UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

AMENDMENT NO. 1

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2009

	OR

o	TRANSITION REPORT PURSUANT TO 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 registrant as specified in its charter)

Delaware	33-0311631
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

11494 Sorrento Valley Road, San Diego, CA 92121

(Address of principal executive offices) (Zip Code)

(858) 558-6064

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

(Do not check if a smaller reporting company)

Smaller reporting company þ

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

The number of shares of the registrant’s common stock issued and outstanding as of August 19, 2009 was 112,959,272.

EXPLANATORY NOTE

Protein Polymer Technologies, Inc. (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 to amend the Form 10-Q that was originally filed with the Securities and Exchange Commission on May 20, 2009. This Amendment No.1 amends the Company’s unaudited financial statements for the quarter ended March 31, 2009 to include the required review of financial information by the Company’s independent registered public accounting firm in accordance with professional standards for conducting such reviews, and the required audited financial information included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the SEC on July 24, 2009. This Amendment No. 1 revises the following specific items:

Part I, Item 1: Financial Statements

Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part I, Item 4T: Controls and Procedures

Part II, Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our principal executive officer and principal financial officer are filed as exhibits to this Amendment No. 1 pursuant to Rule 13a-14(a)/15d-14(a) and Rules 13a-14(b)/15d-14(b) under the Exchange Act. Except as described above, no substantive change has been made to the Form 10-Q as originally filed, nor has any attempt been made to modify or update disclosures to the Form 10-Q as originally filed. The filing of this Amendment No. 1 shall not be deemed to be an admission that the Form 10-Q as originally filed included any untrue statement of material fact or omitted to state a material fact necessary to make a statement not misleading.

PROTEIN POLYMER TECHNOLOGIES, INC.

FORM 10-Q/A — QUARTERLY REPORT

FOR THE PERIOD ENDED MARCH 31, 2009

TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008	3
		Condensed Statements of Operations for the Three Months Ended March 31, 2009 and 2008 (unaudited)	4
		Condensed Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008 (unaudited)	5
		Notes to Condensed Financial Statements (unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
	Item 4T.	Controls and Procedures	21

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	23
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
	Item 3.	Defaults Upon Senior Securities	23
	Item 4.	Submission of Matters to a Vote of Security Holders	23
	Item 5.	Other Information	23
	Item 6.	Exhibits	24

SIGNATURES			25

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Protein Polymer Technologies, Inc.

Condensed Balance Sheets

	March 31, 2009			December 31,
	(unaudited)			2008
Assets
Current assets:
Cash	$	1,507		$	1,291
Prepaid expenses and other current assets		60,844			35,011
Total current assets		62,351			36,302

Deposits		29,679			29,679
Equipment and leasehold improvements, net		20,747			24,429
Investment		520,000			520,000
Total assets	$	632,777		$	610,410

Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$	1,007,678		$	969,435
Accrued liabilities		1,028,325			844,073
Secured note payable - related party		6,414,837			6,414,837
Notes payable - Surgica		519,071			519,071
Notes payable - other, net of unamortized debt discount		161,109			158,589
Fair value of warrant obligations		1,762,651			-
Total current liabilities	$	10,893,671		$	8,906,005

Commitments and contingencies

Stockholders' deficit:
Convertible preferred stock, $0.01 par value; 5,000,000 shares authorized; 20,237 shares issued and outstanding at March 31, 2009 and December 31, 2008; liquidation preference of $2,084,032 and $2,082,930 at March 31, 2009 and December 31, 2008, respectively.		1,834,299			1,834,299
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 112,959,272 and 109,387,843 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively.		1,129,593			1,093,878
Additional paid-in capital		59,605,332			61,982,390
Accumulated deficit		(72,830,118	)		(73,206,162	)
Total stockholders' deficit		(10,260,894	)		(8,295,595	)
Total liabilities and stockholders’ deficit	$	632,777		$	610,410

The accompanying notes are an integral part of these financial statements.

Protein Polymer Technologies, Inc.

Condensed Statements of Operations

(unaudited)

	Three months ended
	March 31,
	2009			2008
Revenues:
Product and other income	$	535		$	-
Total revenues		535			-

Operating expenses:
Research and development		29,003			551,974
Selling, general and administrative		269,746			209,311
Total expenses		298,749			761,285

Net loss from operations		(298,214	)		(761,285	)

Other expenses:
Interest expense		(168,560	)		(169,928	)
Loss from change in fair value of warrant obligations		(604,305	)		-
Total other expenses		(772,865	)		(169,928	)

Net loss		(1,071,079	)		(931,213	)

Dividends on preferred stock		1,102			69,030

Net loss applicable to common shareholders	$	(1,072,181	)	$	(1,000,243	)

Basic and diluted net loss per common share	$	(0.010	)	$	(0.012	)

Weighted average number of common shares outstanding – basic and diluted		112,483,081			80,179,370

The accompanying notes are an integral part of these financial statements.

Protein Polymer Technologies, Inc.

