 16,161,667
-------------------------------------------------
Net cash used for investing activities (1,518) (90,058) (2,658,862)
Financing activities
Net proceeds from issuance of common stock 784,212 364,183 24,004,471
Net proceeds from issuance of preferred stock - 2,889,650 18,398,068
Net proceeds from convertible notes and detachable - - 1,068,457
warrants
Net proceeds from issuance of debt - related party 1,050,000 - 1,050,000
Payments on capital lease obligations - - (288,770)
Payment on note payable - - (242,750)
Proceeds from note payable - - 484,323
-------------------------------------------------
Net cash provided by financing activities 1,834,212 3,253,833 44,473,799
-------------------------------------------------
Net increase (decrease) in cash and cash (1,003,092) 351,336 82,222
equivalents
Cash and cash equivalents at beginning of the 1,085,314 733,978 -
period
-------------------------------------------------
Cash and cash equivalents at end of the period $ 82,222 $ 1,085,314 $ 82,222
=================================================
The accompanying notes are an integral part of these financial statements
F-8
For the period
July 6, 1988
(inception) to
Years ended December 31, December 31,
2004 2003 2004
-------------------------------------------------
Supplemental disclosures of cash flow information
Equipment purchased by capital leases $ - $ - $ 288,772
Interest paid 3,661 758 151,194
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 - 1,921,513 5,277,813
Conversion of Series G preferred stock to
common stock 265,000 15,000 850,000
Imputed dividend on Series I stock - 1,928,237 1,928,237
Imputed dividend on warrants issued and repriced 487,079 656,342 1,143,421
Conversion of Series I preferred stock to
common stock 50,000 155,000 205,000
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
The accompanying notes are an integral part of these financial statements
F-9
Protein Polymer Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Organization and business activities
Protein Polymer Technologies, Inc. ("PPTI" or the "Company") was established to
design, produce and market genetically engineered protein polymers for a variety
of biomedical and specialty materials applications. The Company was incorporated
in Delaware on July 6, 1988. 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, research and development activities, conducting clinical
testing of its product candidates, exploring marketing channels and recruiting
personnel.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less at the time of purchase to be cash equivalents.
F-10
1. Organization and Significant Accounting Policies (continued)
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost, less accumulated
depreciation and amortization. Equipment is depreciated over the estimated
useful life of the asset, typically three to seven years, using the
straight-line method. Leasehold improvements are amortized over the shorter of
the lease term or life of the asset.
Impairment of Long-Lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the fair value is less than the
carrying amount of the asset, a loss is recognized for the difference. Fair
value is determined based on market quotes, if available, or is based on
valuation techniques.
Revenue and Expense Recognition
Research and development contract revenues are recorded as earned in accordance
with the terms and performance requirements of the contracts. If the research
and development activities are not successful, the Company is not obligated to
refund payments previously received. Fees from the sale or license of technology
are recognized on a straight-line basis over the term required to complete the
transfer of technology or the substantial satisfaction of any performance
related responsibilities. License fee payments received in advance of amounts
earned are recorded as deferred revenue. Milestone payments are recorded as
revenue based upon the completion of certain contract specified events that
measure progress toward completion under certain long-term contracts. Royalty
revenue related to licensed technology is recorded when earned and in accordance
with the terms of the license agreement. Research and development costs are
expensed as incurred.
Significant Collaborative Research and License Agreements
The Company's collaborative development agreements generally contain provision
for specific payments for defined activities, services, royalties on the sales
of developed products, and/or the accomplishment of performance benchmarks.
These agreements also may provide for equity investments or other financial
incentives. Technology license agreements usually are associated with
collaborative development agreements, but occasionally the Company will agree to
a license without an accompanying development.
Spine Wave, Inc. In April 2001, the Company entered into agreements with Spine
Wave, Inc. to develop and commercialize an injectable protein-based formulation
for the repair of spinal discs damaged either by injury or aging. As
consideration for entering into an exclusive, worldwide license agreement with
Spine Wave, the Company received one million shares of the founding common stock
in Spine Wave, valued initially at $10,000. The shares of founding common stock
were subject to a vesting schedule; however, Spine Wave's right to repurchase
unvested shares terminated in 2002 upon their merger with VERTx, Inc. Royalties
from the sale or sublicensing of licensed products will be determined in the
future based on the gross margin (sales revenue less the cost of goods) realized
by Spine Wave from the sale of the products
In connection with the license agreement, the Company entered into 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. Spine Wave, in return, agreed to reimburse the Company for
both our direct costs and the associated overhead costs for the services
provided. During 2001, the Company recognized contract revenues of $450,000
related to activities performed under the collaborative agreement.
F-11
1. Organization and Significant Accounting Policies (continued)
In March 2002, the Company executed additional agreements with Spine Wave, Inc.
that expanded its contractual research and development relationship, and that
offered the Company additional equity incentives in the form of Spine Wave
common stock and warrants. Under the amended supply and services agreement, the
Company, on behalf of Spine Wave, is proceeding with pre-clinical safety and
performance studies of a product for spinal disc repair 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 approval, the Company's contractual responsibilities
include the supply of product to be used in clinical testing and preparation for
commercial manufacturing operations. Research and development services performed
for Spine Wave are reimbursed including both direct costs and associated
overhead costs. Spine Wave is responsible for clinical testing, regulatory
approvals, and commercialization. For the year ended December 31, 2004 and for
the period of project inception to date the Company received $457,000 and
$4,918,000, respectively, in contract revenue from Spine Wave which represents
the reimbursement of direct costs plus overhead costs allocated to the research
and development resources used in performing the collaborative activities.
