UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB

(Mark One)

x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

o
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)

33-0311631
(IRS Employer Identification No.)
incorporation or organization)
 

10655 Sorrento Valley Road, San Diego, CA 92121
(Address of principal executive offices)

(858) 558-6064
(Issuer's telephone number)

(former name, former address and former fiscal year, if changed since last report)

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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 4, 2007, 67,809,204 shares of common stock were outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No x
 


PROTEIN POLYMER TECHNOLOGIES, INC.

FORM 10-QSB

INDEX
 
   
Page No.
     
PART I. FINANCIAL INFORMATION
   
     
Item 1. Financial Statements (Unaudited)
   
     
Balance Sheets
   
March 31, 2007 and December 31, 2006
 
3
     
Statements of Operations
   
For three months ended March 31, 2007 and 2006
 
4
     
Statements of Cash Flows
   
For the three months ended March 31, 2007 and 2006.
 
5
     
Notes to Financial Statements
 
6
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
12
 
   
Item 3. Controls and Procedures
 
18
     
PART II. OTHER INFORMATION
   
     
Item 6. Exhibits
 
18
     
Signatures
 
19

2


PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements

Protein Polymer Technologies, Inc.
Balance Sheets
(unaudited)
 
   
March 31,
 
 December 31,
 
   
2007
 
 2006
 
Assets
          
Current assets:
          
Cash and cash equivalents
 
$
87,812
 
$
73,495
 
Contract receivable
   
20,818
   
21,068
 
Current portion of rent receivable
   
24,527
   
39,527
 
Prepaid expenses and other current assets
   
76,378
   
49,940
 
Total current assets
   
209,535
   
184,030
 
               
Deposits
   
30,479
   
29,679
 
Equipment and leasehold improvements, net
   
203,171
   
228,475
 
Investment, at cost
   
520,000
   
520,000
 
Total assets
 
$
963,185
 
$
962,184
 
               
Liabilities and stockholders' (deficit) equity
             
Current liabilities:
             
Accounts payable
 
$
778,159
   
1,098,820
 
Accrued liabilities
   
461,718
   
422,730
 
Secured note payable - related party
   
4,683,416
   
3,461,516
 
Current maturities of notes payable
   
161,697
   
146,697
 
Total current liabilities
   
6,084,990
   
5,129,763
 
               
Notes payable, net of current maturities
   
357,374
   
372,374
 
Deferred rent
   
13,269
   
13,269
 
Total liabilities
   
6,455,633
   
5,515,406
 
               
Commitments and contingencies
             
               
Stockholders' deficit:
             
Convertible preferred stock, $0.01 par value; 5,000,000 shares authorized; 65,645 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively - liquidation preference of $6,564,500 at March 31, 2006 and December 31, 2005, respectively
   
6,019,917
   
6,019,917
 
           
Common stock, $0.01 par value; 120,000,000 shares authorized; 67,809,204 and 67,409,204 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively
   
678,092
   
674,092
 
Additional paid-in capital
   
55,906,894
   
55,760,511
 
Accumulated deficit
   
(68,097,351
)
 
(67,007,742
)
Total stockholders' deficit
   
(5,492,448
)
 
(4,553,222
)
Total liabilities and stockholders' deficit
 
$
963,185
 
$
962,184
 

See accompanying notes.
 
3


Protein Polymer Technologies, Inc.
Statements of Operations
(unaudited)
 
   
Three months ended  
 
   
March 31,  
 
   
2007
 
 2006
 
Revenues:
          
Contract and licensing revenue
 
$
136,088
 
$
220,919
 
Product and other income
   
   
18,558
 
Total revenues
   
136,088
   
239,477
 
               
Operating expenses:
             
Cost of sales
   
   
803
 
Research and development
   
718,769
   
1,036,440
 
Selling, general and administrative
   
414,719
   
1,887,311
 
Total expenses
   
1,133,488
   
2,924,554
 
               
Net loss from operations
   
(997,400
)
 
(2,685,077
)
               
Other income (expense):
             
Interest income
   
   
2,524
 
Interest expense
   
(94,292
)
 
(10,900
)
Gain on derivative liability
   
10,408
   
 
Total other income (expense)
   
(83,884
)
 
(8,376
)
               
Net loss
   
(1,081,284
)
 
(2,693,453
)
               
Undeclared, imputed and/or paid dividends on preferred stock
   
76,784
   
157,409
 
               
Net loss applicable to common shareholders
 
$
(1,158,068
)
$
(2,850,862
)
               
Basic and diluted net loss per common share
 
$
(0.02
)
$
(0.04
)
               
Shares used in computing basic and diluted net loss per common share
   
67,520,315
   
67,311,606
 

See accompanying notes.
 
4


Protein Polymer Technologies, Inc.
Statements of Cash Flows
(unaudited)
 
   
Three months ended  
 
   
March 31,  
 
   
2007