Condensed Statements of Cash Flows

(unaudited)

	Three months ended
	March 31
	2009			2008
Operating activities:
Net loss	$	(1,071,079	)	$	(931,213	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		3,682			25,094
Stock-based compensation expense		1,454			1,236
Debt discount amortization		25,192			20,134
Loss from change in fair value of warrant obligations		604,305			-
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(25,833	)		(20,605	)
Accounts payable		38,243			(55,094	)
Accrued liabilities		184,252			171,058
Net cash used for operating activities		(239,784	)		(789,390	)

Financing activities
Proceeds from sale of common stock		75,000			775,000
Proceeds from issuance of note payable		165,000			-
Net cash provided by financing activities		240,000			775,000

Net increase (decrease) in cash		216			(14,390	)
Cash at beginning of the period		1,291			21,936
Cash at end of the period	$	1,507		$	7,546

Supplemental disclosures of cash flow information
Interest paid	$	444		$	659
Non cash investing and financing activity
Debt discount recorded in connection with issuance/amendment of warrants	$	-		$	135,449
Warrant obligation on warrants issued with common stock and debt	$	229,770		$	-
Secured note payable-related party issued for payment of accrued interest	$	-		$	538,837

The accompanying notes are an integral part of these financial statements.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q under the modified rules and regulations for “Smaller Reporting Companies”. Accordingly, they do not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. However, the Company believes that the condensed financial statements, including the disclosures herein, include all adjustments necessary in order to make the financial statements presented not misleading. The balance sheet as of December 31, 2008 was derived from the Company’s audited financial statements. The financial statements herein should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the U.S. Securities and Exchange Commission. The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2009.

Going Concern and Liquidity

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2009, the Company incurred net losses and negative cash flows from operating activities of approximately $1,071,000 and $240,000, respectively and at March 31, 2009, the Company had a working capital deficit of approximately $10,831,000 and an accumulated deficit of approximately $72,830,000. The Company’s cash balance as of March 31, 2009 was approximately $1,500 and, in combination with anticipated additional contract and license payments, is insufficient to meet our ongoing capital requirements.

From January 1, 2009 through March 31, 2009, required operating capital has been obtained through proceeds totaling $75,000 from equity purchases and proceeds totaling $165,000 from issuance of debt.

Management is currently in discussion with other potential financing sources and collaborative partners and is investigating other funding in the form of equity investments and license fees. If adequate funds are not available, the Company will be required to significantly curtail operations, sell or license out significant portions of its technology, or possibly cease operations. The financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Cost Method Investment

The investment balance at March 31, 2009 and December 31, 2008 represents shares of common stock owned by the Company in a privately held company which were acquired pursuant to a license agreement. Based on the Company’s limited ownership percentage, the investment is reported using the cost method. Under the cost method, the Company does not record its proportional share of earnings and losses of the investee, and income on the investment is only recorded to the extent of dividends distributed from earnings of the investee received subsequent to the date of acquisition.

The Company reviews the carrying value of its cost-method investment for impairment each reporting period unless i) the investment’s fair value has not been estimated for any purpose, including estimates of fair value used to satisfy other financial reporting requirements and ii) there are no impairment indicators present for the investment during the period under review which would indicate there has been an event or change in circumstances that could have a negative effect on the investment’s fair value.

When an impairment test demonstrates that the fair value of an investment is less than its cost, Company management will determine whether the impairment is either temporary or other-than-temporary. Examples of factors which may be indicative of an other-than-temporary impairment include i) the length of time and extent to which market value has been less than cost, ii) the financial condition and near-term prospects of the issuer, iii) and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. If the decline in fair value is determined by management to be other-than-temporary, the cost basis of the investment is written down to its estimated fair value as of the balance sheet date of the reporting period which the assessment is made. This fair value becomes the investment’s new cost basis, which is not changed for subsequent recoveries in fair value. Any recorded impairment write-down will be included in earnings as a realized loss in the period such write-down occurs.

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.

Stock-Based Compensation

On January 1, 2006 the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), Share-Based Payment, (“SFAS No. 123R”), using the modified prospective method. In accordance with SFAS No. 123R, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period. The Company determines the grant-date fair value of employee share options using the Black-Scholes option-pricing model.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Fair Value Measurement

The carrying value of the Company’s cash, accounts payable and accrued expenses approximate their respective fair values because of the short maturities of these instruments. The carrying value of the Company’s notes payable obligations approximates their fair value as the stated interest rates of these instruments reflect rates currently available to the Company.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement focuses on creating consistency and comparability in fair value measurements. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in an active market for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s adoption of SFAS No. 157 with respect to nonfinancial assets and liabilities on January 1, 2008 did not have a material effect on the Company’s financial statements.