Additional equity incentives offered in conjunction with the expanded supply and
services agreement of March 17, 2002 consist of a four year warrant to purchase
1,000,000 shares of Spine Wave common stock at an exercise price of $0.50 per
share, and 400,000 shares of common stock valued at $0.05 per share subject to
repurchase at cost until each of three performance goals is achieved. The
performance goals consist of: (i) completion of certain studies for filing an
investigational device exemption application (100,000 shares); (ii) completion
of additional studies for filing of the investigational device exemption and
provision of inventory for the pilot clinical study (150,000 shares); and (iii)
completion of certain manufacturing arrangements, and production of certain
quantities of product (150,000 shares). As of December 31, 2004, the first two
of the three performance goals had been met.
In October 2003, a second amendment to Supply and Services Agreement was
executed. The amendment further defined the cost basis for reimbursement of
services by Spine Wave.
Significant License Agreements
The Company's license agreements usually include provision for up-front
compensation and eventual royalties on the sale of licensed products. Terms of
license agreements typically commence as of the date executed and continue for a
period of the greater of twenty (20) years from execution date or the date upon
which the last of the patented technology under license expires.
Femcare, Ltd . In January 2000, The Company entered into an agreement with
Femcare, Ltd. ("Femcare"), for the commercialization in Europe and Australia of
the Company's product for treatment of stress urinary incontinence. Under the
terms of the license agreement, Femcare paid a $1 million non-refundable license
fee in exchange for the patented technology and a three year commitment from the
Company to provide support to Femcare in its efforts to clinically test the
products in
Great Britain and to achieve European regulatory approval. The Company did not
incur any research and development costs associated with its support. As a
result of the arrangement, the Company recognized approximately $333,000 in
deferred license fee revenue for years ended December 31, 2000, 2001 and 2002.
Subsequently, Femcare notified the Company that it was closing its urology
business and ceasing all product development efforts pertaining to the licensed
technology. The
Company is in discussions with Femcare regarding the termination of the license
agreement.
F-12
1. Organization and Significant Accounting Policies (continued)
Genencor International, Inc. In December 2000, the Company signed a broad-based,
worldwide exclusive license agreement with Genencor International, Inc.
("Genencor") enabling Genencor to potentially develop a wide variety of new
products for industrial markets. In October 2002, the license agreement was
amended to provide Genencor with an additional one-year option to initiate
development of products in the field of non-medical personal care. As a result
of the agreements, Genencor may use our patented protein polymer design and
production technology, in combination with Genencor's extensive gene expression,
protein design, and large-scale manufacturing technology, to design and develop
new products with improved performance properties for defined industrial fields
and the field of non-medical personal care products.
In return for the licensed rights, Genencor paid the Company an up-front license
fee of $750,000, and will pay royalties on the sale of any products
commercialized by Genencor under the agreement. The licensed technology was
transferred to Genencor upon execution of the license agreement without any
further product development obligation on our part. Future royalties on the net
sales of products incorporating the technology under license and developed by
Genencor will be calculated based on a royalty rate to be determined at a later
date. In addition, the Company is entitled to receive up to $5 million in
milestone payments associated with Genencor's achievement of various industrial
product development milestones incorporating the licensed technology. There is
no limitation on the amount of milestone payments the Company can receive from
Genencor for Genencor's product development in the field of non-medical personal
care products. In December 2002 the Company received a license milestone payment
of $250,000 from Genencor for Genencor's initiation of a product development
project based on technology licensed from the Company.
In connection with the license agreement, Genencor was issued two warrants, each
convertible by formula into $500,000 of our common stock. The first warrant has
expired. The second warrant could be converted into 1,250,000 shares at an
exercise price of $0.40 per share. As a result of the collaboration, in 2000 the
Company recognized $750,000 in license fee revenue (less the issuance of
warrants to purchase $1 million of the Company's common stock valued at
$319,000). The agreement terminates on the date of expiration of the last
remaining patent.
Accounting for Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation", encourages but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value (See SFAS 123R below under Recently Issued
Accounting Pronouncements). The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees", and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock. Had compensation cost for the Company's stock option
awards been determined based upon the fair value at the grant date for awards
from 2001 through 2004 and recognized on a straight-line basis over the related
vesting period, in accordance with the provisions of SFAS No. 123, the Company's
net loss and loss per share for 2004 and 2003 would have been increased to the
proforma amounts indicated below:
F-13
1. Organization and Significant Accounting Policies (continued)
2004 2003
-------------- ---------------
Net loss as applicable to common shareholders $ (4,329,923) $ (5,055,458)
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects (454,620)
(1,961,688)
-------------- ---------------
Pro forma net loss $ (6,291,611) $ (5,510,078)
============== ===============
Earnings per share:
Basic - as reported $ (0.11) $ (0.15)
Basic - pro forma $ (0.16) $ (0.16)
The fair value was estimated using the following weighted-average assumptions: a
risk free interest rate of 3.50% for 2004 and 3.77% for 2003; a volatility
factor of the expected market price of the Company's common stock of 128% for
2004 and 124% for 2003, expected option lives of 10 years for 2004 and 10 years
for 2003, and no dividend yields for all 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.
