UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

	For the quarterly period ended June 30, 2008

OR

¨	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 ¨

Accelerated filer ¨

Non-accelerated filer ¨

(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 ¨ NO þ

The number of shares of the registrant’s common stock issued and outstanding as of August 5, 2008 was 107,307,982.

PROTEIN POLYMER TECHNOLOGIES, INC.

FORM 10-Q — QUARTERLY REPORT

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007	3
	Condensed Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007 (unaudited)	4
	Condensed Statements of Cash Flows for the Six Months ended June 30, 2008 and 2007 (unaudited)	5
	Notes to Condensed Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4T.	Controls and Procedures	19

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits	22

SIGNATURES		23

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Protein Polymer Technologies, Inc.

Condensed Balance Sheets

	June 30			December 31
	2008 (unaudited)			2007
Assets
Current assets:
Cash	$	7,592		$	21,936
Prepaid expenses and other current assets		43,715			33,419
Total current assets		51,307			55,355

Deposits		29,679			29,679
Equipment and leasehold improvements, net		32,397			128,100
Investment		520,000			520,000
Total assets	$	633,383		$	733,134

Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$	1,126,476		$	827,626
Accrued liabilities		510,462			794,312
Secured note payable - related party, net of unamortized debt discount		6,369,366			5,876,000
Current maturities of notes payable		519,071			419,071
Total current liabilities		8,525,375			7,917,009

Notes payable, net of current maturities		—			100,000
Total liabilities		8,525,375			8,017,009
Commitments and contingencies (Note 9)

Stockholders' deficit:
Convertible preferred stock, $0.01 par value; 5,000,000 shares authorized; 65,646 shares issued and outstanding at June 30, 2008 and December 31, 2007 - liquidation preference of $9,607,426 and $9,464,500 at June 30, 2008 and December 31, 2007, respectively.		6,019,917			6,019,917
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 97,384,453 and 73,722,232 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		973,845			737,222
Additional paid-in capital		57,346,505			56,227,221
Accumulated deficit		(72,232,259	)		(70,268,235	)
Total stockholders' deficit		(7,891,992	)		(7,283,875	)
Total liabilities and stockholders’ deficit	$	633,383		$	733,134

The accompanying notes are an integral part of these financial statements

Protein Polymer Technologies, Inc.

Condensed Statements of Operations

(unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues:
Contract revenue	$	—		$	131,530		$	—		$	267,618
Product and other income		6,755			—			6,755			—
Total revenues		6,755			131,530			6,755			267,618

Operating expenses:
Research and development		573,516			628,131			1,125,490			1,273,152
Selling, general and administrative		302,181			351,596			511,492			671,299
Total expenses		875,697			979,727			1,636,982			1,944,451

Net loss from operations		(868,942	)		(848,197	)		(1,630,227	)		(1,676,833	)

Other income (expense):
Interest and other income		—			145			—			9,655
Interest and other expense		(208,314	)		(111,949	)		(378,242	)		(205,343	)
Gain on sale of equipment		40,646			—			40,646			—
Gain on settlement		—			—			—			193,917
Total other income (expense)		(167,668	)		(111,804	)		(337,596	)		(1,771	)

Net loss		(1,036,610	)		(960,001	)		(1,967,823	)		(1,678,604	)

Undeclared, imputed and/or paid dividends on preferred stock		69,030			69,219			138,060			146,003

Net loss applicable to common shareholders	$	(1,105,640	)	$	(1,029,220	)	$	(2,105,883	)	$	(1,824,607	)

Basic and diluted net loss per common share	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)

Weighted average number of common shares outstanding – basic and diluted		94,582,408			67,809,204			87,380,889			67,665,558

The accompanying notes are an integral part of these financial statements

Protein Polymer Technologies, Inc.