At March 31, 2009, the Company remeasured the fair value of warrants to purchase shares of common stock that were classified as liabilities (see Note 8). These warrants were valued using Level 3 inputs because there are certain unobservable inputs associated with them. The following table reconciles the liability for these warrants measured at fair value on a recurring basis using Level 3 inputs for the three months ended March 31, 2009:

Balance at December 31, 2008	$	-
Cumulative effect of accounting change (Note 8)	933,000
Issuance of new warrants	226,000
Loss on change in fair value included in net income	604,000
Balance at March 31, 2009	$	1,763,000

Fair Value of Warrant Obligations

In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ("EITF No. 07-5"). EITF No. 07-5 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.

As a result of adopting EITF 07-05 on January 1, 2009, 50,687,119 of the Company’s warrants to purchase common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment due to exercise price reset and anti-liquidation features.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

On January 1, 2009, the Company reduced additional paid-in capital by $2,380,000 and decreased the beginning accumulated deficit by $1,447,000 as a cumulative effect to establish a long-term warrant liability of $933,000 to recognize the fair value of such warrants.

These common stock purchase warrants were initially issued in connection with placement of the Company’s common stock. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities market, and as such, we estimate the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:

	March 31, 2009		January 1, 2009
Annual dividend yield		0%		0%
Expected life (years)		1.8 - 4.8		2.1 - 5.0
Risk-free interest rate		0.9% - 1.8%		0.8% - 1.5%
Expected volatility		200% - 233%		191% - 221%

Expected volatility is based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods that correspond to the expected life of the warrants. The Company believes this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants. We currently have no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is estimated by management based on the remaining term of the warrants. The risk-free interest rate is based on the rate for U.S. Treasury securities over the expected life.

Net Loss per Common Share

Basic loss per share is calculated using the weighted-average number of outstanding common shares during the period. Diluted loss 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.

Excluded from diluted loss per common share as of March 31, 2009 and 2008 were 83,677,882 and 62,037,741 shares, respectively, because the effect would be anti-dilutive.

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 that the related tax benefits will not be realized in the future.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2009 presentation.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS No. 141(R) was effective for the Company on January 1, 2009. The adoption of SFAS No. 141(R) on January 1, 2009 did not have a material effect on the Company’s financial statements.

In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 142-3, Determination of Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS No. 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP FAS No. 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. The adoption of FSP FAS No. 142-3 on January 1, 2009 did not have a material effect on the Company’s financial statements.

In May 2008, the FASB issued FSP Accounting Principles Board Opinion (“APB”) No. 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”), which requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The adoption of FSP APB 14-1 on January 1, 2009 did not have a material effect on the Company’s financial statements.

In April 2009, the FASB issued FSP SFAS No. 107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP SFAS 107-1 and APB 28-1”). FSP SFAS 107-1 and APB 28-1 amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments (“SFAS 107”), and APB Opinion No. 28, Interim Financial Reporting (“APB 28”), to require public companies to comply with the disclosure requirements in SFAS 107 related to the fair value of financial instruments in interim financial statements. Prior to the issuance of FSP SFAS 107-1 and APB 28-1, these disclosures were only required in annual financial statements. This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption. The Company is currently evaluating the impact that the adoption of FSP SFAS 107-1 may have on its financial position, results of operations, and cash flows.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”), which is effective for fiscal years beginning after June 15, 2009. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The Company is currently evaluating the impact that the adoption of SFAS No. 165 may have on its financial position, results of operations, and cash flows.

In June 2009, the FASB issued SFAS No. 168, The “FASB Accounting Standards Codification” and the Hierarchy of Generally Accepted Accounting Principles. SFAS No. 168 establishes the FASB Accounting Standards Codification (Codification) to become the source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS No. 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company is currently evaluating the impact that the adoption of SFAS No. 168 may have on its financial position, results of operations, and cash flows.

Note 2. Investment

The investment included on our balance sheets at March 31, 2009 and December 31, 2008 represents the Company’s cost basis in shares of common stock of Spine Wave, Inc. (“Spine Wave”), a privately held company focused on the development and commercialization of innovative products and technologies for the treatment of spinal disorders.

Based on adverse changes in market values of companies in the medical device/equipment industry during the second half of 2008, as evidenced by the steep declines in stock market values of publicly traded companies in this sector and in the overall stock market, the Company evaluated its investment in Spine Wave for impairment as of March 31, 2009. Since there are no quoted prices of Spine Wave’s common stock, and since it was not practicable for the Company to otherwise estimate the fair value of Spine Wave’s common stock at March 31, 2009, the Company was unable to quantify the specific amount of potential impairment. However, because the Company believes there may be potential impairment, it completed an evaluation to determine if the potential impairment was other-than-temporary. This evaluation was based on a number of factors including: i) the length of time and the extent to which the market value has been less than the cost; ii) the financial condition and near term prospects of Spine Wave: and iii) the Company’s intent and ability to retain its investment in Spine Wave for a period of time sufficient to allow for a recovery in market value. In connection with this evaluation, the Company determined that any potential impairment in its investment in Spine Wave was primarily a function of the impact on the stock market and the medical device/equipment sector of the deterioration of global economic conditions during the second half of 2008, and that any potential impairment was not a function of factors specifically relating to Spine Wave’s business or its near term prospects. Based on the Company's evaluation of Spine Wave’s near term prospects, the partial recovery of stock market values subsequent to March 31, 2009 and on management's intention to hold the investment in Spine Wave for a sufficient period of time to allow for a recovery in the market value, the Company determined that any potential impairment was not other-than-temporary, and accordingly, no impairment was recorded at March 31, 2009.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

As of March 31, 2009 the Company was not aware of any indicators of impairment with respect to its investment in Spine Wave, and it was not practicable for the Company to estimate the fair value of this investment because of the lack of quoted market prices and the inability to otherwise estimate fair value without incurring excessive costs. Management believed that the carrying amount of its investment in Spine Wave was not impaired at March 31, 2009.