The pro forma effect on net loss for 2004 and 2003 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.
The Company accounts for stock options granted to consultants in accordance with
Emerging Issues Task Force, or EITF, Issue 96-18, "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling Goods or Services".
Net loss per common share
Basic earnings per share is calculated using the weighted-average number of
outstanding common shares during the period. Diluted earnings per share is
calculated using the weighted-average number of outstanding common shares and
dilutive common equivalent shares outstanding during the period, using either
the as-converted method for convertible notes and convertible preferred stock or
the treasury stock method for options and warrants.
The net loss per common share for the years ended December 31, 2004 and 2003 is
based on the weighted average number of shares of common stock outstanding
during the periods. Potentially dilutive securities include options, warrants
and convertible preferred stock; however, such securities have not been included
in the calculation of the net loss per common share as their effect is
antidilutive. Since this is the case, there is no difference between the basic
and dilutive net loss per common share for any of the periods presented and none
of the prior periods were required to be restated. For purposes of this
calculation, net loss in 2004 and 2003 has been adjusted for accumulated and/or
paid dividends on the preferred stock.
F-14
1. Organization and Significant Accounting Policies (continued)
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, 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 from those estimates.
Income Taxes
The Company records income taxes using the asset and liability method. Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their future respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are expected
to be recorded or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.
A valuation allowance is established to reduce the deferred tax asset if it is
more likely than not the related tax benefits will not be realized in the
future.
Reclassification
Certain account reclassifications have been made to the financial statements of
the prior year in order to conform to classifications used in the current year.
These changes had no impact on previously stated financial statements of the
Company.
Recently issued accounting pronouncements
In December 2004, the Financial Accounting Standards Board issued SFAS No.
123(R), "Share-Based Payment". SFAS No. 123(R) replaces SFAS No. 123 "Accounting
for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting
for Stock Issued to Employees". SFAS No. 123(R) requires compensation costs
related to share-based payment transactions to be recognized in the financial
statements over the period that an employee provides service in exchange for the
award. SFAS No. 123(R) is effective for period beginning after June 15, 2005.
The Company plans to adopt SFAS No. 123(R) on July 1, 2005, the beginning of its
third fiscal quarter. SFAS 123(R) eliminates the alternative to use the
intrinsic value method of accounting that was provided in SFAS 123 as originally
issued. In accordance with SFAS No. 148, the Company has been disclosing the
impact on net income and earnings per share had the fair value based method been
adopted.
If the fair value method had been adopted, net loss for 2004 and 2003 would have
been increased by $1,961,688 and $454,620, respectively, than reported and loss
per share would have increased approximately $0.05 and $0.01 in 2004 and 2003,
respectively.
2. Equipment and Leasehold Improvements
Equipment and leasehold improvements consist of the following:
F-15
2. Equipment and Leasehold Improvements (continued)
December 31,
2004 2003
-------------------------------
Laboratory equipment $ 1,184,000 $ 1,349,000
Office equipment 200,000 94,000
Leasehold improvements 306,000 306,000
-------------------------------
1,690,000 1,749,000
Less accumulated depreciation and amortization (1,605,000) (1,635,000)
-------------------------------
$ 85,000 $ 114,000
===============================
Depreciation expense was $31,000 and $57,000 for the years ended December 2004
and 2003, respectively. During the year ended December 31, 2004, the Company
wrote-off fully depreciated assets in the amount of $61,000 for assets no longer
in service.
3. Rent Receivable
The Company subleases 6,183 square feet of its office and research facilities
under a month to month arrangement for $13,000 per month plus utilities. From
December 2002 until July 2004, the sublessee was unable to make monthly rental
payments due to a lack of funding. In August 2004 the sublessee resumed making
rental payments and as of September 2004 an additional $5000 per month is being
paid as credit against previous rental obligations. Obligations under the
sublease are secured by certain listed property and equipment of the sublessee.
At December 31, 2004 and 2003 the amount past due from the sub-lessee is
$264,000 and $185,000, net of reserve of $157,000 and $0, respectively.
4. Accrued Expenses
Accrued expenses consist of the following:
December 31,
2004 2003
-------------------------------
Payroll and employee benefits $ 125,000 $ 132,000
Legal and professional fees 31,000 22,000
Accrued interest 35,000 -
Property tax 8,000 9,000
Other 3,000 -
-------------------------------
$ 202,000 $ 163,000
===============================
5. Stockholders' Equity
Convertible Preferred Stock
On March 25 and May 12, 2003, we raised a total of $3,255,000 (less expenses)
from the sale of 32,550 shares of our Series I Convertible Preferred Stock
("Series I Stock") priced at $100 per share, with warrants to purchase an
aggregate of 2,582,669 shares of common stock to a small group of institutional
and accredited investors. Each share of Series I Stock is convertible at any
time at the election of the holder into approximately 181 shares of common stock
at a conversion price of $0.55 per share, subject to certain anti-dilution
adjustments. In connection with this transaction, we recorded non-cash "imputed
dividend" of $1,928,237 in order to account for the difference between the fair
market value of the common stock and the conversion price of the preferred stock
into common stock.
