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