As discussed in Note 4, a portion of the Spine Wave shares owned by the Company serve as collateral for a currently outstanding note payable.

Note 3. Accrued Liabilities

Accrued liabilities consist approximately of the following:

	March 31, 2009		December 31, 2008
Payroll and employee benefits	$	52,000		67,000
Professional Fees		21,000		-
Accrued interest		752,000		610,000
Insurance premium financing		47,000		27,000
Directors fees		110,000		100,000
Other		46,000		40,000
	$	1,028,000		844,000

Note 4. Notes Payable

Secured Notes Payable – Related Party

As of March 31, 2009, the amount due on this note includes the $6,415,000 outstanding balance plus $629,000 of accrued interest. On March 31, 2009, the Company extended the maturity date of its secured notes payable – related party to September 30, 2009.

The note is secured, in accordance with the terms of a security agreement (the “Security Agreement”), by a continuing security interest in and a general lien upon (i) 2,000,000 shares of Spine Wave, Inc. common stock owned by the Company; and (ii) all U.S. patents owned by the Company.

Notes Payable - Other

On February 6, 2009 and March 18, 2009 the Company received proceeds of $80,000 and $85,000, respectively, as loans. These notes are due on February 5, 2010 and March 17, 2010, respectively, and bear an annual interest rate of 8%. The interest and principal are payable on the maturity dates, either in cash or common stock at a rate of $0.02 per share, at the discretion of the Company. In connection with the loans, the Company granted warrants to the noteholders to purchase an aggregate of 4,000,000 and 4,250,000 shares, respectively, of the Company’s common stock at an exercise price of $0.02 per share. As of March 31, 2009 the total amount of accrued interest owed was $9,000.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

A portion of the proceeds totaling $153,000 was allocated to the warrant liabilities and as debt discount. The fair value of these warrants was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions:

	2/06/09 Warrant			3/18/09 Warrant
Expected annual dividends		0	%		0	%
Risk-free interest rate		1.4	%		1.3	%
Expected term (in years)		3.0			3.0
Expected Volatility		225	%		230	%

The carrying value of the notes payable - other at March 31, 2009, is comprised of the following:

Principal value of notes	$	395,000
Less: Unamortized debt discount		(234,000	)
	$	161,000

The total debt discount recorded is being amortized as interest expense over the expected term of the notes using the effective interest method. During the three months ended March 31, 2009, the Company recorded non-cash interest expense of approximately $25,000 based on the debt discount amortization of these warrants.

Surgica Notes

In December 2005, in connection with a license agreement with Surgica Corporation for the rights to certain intellectual property, the Company assumed several notes payable agreements with an aggregate principal balance of $519,000.

In March 2007, the license agreement with Surgica was terminated. On October 15, 2008, the noteholders instituted suit against the Company in Superior Court of California, County of Sacramento seeking payment of these notes. Until a final determination was made with respect to the disposition of the notes, the Company continued to carry them on its balance sheet. Accordingly, as of March 31, 2009, the entire balance of the outstanding notes payable and related accrued interest of $115,000 is reflected in the accompanying financial statements as a current liability.

On May 19, 2009, the plaintiffs filed a request for dismissal with prejudice of the action against the Company, and the Company paid nothing to plaintiffs in exchange for the dismissal. The Company expects to reverse amounts accrued relating to this license agreement during the second quarter of 2009.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Note 5. Common Stock

The Company’s Board of Directors agreed to the terms of a Stock Purchase Agreement (“SPA”) and a Registration Rights Agreement (“RRA”), each dated as of September 27, 2007 and amended on November 28, 2007, with TAG Virgin Islands, Inc.(“TAG”), as agent for certain purchasers of the Company’s common stock. TAG is a registered investment advisor and advises a number of the Company’s stockholders, including certain members of our Board of Directors, in investment decisions, including decisions about whether to invest in our stock. Based upon our stock records and data supplied to us by our stockholders, we believe that clients of TAG beneficially owned approximately 55.1% of our common stock, prior to the stock purchases subject to the SPA. The SPA essentially provides for the Company selling, from time to time, shares of its common stock, par value $0.01, to the purchasers at a purchase price determined as the closing price of the stock on sale date. As a component of the purchase of the common stock, the purchaser also will receive a warrant to purchase the same number of shares of common stock in the future. Each warrant expires in five years from the date of purchase and is exercisable at a per share price, subject to certain anti-dilution provisions, equal to 100% of the purchase price paid by the purchase. The SPA can be terminated at any time by TAG. The purchasers have certain registration rights, as provided by the RRA, to require the Company, at its cost, to file an effective registration statement with the Securities and Exchange Commission.