Each share of Series I Stock received two common stock warrants. One warrant was
exercisable at any time for
F-16
approximately 27 shares of common stock at an exercise price of $0.88 per share,
and expired 18 months after the close of the offering; the other warrant was
exercisable at any time for approximately 18 shares of common stock at an
exercise price of $1.65 per share, and expires 48 months after the close of the
offering. In connection with the issuance of the Series I Stock, additional
warrants to purchase 819,543 shares of common stock at an exercise price of
$0.65 per share, expired 18 months after the close of the offering were issued,
as well as warrants to purchase 204,998 shares of common stock at an exercise
price of $0.58 per share, warrants to purchase 27,340 shares of common stock at
an exercise price of $0.68 per share, warrants to purchase 30,748 shares of
common stock at an exercise price of $0.92 per share and warrants to purchase
20,500 shares of common stock at an exercise price of $1.73 per share, each
expiring 5 years after the close of the offering.
No underwriters were engaged by us in connection with such issuance and,
accordingly, no underwriting discounts were paid. The offering was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and met the requirements of Rule 506 of Regulation D
promulgated under the Securities Act.
On July 24, 2001, the Company had a private placement of 12,182 shares of Series
H convertible Preferred Stock and warrants to purchase an aggregate of 304,550
shares of common stock with a small group of institutional and accredited
investors in exchange for cash and convertible notes totaling $1.2 million.
Each share of Series H Preferred Stock is convertible at any time at the
election of the holder into 133.33 shares of common stock at a conversion price
of $0.75 per share, subject to certain anti-dilution adjustments. No
underwriters were engaged by the Company in connection with such issuance and,
accordingly, no underwriting discounts were paid. The offering was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and met the requirements of Rule 506 of Regulation D
promulgated under the Securities Act.
Each share of Series H Preferred Stock also received two common stock warrants.
One warrant was exercisable at any time for 15 shares of common stock at an
exercise price of $1.50 per share, and expired approximately 12 months after the
close of the offering; the other warrant was exercisable at any time for 10
shares of common stock at an exercise price of $2.00 per share, and expired
approximately 24 months after the close of the offering.
During March 2001, the Company issued convertible notes to two current
shareholders in exchange for a total of $800,000. The notes provided for an
interest rate of 7% and both principal and interest were convertible into Series
H Preferred Stock at a common equivalent price of $0.75 per share. The notes
were converted in July 2001.
On August 16, 1999, the Company received $1,775,000 for 17,750 shares of Series
G Preferred Stock from several institutional and accredited individual
investors. On September 15, 1999, the Company received an additional $325,000
for 3,250 shares of Series G Preferred Stock, for a total of $2,100,000. Each
share of Series G Convertible Preferred Stock was priced at $100 per share. Each
share can be converted at any time by the holder into common stock at a price of
$0.50 per share, subject to certain antidilution adjustments. Each share of
Preferred Stock also receives a common stock warrant, exercisable for 12 months,
that allows the holder to acquire 200 shares of PPTI common stock at a price of
$0.50 per share.
In April 1999, the Company received approximately $508,000 from the exercise of
redeemable publicly traded warrants originally issued as part of PPTI's Initial
Public Offering. Following the close of business on April 15, 1999, the
remaining unexercised redeemable, publicly traded, warrants expired. On May 12,
1999, the Company received approximately $416,000 from the exercise of warrants
issued in conjunction with the private placement of the Company's Series E
Convertible Preferred Stock.
F-17
5. Stockholders' Equity (continued)
In 1998, the Company raised approximately $5.4 million from the sale of 54,437
shares of Series E Convertible Preferred Stock ("Series E Stock") priced at $100
per share, with warrants to purchase an aggregate of 3,266,250 shares of common
stock to a small group of institutional and accredited investors. In connection
with this transaction, the Company recorded a non-cash "imputed dividend"
expense of $3,266,250 in order to account for the difference between the fair
market value of the common stock and the conversion price of the preferred stock
into common stock.
Each share of Series E Stock was convertible at any time at the election of the
holder into 80 shares of common stock at a conversion price of $1.25 per share,
subject to certain antidilution adjustments. In March 2003, the Company offered
the holders of Series E Convertible Preferred Stock a reduction in the
conversion price to $0.50 per share with the provision that all holders of the
Series E Convertible Preferred stock agree to convert. As a result, all of the
shares of Series E Convertible Preferred Stock were converted into common stock.
Each share of Series E Stock received two common stock warrants. One warrant is
exercisable at any time for 40 shares of common stock at an exercise price of
$2.50 per share, and expired approximately 18 months after the close of the
offering; the other warrant was exercisable at any time for 20 shares of common
stock at an exercise price of $5.00 per share, and expired approximately 36
months after the close of the offering. In addition, an 18 month warrant to
acquire 200,000 common shares exercisable at $2.50 per share and a 36 month
warrant to acquire 100,000 common shares exercisable at $5.00 per share were
issued as a finder and document review fee paid to a lead investor. These
warrants have now expired. An 18 month warrant to acquire 32,000 common shares
exercisable at $2.50 per share, a 24 month warrant to acquire 16,000 common
shares exercisable at $5.00 per share, and 5 year warrants to acquire an
aggregate of 25,200 common shares exercisable at $2.50 per share were issued to
certain persons for service as finders in relation to the private placement. The
18 month and 24 month warrants have now expired.