Condensed Statements of Cash Flows

(unaudited)

	Six months
	Ended
	June 30			June 30
	2008			2007
Operating activities
Net loss	$	(1,967,823	)	$	(1,678,604	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		35,349			50,609
Share-based compensation expense		4,257			109,082
Debt discount amortization		89,978			—
Gain on sale of fixed assets		(40,646	)		—
Changes in operating assets and liabilities:
Deposits		—			(1,600	)
Prepaid expenses and other current assets		(10,296	)		(67,268	)
Rent receivable		—			30,000
Accounts payable		298,850			(311,488	)
Accrued liabilities		254,987			205,357
Net cash used for operating activities		(1,335,344	)		(1,663,912	)

Investing activities:
Proceeds from sale of equipment		101,000			—
Net cash provided by investing activities		101,000			—

Financing activities:
Net proceeds from sale of common stock		1,220,000			—
Proceeds from issuance of debt - related party		—			1,695,900
Net cash provided by financing activities		1,220,000			1,695,900

Net increase (decrease) in cash		(14,344	)		31,988
Cash at beginning of the period		21,936			73,495
Cash at end of the period	$	7,592		$	105,483

Supplemental disclosures of cash flow information
Interest paid	$	1,647		$	3,834
Non cash investing and financing activity
Issuance of common stock in settlement of indemnification obligation	$	—		$	61,067
Debt discount recorded in connection with issuance/amendment of warrants	$	135,449		$	—
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, 2007 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-KSB for the year ended December 31, 2007, as filed with the U.S. Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2008.

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 six months ended June 30, 2008, the Company incurred a net loss of approximately $1,968,000 and at June 30, 2008, the Company had a working capital deficit of approximately $8,474,000. Our cash balance as of June 30, 2008 was approximately $8,000 and, in combination with anticipated additional contract and license payments, are insufficient to meet our ongoing capital requirements.

From January 1, 2008 through June 30, 2008, required operating capital has been obtained through proceeds totaling $1,220,000 from equity purchases of common stock and warrants pursuant to a Stock Purchase Agreement entered into as of September 27, 2007. Between September 27, 2007 and August 5, 2008, the Company received proceeds of $2,145,000 for the purchase of 39,498,778 shares of common stock and 39,498,778 warrants pursuant to this Stock Purchase Agreement. In addition, effective January 9, 2008, the Company converted a related party Note Payable with an outstanding principal balance of $5,876,000 plus accrued interest totaling $539,000, to a new note payable agreement, with a scheduled maturity date of September 1, 2008, in the principal amount of $6,415,000.

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)

Investments

The Company determines the appropriate classification of its investments in equity securities at the time of acquisition and reevaluates such determinations at each balance-sheet date. Marketable equity securities not classified as trading, are classified as available-for-sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in shareholders’ equity. Investments, for which market prices are not available, are valued and reported at cost in periods subsequent to acquisition. No gains or losses are recognized until the securities are sold.

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 Statements 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.

Under the modified prospective approach, SFAS No. 123R applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized on an annual basis at year end during the years ended December 31, 2007 and 2006, includes compensation cost for all share-based payments granted prior to, but not yet vested on, January 1, 2006, based on the grant-date fair value estimated in accordance with the pro forma provisions of SFAS No. 123, Share-Based Payment (“SFAS No. 123”), and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Periods prior to January 1, 2006 were not restated to reflect the impact of adopting the new standard.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Fair Value Measurement

The carrying value of the Company’s cash, accounts receivable, accounts payable and short-term debt are measured at cost and approximate their respective fair values because of the short maturities of these instruments. Notes payable are recorded at cost which approximates their fair value.

Net Loss per Common Share

Basic earnings per share are 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.

Excluded from diluted loss per common share as of June 30, 2008 and 2007 were 52,782, 938 and 26,341,157 shares, respectively, issuable upon conversion of convertible preferred stock, and options and warrants to purchase 56,495,592 and 29,073,074 shares of common stock, respectively, because the effect would be anti-dilutive. For purposes of this calculation, net loss in 2008 and 2007 has been adjusted for imputed, accumulated and/or paid dividends on the preferred stock.

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.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2008 presentation.

Recent Accounting Pronouncements

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. SFAS No. 157 is effective with respect to financial assets and liabilities for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. For non-financial assets and liabilities, the effective date of SFAS No. 157 has been deferred until fiscal years beginning after November 15, 2008. Our adoption of SFAS No. 157 with respect to financial assets and liabilities on January 1, 2008 did not have a material affect on our financial statements. The Company is currently evaluating the impact of adopting SFAS No. 157 on our financial statements with respect to non-financial assets and liabilities.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115 (“SFAS No. 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. Our adoption of SFAS No. 159 on January 1, 2008 did not have a material effect on our financial statements.