For the three months ended March 31, 2009, the Company received an aggregate of $75,000 in subscriptions for the purchase of 3,571,429 shares of common stock and 3,571,429 warrants, subject to the terms of the SPA and RRA. Between September 27, 2007 and March 31, 2009, the Company received proceeds of $2,357,500 for the purchase of 46,070,548 shares of common stock and 46,070,548 warrants pursuant to this Stock Purchase Agreement.

A portion of the proceeds received for the three months ended March 31, 2009, totaling $73,000 was allocated to the warrant liabilities, with the remaining balance recorded as additional paid-in capital. The fair value of these warrants was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions:

Expected annual dividends	0	%
Risk-free interest rate	1.6	%
Expected term (in years)	5.0
Expected Volatility	191	%

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Note 6. Stock Options

The Company did not grant options during the three months ended March 31, 2009. Stock option activity for the three months ended March 31, 2009 is as follows:

	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2008		3,507,500	$	0.68		4.40
Issued		-
Cancelled		-
Exercised		-
Outstanding at March 31, 2009		3,507,500		0.68		4.15
Exercisable at March 31, 2009		3,498,587	$	0.68		4.14

During the three month periods ended March 31, 2009 and 2008, respectively, the Company recognized $1,454 and $1,236 in stock-based compensation expense. As of March 31, 2009, there was $969 of unrecognized compensation expense related to unvested share-based compensation arrangements which is expected to be fully recognized by the end of 2009. There was no intrinsic value related to the stock options outstanding as of March 31, 2009.

Note 7. Warrants to Purchase Common Stock

The Company has reserved for issuance, out of currently authorized and unissued shares of common stock, shares underlying outstanding warrants to purchase common stock. Upon exercise of the warrants, shares of common stock will be issued out of currently authorized and unissued shares.

A summary of warrant activity for the three months ended March 31, 2009 is as follows:

	Number of Warrants Outstanding and Exercisable		Weighted- Average Exercise Price
Outstanding, December 31, 2008	$	63,246,314	$	0.14
Granted		11,821,429	$	0.02
Exercised		-	$	-
Expired		-	$	-
Outstanding, March 31, 2009		75,067,743	$	0.12

At March 31, 2009, the weighted-average remaining contractual life of the warrants was approximately 3.1 years.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Note 8. Change in Accounting Principle: Warrant Obligations

As a result of adopting EITF 07-5, the Company reclassified the fair value of warrants to purchase common stock as follows:

	Additional Paid-in Capital			Accumulated Deficit
Balances at December 31, 2008		61,982,000			(73,206,000	)

Cumulative effect of warrants reclassified		(2,380,000	)		1,447,000
Stock issuance		2,000			-
Stock-based compensation expense		1,000			-
Net loss		-			(1,071,000	)

Balances at March 31, 2009	$	59,605,000			(72,830,000	)

Note 9. Subsequent Events

Between April 1, 2009 and August 19, 2009, the Company received proceeds of $330,000 pursuant to note payable agreements entered into with clients of TAG. These loans are represented by unsecured notes issued by the Company. These notes are due one year after issuance and bear an annual interest rate of 8%. The interest and principal are payable on the maturity dates, either in cash or common stock, at the discretion of the Company, at rates ranging from $0.02 to $0.034 per share. As consideration for the loans, the Company granted warrants to the noteholders to purchase an aggregate of 14,615,614 shares of the Company’s common stock at exercise prices ranging from $0.02 to $0.034 per share.

On June 29, 2009, the Company received from Sanyo Chemical Industries, Ltd. (“Sanyo”) a fully executed copy of a License Agreement between Sanyo and the Company. The effective date of the Agreement is June 18, 2009. Pursuant to the Agreement, the Company has granted a non-exclusive, world-wide license to Sanyo of its technology, know-how, and intellectual property relating to recombinant, repetitive unit proteins and peptides, for the purposes of developing and commercializing products related to Sanyo’s specific fields of business. The Agreement remains in effect until the expiration of the last to expire of the Company’s patents licensed by Sanyo under this Agreement. The Agreement further provides the Company with initial and ongoing license fees, technical service and training fees, and a percentage royalty on the quarterly net sales of any new products developed by Sanyo under this Agreement.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Protein Polymer Technologies, Inc

We have reviewed the accompanying condensed balance sheet of Protein Polymer Technologies, Inc. as of March 31, 2009, and the related condensed statements of operations and cash flows for the three-month periods ended March 31, 2009 and 2008. These condensed financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the condensed financial statements and Note 1 to the annual financial statements for the year ended December 31, 2008 (not presented herein), the Company has minimal cash balances and a significant working capital deficit as of March 31, 2009, and has incurred significant recurring net losses through March 31, 2009. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1 to the respective financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheet of Protein Polymer Technologies, Inc. as of December 31, 2008, and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended (not presented herein) and in our report dated July 24, 2009, we expressed an unqualified opinion on those financial statements and included an explanatory paragraph concerning matters that raise substantial doubt about the Company’s ability to continue as a going concern. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