In connection with the above private placement, the Company issued 26,420 shares
of its Series F Convertible Preferred Stock ("Series F Stock") in exchange for
the same number of shares of outstanding Series D Convertible Preferred Stock
("Series D Stock").
Each share of Series D and F Stock earns a cumulative dividend at the annual
rate of $10 per share, payable if and when declared by the Company's Board of
Directors, in the form of cash, common stock or any combination thereof. The
Series D and F Stock are convertible into common stock after two years from the
date of issuance at the holder's option. The conversion price at the time of
conversion is the lesser of $3.75 or the market price. The Series D and F Stock
are redeemable at the Company's option after four years from the date of
issuance. Automatic conversion of all of the Series D and F Stock will occur if:
(a) the Company completes a public offering of common stock at a price of $2.50
or higher; or (b) the holders of a majority thereof elect to convert. The
Company has the option to demand conversion of the Series D and F 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 and F Stock have a liquidation
preference of $100 per share plus accumulated dividends.
Series D, F, and H Convertible Preferred Stock have been designated as
non-voting stock.
F-18
5. Stockholders' Equity (continued)
Exercise and Exchange of Warrants
In October 2004, certain holders of warrants issued in conjunction with sale of
Series I Convertible Preferred Stock of the Company exercised their warrants to
purchase common stock. Certain of such warrants were due to expire at the end of
September 2004, but the Company extended the exercise period of such warrants
until the end of October 2004. The exercise prices of such warrants were between
$0.58 and $1.73 per share. As an incentive to exercise the warrants early, the
Company reduced the exercise price to $0.50 per share for all of such warrants
to the extent such warrants were exercised on or before October 29, 2004. As a
result, the Company raised $545,156. In connection with the repricing of
warrants to the investors, the Company recorded an imputed dividend in the
amount of $183,212 to reflect the additional benefit created for these
investors.
In March 2004, certain holders of warrants exercised their warrants to purchase
common stock. These warrants were due to expire at the end of March 2004. The
exercise prices of such warrants were $0.40 and $0.55 per share. As an incentive
to exercise the warrants early the Company offered to reduce the exercise price
of the warrants to $0.25 per share and offered each holder the issuance of a new
warrant, for a similar number of shares, at an exercise price of $0.55 per
share. As a result, the Company raised $246,250. The newly issued warrants will
expire on the last day of January 2005. In connection with the repricing of
warrants and the issuance of new warrants to the investors, the Company recorded
an imputed dividend in the amount of $303,867 to reflect the additional benefit
created for these investors.
In June 2003, certain holders of warrants exercised their warrants to purchase
common stock, these warrants were due to expire in August 2003. The exercise
prices of such warrants were $0.40 and $0.10 per share. As an incentive to
exercise the warrant early the Company offered each holder the issuance of a new
warrant, for a similar number of shares, at an exercise price of $0.55 per
share. As a result, the Company raised $353,500, through the exercise of
2,590,000 previously outstanding warrants, and issued 2,590,000 new warrants
that expired on March 26, 2004, to the extent they were not exercised. In
connection with the issuance of new warrants to the investors, the Company
recorded an imputed dividend in the amount of $656,342 to reflect the additional
benefit created for these investors.
In August 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 August 2003. The original exercise price was $0.40
per share. As an incentive to exercise the warrant early, the Company offered
each holder a reduced exercise price of $0.30 per share and the issuance of a
new warrant for a similar number of shares at an exercise price of $0.10 per
share. As a result, the Company raised $683,000.
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 incentive to exercise the warrant early, the Company
offered each holder a reduced exercise price of $0.25 and the issuance of a new
eighteen month warrant for a similar number of shares at an exercise price of
$0.40 per share. As a result the Company raised $990,000.
During March 2001, 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, 2001, but which had been extended
by the Company's Board of Directors originally until February 2002. The original
exercise price was $1.50 per share. As an incentive to exercise the warrant
early, the Company offered to reduce the exercise price to $0.50 and offer each
holder a new one year warrant for a similar number of shares at an exercise
price of $1.00 per share. As a result, the Company raised $1,246,000 (less
expenses).
F-19
5. Stockholders' Equity (continued)
Notes Payable, related party
On July 2, 2004, the Company issued notes with detachable warrants payable to
several of its current shareholders in exchange for $150,000 in cash. The notes
become due on March 31, 2005 with interest at a rate of 10% per annum. The
detachable warrants were for the purchase of 60,000 shares of the Company's
common stock at $0.37 per share. The warrants have a term of three years and
become exercisable upon issue. The Company allocated the investment proceeds to
the debt and warrants based on their relative fair values. The relative fair
value of the warrants was determined to be $13,730, which was recorded as debt
discount, a reduction of the carrying amount of the debt. This amount is being
amortized to interest expense over the term of the debt. The fair value of the
warrants was based on the Black-Scholes model. The Black-Scholes calculation
incorporated the following assumptions: 0% dividend yield, 138% volatility,
1.98% average risk-free interest rate, a three-year life and an underlying
common stock value of $0.33 per share. For the year ended December 31, 2004,
debt discount of $13,730 was amortized to interest expense.