/s/ SQUAR, MILNER, PETERSON, MIRANDA & WILLIAMSON, LLP

Newport Beach, California

August 19, 2009

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2008, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2008. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. When used herein, the words “believe,” “anticipate,” “expect,” “estimate” and similar expressions are intended to identify such forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Risk Factors” in the Form 10-K for the year ended December 31,2008. We undertake no obligation to update any of the forward-looking statements contained herein to reflect any future events or developments.

Company and Technology Background

Protein Polymer Technologies, Inc. (hereafter the “Company”, “our” or “we”), a Delaware corporation, is a biotechnology company incorporated on July 6, 1988. We are engaged in the research, development and production of bio-active devices to improve medical and surgical outcomes. Through our patented technology to produce proteins of unique design, biological and physical product components are integrated to provide for optimized clinical performance.

We are focused on developing products to improve medical and surgical outcomes, based on an extensive portfolio of proprietary biomaterials. Biomaterials are materials that are used to direct, supplement, or replace the functions of living systems. The interaction between materials and living systems is dynamic. It involves the response of the living system to the materials (e.g., biocompatibility) and the response of the materials to the living system (e.g., remodeling). The requirements for performance within this demanding biological environment have been a critical factor in limiting the possible metal, polymer, and ceramic compositions to a relatively small number that to date have been proven useful in medical devices implanted within the body.

The goal of biomaterials development historically has been to produce inert materials, i.e., materials that elicit little or no response from the living system. However, we believe that such conventional biomaterials are constrained by their inability to convey appropriate messages to the cells that surround them, the same messages that are conveyed by proteins in normal human tissues.

The products we have targeted for development are based on a new generation of biomaterials which have been designed to be recognized and accepted by human cells to aid in the natural process of bodily repair, (including the healing of tissue and the restoration or augmentation of its form and function) and, ultimately, to promote the regeneration of tissues. We believe that the successful realization of these properties will substantially expand the role that artificial devices can play in the prevention and treatment of human disability and disease, and enable the culture of native tissues for successful reimplantation.

Through our proprietary core technology, we produce high molecular weight polymers that can be processed into a variety of material forms such as gels, sponges, films, and fibers, with their physical strength and rate of resorption tailored to each potential product application. These polymers are constructed of the same amino acids as natural proteins found in the body. We have demonstrated that our polymers can mimic the biological and chemical functions of natural proteins and peptides, such as the attachment of cells through specific membrane receptors and the ability to participate in enzymatic reactions, thus overcoming a critical limitation of conventional biomaterials. In addition, materials made from our polymers have demonstrated excellent biocompatibility in a variety of preclinical safety studies.

Our patented core technology enables messages that direct activities of cells to be precisely formulated and presented in a structured environment similar to what nature has demonstrated to be essential in creating, maintaining and restoring the body’s functions. Our protein polymers are made by combining the techniques of modern biotechnology and traditional polymer science. The techniques of biotechnology are used to create synthetic genes that direct the biological synthesis of protein polymers in recombinant microorganisms. The methods of traditional polymer science are used to design novel materials for specific product applications by combining the properties of individual “building block” components in polymer form.

In contrast to natural proteins, either isolated from natural sources or produced using traditional genetic engineering techniques, our technology results in the creation of new proteins with unique properties. We have demonstrated an ability to create materials that:

combine properties of different proteins found in nature;

reproduce and amplify selected activities of natural proteins;

eliminate undesired properties of natural proteins; and

incorporate synthetic properties via chemical modifications

This ability is fundamental to our current primary product research and development focus — tissue repair and regeneration. Tissues are highly organized structures made up of specific cells arranged in relation to an extracellular matrix (“ECM”), which is principally composed of proteins. The behavior of cells is determined largely by their interactions with the ECM. Thus, the ability to structure the cells’ ECM environment allows the protein messages they receive — and their activity — to be controlled.

Results of Operations

Revenue. Revenues from product sales for the three months ended March 31, 2009 were $535 compared to $0 revenue generated in the comparable period in 2008.

Research and Development Expenses. Research and development expenses for the three months ended March 31, 2009 were approximately $29,000, compared to $552,000 for the three months ended March 31, 2008. The decline resulted from our inability to raise additional capital, and the closing of our laboratory and administrative facility, and the subsequent sub-contracting of the laboratory function. We expect our research and development expenses will increase in the future only to the extent that additional capital is obtained or future collaborative development and licensing agreements are secured.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended March 31, 2009 were approximately $270,000, as compared to $209,000 for the three months ended March 31, 2008. The increase was due to the reallocation of certain expenses previously associated with our research and development efforts. To the extent possible, we continue to concentrate on controlling costs in this area. We expect our selling, general and administrative expenses will increase in the future only to the extent that additional capital is obtained or future collaborative development and licensing agreements are secured.

Operating Losses. For the three months ended March 31, 2009, we recorded a net loss applicable to common shareholders of $1,072,000 or $0.010 per share, as compared to a loss of $1,000,000 or $0.012 per share for the comparable period in 2008.

Loss from change in fair value of warrants

On January 1, 2009 we reclassified the fair value of warrants to purchase common stock from equity to liability status as if these warrants were treated as a derivative liability since their date of issue. The fair value of these common stock purchase warrants increased to $1,760,000 as of March 31, 2009 due to the issuance of new warrants and an increase in the Company’s stock price. We recognized a $604,000 non-cash loss from the change in fair value of these warrants for the three months ended March 31, 2009.

Liquidity and Capital Resources

As of March 31, 2009, we had cash totaling approximately $1,500, as compared to $1,000 at December 31, 2009. As of March 31, 2009, we had a working capital deficit of $10,831,000 compared to a working capital deficit of $8,796,000 at December 31, 2008.

We do not have any off balance sheet financing activities and do not have any special purpose entities. We had no long-term capital lease obligations as of March 31, 2009. During the three months ended March 31, 2009, we did not purchase or sell any capital equipment or leasehold improvements. We do not anticipate significant expenditures for capital equipment or leasehold improvements for the remainder of 2009.

We believe our existing available cash, cash equivalents, and accounts receivable, in combination with anticipated contract research payments and revenues received from the transfer of clinical testing materials, will not be sufficient to meet our anticipated capital requirements during 2009. Substantial additional capital resources are required to fund continuing expenditures related to our operating, research, development, manufacturing and business development activities.

As discussed in Note 5 to the financial statements, the Company entered into a common stock purchase agreement (hereafter “SPA”) in September 2007 and has raised $2,357,500 as of June 30, 2009, as a result of that SPA. The SPA has been our main source of external financing since September 2007.

Prior to the SPA, required funding was provided to us through a note payable agreement (known as the Szulik Loan) by Matthew Szulik, one of our stockholders. On January 9, 2008, we replaced the Szulik Loan by issuing to Mr. Szulik a new note in the principal amount of $6,415,000. On March 31, 2009, the scheduled maturity date was extended to September 30, 2009.

Between October 2, 2008 and August 19, 2009, the Company received proceeds of $725,000 as loans from clients of TAG. These loans are represented by unsecured notes issued by the Company. These notes are due one year after issuance and bear an annual interest rate of 8%. The interest and principal are payable on the maturity dates, either in cash or common stock, at the discretion of the Company, at rates ranging from $0.02 to $0.05 per share.

As noted above, we believe our existing available cash as of March 31, 2009 will not be sufficient to meet our anticipated capital requirements during 2009. We are unable to pay certain vendors in a timely manner and remain over 90 days past due with certain critical vendors, such as outside laboratories and law firms. Additionally, we are currently outsourcing administrative and accounting functions as a result of cutbacks necessitated by insufficient monetary resources. We are attempting to remedy this problem. Our ability to continue operating is dependent on the receipt of additional funding and substantial additional capital resources will be required to fund continuing expenditures related to our research, development, manufacturing and business development activities. If adequate funds are not available, we will be required to significantly curtail our operating plans and most likely cease operations. We are still in discussions with other potential financing sources and collaborative partners, and are seeking additional funding in the form of equity investments, license fees, loans, milestone payments or research and development payments. We cannot assure that any of these other sources of funding will be consummated in the timeframes needed for continuing operations or on terms favorable to us, if at all.

Inflation

To date, we believe that inflation and changing prices have not had a material impact on our continuing operations. However, we have experienced increased general and product liability insurance costs over the past two years, and these increases are expected to continue for the foreseeable future.

Caution on Forward-Looking Statements

Any statements in this report about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. You can identify these forward-looking statements by the use of words or phrases such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should” or “would.” Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties inherent in our business including, without limitation: the potential for the FDA to impose non-clinical, clinical or other requirements to be completed before or after use of any of our intellectual property or methodology; our ability to demonstrate to the satisfaction of potential collaborative development partners of the feasibility of utilizing our intellectual property or methodology; the failure to generate the potential to enter into and the terms of any strategic transaction relating to our intellectual property or methodology; the scope, validity and duration of patent protection and other intellectual property rights for our intellectual property or methodology ; estimates of the potential markets for our intellectual property or methodology and our ability to compete in these markets; our products, our expected future revenues, operations and expenditures and projected cash needs; our ability to raise sufficient capital and other risks detailed in this report. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations, and therefore are not required to provide the information requested by this Item.