On August 2, 2004, the Company issued a note with detachable warrants payable to
one of its current shareholders in exchange for $250,000 in cash. The note
becomes due on March 31, 2005 with interest at a rate of 10% per annum. The
detachable warrants were for the purchase of 100,000 shares of the Company's
common stock at $0.37 per share. The warrants have a term of three years and
become exercisable upon issue.. The Company allocated the investment proceeds to
the debt and warrants based on their relative fair values. The relative fair
value of the warrants was determined to be $23,995, which was recorded as debt
discount, a reduction of the carrying amount of the debt. This amount is being
amortized to interest expense over the term of the debt. The fair value of the
warrants was based on the Black-Scholes model. The Black-Scholes calculation
incorporated the following assumptions: 0% dividend yield, 133% volatility,
1.98% average risk-free interest rate, a three-year life and an underlying
common stock value of $0.35 per share. For the year ended December 31, 2004,
debt discount of $23,995 was amortized to interest expense.
On August 19, 2004, the Company issued a note with detachable warrants payable
to one of its current shareholders in exchange for $250,000 in cash. The note
becomes due on March 31, 2005 with interest at rate of 10% per annum. The
detachable warrants were for the purchase of 100,000 shares of the Company's
common stock at $0.45 per share. The warrants have a term of three years and
become exercisable upon issue. The Company allocated the investment proceeds to
the debt and warrants based on their relative fair values. The relative fair
value of the warrants was determined to be $33,802, which was recorded as debt
discount, a reduction of the carrying amount of the debt. This amount is being
amortized to interest expense over the term of the debt. The fair value of the
warrants was based on the Black-Scholes model. The Black-Scholes calculation
incorporated the following assumptions: 0% dividend yield, 140% volatility,
1.98% average risk-free interest rate, a three-year life and an underlying
common stock value of $0.52 per share. For the year ended December 31, 2004,
debt discount of $33,802 was amortized to interest expense.
On September 9, 2004, the Company issued a note with detachable warrants payable
to one of its current shareholders in exchange for $250,000 in cash. The note
becones due on March 31, 2005 with interest at a rate of 10% per annum. The
detachable warrants were for the purchase of 100,000 shares of the Company's
common stock at $0.45 per share. The warrants have a term of three years and
become exercisable upon issue. The Company allocated the investment proceeds to
the debt and warrants based on their relative fair values. The relative fair
value of the warrants was determined to be $41,949, which was recorded as debt
discount, a reduction of the carrying amount of the debt. This amount is being
amortized to interest expense over the term of the debt. The fair value of the
warrants was based on the Black-Scholes model. The Black-Scholes calculation
incorporated the following assumptions: 0% dividend yield, 141% volatility,
1.98% average risk-free interest rate, a three-year life and an underlying
common stock value of $0.67 per share. For the year ended December 31, 2004,
debt discount of $41,949 was amortized to interest expense.
F-20
5. Stockholders' Equity (continued)
On December 22, 2004, the Company issued a note with detachable warrants payable
to one of its current shareholders in exchange for $150,000 in cash. The note
has a three month term with interest at a rate of 10% per annum. The detachable
warrants were for the purchase of 60,000 shares of the Company's common stock at
$0.50 per share. The warrants have a term of three years and become exercisable
upon issue. The Company allocated the investment proceeds to the debt and
warrants based on their relative fair values. The relative fair value of the
warrants was determined to be $19,065, which was recorded as debt discount, a
reduction of the carrying amount of the debt. This amount is being amortized to
interest expense over the term of the debt. The fair value of the warrants was
based on the Black-Scholes model. The Black-Scholes calculation incorporated the
following assumptions: 0% dividend yield, 127% volatility, 1.98% average
risk-free interest rate, a three-year life and an underlying common stock value
of $0.50 per share. For the year ended December 31, 2004, debt discount of
$1,906 was amortized to interest expense.
Employee Stock Purchase Plan
In September 1996 the Company established the Protein Polymer Technologies,
Inc., Employee Stock Purchase Plan ("Plan"). The Plan commenced 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 Company's
Board of Directors may modify the Plan at any time. During 2004, a total of
20,545 shares were purchased under the Plan at prices ranging from $0.36 to
$0.47. The value of shares issued under the Plan as calculated in accordance
with Statement 123 is not significant and is not included in the following pro
forma information.
Stock Options
In June 1996, the Company adopted the 1996 Non-Employee Directors Stock Option
Plan ("1996 Plan"), which provides for the granting of nonqualified options to
purchase up to 250,000 shares of common stock to directors of the Company. In
April 2003, the 1996 Plan was amended to increase the number of options
available for grant to 1,750,000, and the annual award to each Director to
80,000. Such grants of options to purchase 80,000 shares of common stock are
awarded automatically on the first business day of June during each calendar
year to every Participating Director then in office, subject to certain
adjustments. No Participating Director is eligible to receive more than one
grant per year. The purchase price of each option is set at 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 Company's
Board of Directors (or a designated committee of the Board) administers the 1996
Plan. At December 31, 2004, 1,129,950 options to purchase common stock have been
granted under the 1996 Plan with 1,129,950 options exercisable.
In April 2002, the Company adopted the 2002 Stock Option Plan, which provides
for the issuance of incentive and non-statutory stock options for the purchase
of up to 1,500,000 shares of common stock to its key employees and certain other
individuals. In April 2003, the plan was amended to increase the number of
options available for grant to 9,000,000. The options will expire ten years from
their respective dates of grant. Options become exercisable ratably over periods
of up to three years from the dates of grant. The purchase price of each option
approximated the fair market value of the common stock on the date of grant. At
December 31, 2004, 7,348,500 options to purchase common stock had been granted
under the 2002 Plan with 3,693,243 options exercisable.