Item 4T. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Interim Chief Executive Officer and Interim Principal Financial Officer, who is the same person, to allow timely decisions regarding required disclosure. As reported in our Annual Report on Form 10-K for the year ended December 31, 2008 (filed on July 24, 2009), Company management identified material weaknesses in our internal accounting control over financial reporting as of December 31, 2008, including:

Pervasive, entity-level control deficiencies across key COSO components in the Company’s control environment, including:

Controls over the period-end financial closing and reporting processes;

Controls over managerial override;

Controls to prevent or reduce the risk of fraudulent activity;

Controls to monitor other controls, including the role of the Board of Directors; and

Controls related to risk assessment.

An absence of independence and financial expertise on the Board of Directors, limiting its ability to provide effective oversight.

An absence of a formalized process to manage the Company’s internal controls over financial reporting and become compliant with Section 404 of the Sarbanes-Oxley Act.

Inadequate controls over the period-end financial close and reporting processes;

Insufficient personnel resources and technical accounting expertise within the accounting function to provide for adequate segregation of duties and to properly account for non-routine or complex accounting matters; and

Inadequate documentation of policies, procedures, and controls related to finance and accounting, including inadequate procedures for appropriately identifying, assessing, and applying accounting principles.

As a result of these material weaknesses, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2008.

As of March 31, 2009, our management, including our Interim Chief Executive Officer and Interim Principal Financial Officer, who is the same person, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). As part of its evaluation, management evaluated whether the previously reported material weaknesses in internal control over financial reporting continue to exist. Company management has determined that it cannot assert that the reported material weaknesses have been effectively remediated as of March 31, 2009. Accordingly, Company management, including our Interim Chief Executive Officer and Interim Principal Financial Officer, who is the same person, has concluded that Company’s disclosure controls and procedures were not effective as of March 31, 2009.

Notwithstanding the identified material weaknesses, Company management has concluded that the financial statements included in this Quarterly Report present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in litigation and proceedings in the ordinary course of our business. We are not currently involved in any legal proceeding that we believe would have a material adverse effect on our business or financial condition.

On October 15, 2008, certain alleged noteholders instituted suit against the Company in Superior Court of California, County of Sacramento, seeking payment of outstanding notes payable allegedly owed by the Company. On May 19, 2009, the plaintiffs filed a request for dismissal with prejudice of the action against the Company, and the Company paid nothing to plaintiffs in exchange for the dismissal.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March 31, 2009, we received an aggregate of $75,000 for the purchase of 3,571,429 common shares and 3,571,429 warrants to purchase our common stock. On February 6, 2009 and March 18, 2009 we sold notes in the principal amounts of $80,000 and $85,000 and issued warrants in connection therewith to purchase 4,000,000 and 4,250,000 shares of our common stock, respectively. Reference is made to Liquidity and Capital resources under Management’s Discussion and Analysis of Financial Condition and Results of Operations or information relating to these sales. The sales were made pursuant to the exemption from the registration provisions of the Securities Act of 1933 provided by Section 4 (2) thereof.

As of August 19, 2009, we had used substantially all of the net proceeds which were generated from the sale of our securities described in the preceding paragraph to fund ongoing operations. We have no remaining proceeds from these sales and will require further sales or other financing transactions or collaborative development agreements to maintain ongoing operations.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following documents are included or incorporated by reference:

Exhibit Number		Description
10.6.1*		Secured Promissory Note Replacement Agreement, dated as of January 9, 2008, between the Company and Matthew J. Szulik.

10.6.2*		Secured Promissory Note issued to Matthew J. Szulik, dated as of January 9, 2008.

10.6.3*		Form of Warrant to Purchase Shares of Common Stock of the Company in connection with the Secured Promissory Note issued to Matthew J. Szulik, dated as of January 9. 2008.

10.6.4**		Form of Promissory Note issued to noteholders, dated as of October 2, 2008, November 3, 2008, December 11, 2008, February 6, 2009, March 18, 2009, April 20, 2009, May 7, 2009, and June 5, 2009.

10.6.5**		Form of Warrant to Purchase Shares of Common Stock of the Company in connection with the Promissory Note issued to noteholders, dated as of October 2, 2008, November 3, 2008, December 11, 2008, February 6, 2009, March 18, 2009, April 20, 2009, and May 7, 2009, and June 5, 2009.

10.6.6		Secured Promissory Note Replacement Agreement, dated as of March 31, 2009, between the Company and Matthew J. Szulik.

31.1		Certification of Interim Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Interim Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Interim Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 960 of the Sarbanes-Oxley Act of 2002.

*	Incorporated by reference to Registrant’s Report on Form 10-KSB for the fiscal year ended December 31, 2008, SEC File No. 000-19724, as filed with the Commission on May 12, 2008.

**	Incorporated by reference to Registrant’s Report on Form 10-Q for the quarter ended September 30, 2008, SEC File No. 000-19724, as filed with the Commission on November 19, 2008.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROTEIN POLYMER TECHNOLOGIES, INC.

Date: August 19, 2009	By:	/s/ James B. McCarthy
		James B. McCarthy
		Interim Chief Executive Officer


Date: August 19, 2009	By:	/s/ James B. McCarthy
		James B. McCarthy
		Interim Principal Financial Officer