F-21
5. 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 1,500,000
shares of common stock to its key employees and certain other individuals. The
1992 Stock Option Plan expired as of December 31, 2002. The options granted 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.
The purchase price of each option approximated the fair market value of the
common stock on the date of grant. At December 31, 2004, 1,383,500 options to
purchase common stock had been granted under the 1992 Plan with 1,121,000 with
options exercisable.
The Company adopted the 1989 Stock Option Plan, which provided 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 1989
Stock Option Plan expired as of March 17, 1999. The options granted will expire
ten years from their respective dates of grant. Options granted in the plan
became exercisable ratably over periods of up to five years from the date of
grant. At December 31, 2004, 302,500 options to purchase common stock have been
granted under the 1989 Plan with 302,500 options exercisable.
Since inception, the Company has granted non-qualified options outside the
option plans to employees, directors and consultants. At December 31, 2004,
1,724,000 options to purchase common stock have been granted with 901,834
options exercisable.
The following table summarizes the Company's stock option activity:
Years ended December 31
----------------------------------------------------------------------
2004 2003 2002
----------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
----------------------------------------------------------------------
Outstanding - beginning
of year 9,592,000 $0.91 2,605,500 $0.90 2,124,000 $1.09
Granted 2,400,000 $0.57 6,988,500 $0.71 692,500 $0.35
Exercised (103,500) $0.34 (2,000) $0.30 (28,500) $0.35
Forfeited/Expired - - - - (182,500) $1.05
----------------------------------------------------------------------
Outstanding - end of year 11,888,500 $0.11 9,592,000 $0.76 2,605,500 $0.90
======================================================================
Exercisable - end of year 7,148,527 $0.76 2,725,900 $0.91 1,936,000 $1.01
======================================================================
The exercise prices for options outstanding as of December 31, 2004 range from
$0.22 to $3.75. The weighted average remaining contractual life of these options
is approximately 7.80 years.
6. Stockholder Protection Agreement
In 1997, the Company's Board of Directors adopted a Stockholder Protection
Agreement ("Rights Plan") that distributes Rights to stockholders of record as
of September 10, 1997. The Rights Plan contains provisions to protect
stockholders in the event of an unsolicited attempt to acquire the Company. The
Rights trade together with the common stock, and generally become exercisable
ten business days after a person or group acquires or announces the intention to
acquire 15% or more of the Company's outstanding shares of common stock, with
certain permitted exceptions. The Rights then generally allow the holder to
acquire additional shares of the Company's capital stock at a discounted price.
The issuance of the Rights is not a taxable event, does not affect the Company's
reported earnings per share, and does not change the manner in which the
Company's common stock is traded.
F-22
7. Commitments
The Company leases its office and research facilities totaling 27,000 square
feet under an operating lease, which expires in May 2008. The facilities lease
is subject to an annual escalation based upon the Consumer Price Index in 2004
and an adjustment of one hundred two percent (102%) of the previous year's rent
annually from 2005 through 2008. The lease
provides for deferred rent payments; however, for financial purposes rent
expense is recorded on a straight-line basis over the term of the lease.
Accordingly, deferred rent in the accompanying balance sheet represents the
difference between rent expense accrued and amounts paid under the lease
agreement.
Annual future minimum operating lease payments are as follows:
Year Ending Operating Leases
December 31,
-------------- -----------------
2005 669,000
2006 682,000
2007 695,000
2008 233,000
-----------------
Total minimum operating lease payments $2,279,000
=================
Rent expense, net of rental income, was approximately $567,000, $478,000,
$457,000, and $5,887,000 for the years ended December 31, 2004, 2003 and 2002
and for the period July 6, 1988 (inception) through December 31, 2004,
respectively. Rental income was approximately $66,000, $157,000 and 163,000 for
the years ended December 31, 2004, 2003 and 2002, respectively and $656,000 for
the period July 6, 1988 (inception) through December 31, 2004.
8. Income Taxes
At December 31, 2004, the Company had net operating loss carryforwards of
approximately $42,054,282 for federal income tax purposes, which may be applied
against future income, if any, and will begin expiring in 2005 unless previously
utilized. In addition, the Company had California net operating loss
carryforwards of approximately $15,361,557, which will begin expiring in 2005.
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, certain limitations in the utilization of
California loss carryforwards, and the expiration of certain California tax loss
carryforwards.
The Company also has federal and California research and development tax credit
carryforwards of approximately $1,723,011 and $930,061, respectively, which will
begin expiring in 2005 unless previously utilized.
Some of these carryforward benefits may be subject to limitations imposed by the
Internal Revenue Code. The Company believes these limitations will not prevent
carryforward benefits from being realized.
F-23
8. Income Taxes, continued
Significant components of the Company's deferred tax assets as of December 31,
2004 are shown below. A valuation allowance of $18,934,292 has been recognized
to offset the deferred tax assets as realization of such assets is uncertain.
2004 2003
---------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 16,077,000 $ 14,526,000
Federal & state tax credits 2,715,000 2,177,000
Other, net 142,000 228,000
---------------------------------
Total deferred tax assets 18,934,000 16,931,000
Valuation allowance for deferred tax assets (18,934,000) (16,931,000)
---------------------------------
Net deferred tax assets $ - $ -
=================================
9. 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,
subject to legislated annual limits. Each year the Company may provide a
discretionary matching contribution. As of December 31, 2004, the Company had
not made a contribution to the 401(k) Savings Plan.
10. Subsequent Events
On April 1, 2005, the Company completed the initial closing related to a
Securities Purchase Agreement, with a group of accredited individual and
institutional investors for the private placement of shares of the Company's
common stock at a price of $0.33 per share. At the initial closing, the Company
sold an aggregate of 12,728,269 shares to the initial investors for an aggregate
purchase price of $4,200,331, including approximately $1,200,000 of converted
short-term promissory notes and accumulated interest previously issued by the
Company to certain of the initial investors. As part of the transaction, the
Company also issued to the initial investors warrants that entitle the holders
to purchase an aggregate of 6,364,132 shares of Common Stock at an exercise
price of $0.50 per share. The warrants expire on April 1, 2008.
On or about April 15, 2005, the Company, in a final closing pursuant to the
Securities Purchase Agreement, sold an aggregate of 10,827,955 shares to
additional investors for an aggregate purchase price of $3,573,225. As part of
the transaction, the Company also issued to the investors warrants that entitle
the holders to purchase an aggregate of 5,413,976 shares of Common Stock at an
exercise price of $0.50 per share.
For the entire private placement offering, including the Initial Closing on
April 1, 2005 and the Subsequent Closing, the Company issued a total of
23,556,224 shares of common stock at price of $0.33 per share, for aggregate
total proceeds of $7,773,556 (including approximately $1,200,000 of converted
short-term promissory bridge notes previously issued by the Company to certain
of the Initial Investors), together with warrants for the purchase of an
aggregate of approximately 11,778,108 shares of common stock at an exercise
price of $0.50 per share.
The sales and issuances of the securities under the Purchase Agreement to the
investors were exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder, as transactions by an issuer not involving a public offering. The
Company relied upon the representations made by the investors pursuant to the
Purchase Agreement in determining that such exemptions were available. No
underwriting discounts or commissions were paid by the Company in connection
with these transactions. The Company has agreed to file a registration statement
registering these securities with the Securities and Exchange Commission, and to
attempt to achieve effectiveness of such registration within 120 days of April
15, 2005, the date of the final closing under the Securities Purchase Agreement.
Failing to do so would result in a cash penalty to the Company of approximately
five percent per annum, calculated and applied on a daily basis.
The Company incurred aggregate selling fees of approximately $535,000 and issued
to placement agents warrants to acquire 751,088 shares of common stock at an
exercise price of $0.55 per share exercisable at any time and expiring
approximately 5 years after issuance.
F-24
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.
May 18, 2005 By: /s/ J. Thomas Parmeter
---------------------------------
J. Thomas Parmeter
Chairman of the Board
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 May 17, 2005
- ------------------------------------------
J. Thomas Parmeter
/s/ William N. Plamondon III Chief Executive Officer and Director May 18, 2005
- ------------------------------------------ (Principal Executive Officer)
William N. Plamondon III
/s/ Janis Y. Neves Director of Finance, Controller and Corporate May 18, 2005
- ------------------------------------------ Secretary
Janis Y. Neves (Principal Financial and Accounting Officer)
/s/ Donald S. Kaplan President, Chief Operating Officer and Director May 13, 2005
- ------------------------------------------
Donald S. Kaplan
/s/ Edward G. Cape Director May 13, 2005
- ------------------------------------------
Edward G. Cape
/s/ Kerry L. Kuhn Director May 18, 2005
- ------------------------------------------
Kerry L. Kuhn
/s/ Steven M. Lamon Director May 18, 2005
- ------------------------------------------
Steven M. Lamon
/s/ Steve Peltzman Director May 14, 2005
- ------------------------------------------
Steve Peltzman
/s/ James B. McCarthy Director May 13, 2005
- ------------------------------------------
James B. McCarthy
EXHIBIT INDEX
23.1 Consent of Peterson & Co. LLP, Independent Registered Public Accounting
Firm.
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange
Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Director of Finance (Principal Financial Officer)
pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and 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.
Exhibit 23.1
CONSENT OF PETERSON & CO., LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Forms S-2 (Nos. 333-108923, 333-105656, 333-37676, 333-63468, 333-73906,
333-84766), Forms S-3 (Nos. 333-19695, 333-62761, 333-45759, 333-07861) and
Forms S-8 (Nos. 333-105854, 033-61704, 033-61708, 033-63046, 333-24991,
333-26319, 333-60011) of our report dated February 28, 2005, except for Note 10,
as to which the date is May 13, 2005, included in the Annual Report on Form
10-KSB/A of Protein Polymer Technologies, Inc. for the year ended December 31,
2004, with respect to the financial statements, included in this Form 10-KSB/A.
/s/ PETERSON & CO., LLP
San Diego, California
May 18, 2005
Exhibit 31.1
SECTION 302 CERTIFICATION
of the Chief Executive Officer
I, William N. Plamondon III, the Chief Executive Officer of Protein Polymer
Technologies, Inc., certify that:
1. I have reviewed this annual report on Form 10-KSB/A of Protein Polymer
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included