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. The Company is required to adopt SFAS No. 141(R) no later than January 1, 2009. The Company has not yet determined the impact SFAS No. 141(R) may have on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 changes the accounting for non-controlling (minority) interests in consolidated financial statements including the requirements to classify non-controlling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to non-controlling interests reported as part of consolidated earnings. Additionally, SFAS No. 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. The Company must adopt SFAS No. 160 no later than January 1, 2009. The Company has not yet determined the impact SFAS No. 160 may have on its financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (“SFAS No. 161”), as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted. The Company does not expect SFAS No. 161 to have a material impact on its financial statements.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, Determination of Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 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 FAS 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Earlier adoption is not permitted. The Company does not expect FSP FAS 142-3 to have a material impact on its financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Policies (“SFAS 162”), which reorganizes the GAAP hierarchy. The purpose of the new standard is to improve financial reporting by providing a consistent framework for determining what accounting principles should be used when preparing the U.S. GAAP financial statements. The standard is effective 60 days after the SEC’s approval of the PCAOB’s amendments to AU Section 411. The adoption of SFAS 162 will not have an impact on the Company’s financial position or results of operations.

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. FSP APB 14-1 will be effective for the Company on January 1, 2009 and will require retroactive disclosure. The Company is currently evaluating the impact of adopting FSP APB 14-1 on its consolidated financial position, cash flows, and results of operations.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”), which requires entities to apply the two-class method of computing basic and diluted earnings per share for participating securities that include awards that accrue cash dividends (whether paid or unpaid) any time common shareholders receive dividends and those dividends do not need to be returned to the entity if the employee forfeits the award. FSP EITF 03-6-1 will be effective for the Company on January 1, 2009 and will require retroactive disclosure. The Company is currently evaluating the impact of adopting FSP EITF 03-6-1 on its consolidated financial position, cash flows, and results of operations.

Note 2.

Equipment and Leasehold Improvements

Equipment and leasehold improvements consist approximately of the following:

	June 30,			December 31,
	2008			2007
Laboratory equipment	$	298,000		$	1,378,000
Office equipment		60,000			220,000
Leasehold improvements		—			360,000
		358,000			1,958,000
Less: accumulated depreciation and amortization		(326,000	)		(1,830,000	)
	$	32,000		$	128,000

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

Depreciation and amortization expense was approximately $10,000 and $35,000 for the three and six months ended June 30, 2008 respectively, and approximately $25,000 and $51,000 for the three and six months ended June 30, 2007 respectively.

Note 3.

Accounts Payable and Accrued Liabilities

Accounts Payable

During the quarter ended June 30, 2008, management identified invoices totaling $98,000 which related to services that were performed for the Company in the first quarter of 2007 that had not been previously recorded. These invoices were recorded during the quarter ended June 30, 2008, and as such are included in R&D expense for three and six months ended June 30, 2008 and in accounts payable as of June 30, 2008. Management has concluded that based on certain quantitative and qualitative factors, the understatement of expense did not result in a material misstatement of the Company’s 2007 interim or annual financial statements.

Accrued Liabilities

Accrued liabilities consist approximately of the following:

	June 30,		December 31,
	2008		2007
Payroll and employee benefits	$	49,000	$	82,000
Accrued interest		332,000		585,000
Insurance premium financing		16,000		22,000
Directors fees		80,000		60,000
Other		33,000		45,000
	$	510,000	$	794,000


Note 4.	Secured Notes Payable – Related Party

On April 13, 2006, a shareholder loaned $1,000,000 (the “Loan”) to the Company ($500,000 in cash and an additional $500,000 deposited with an escrow agent as a line of credit) represented by a note (the “4/13/06 Note”) issued by the Company to the shareholder in the principal amount of $1,000,000 (the “Principal”). The Note was originally due on July 7, 2006 (the “Maturity Date”) and bore annual interest at the rate of 8% payable on the Maturity Date. It was 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. The Note and the Security Agreement were both dated April 13, 2006.

As consideration for the Loan, the Company granted a warrant (the “4/13/06 Warrant”) to the shareholder to purchase an aggregate of 500,000 shares of the Company’s common stock at an exercise price of $0.30 per share. The shareholder’s counsel acts as the escrow agent and now serves as our outside general counsel. Through December 31, 2007, the 4/13/06 Note had been amended seven times so that as of December 31, 2007, the outstanding principal balance was $5,876,000, and had a scheduled maturity date of January 10, 2008.

Effective January 9, 2008, the Company replaced the 4/13/06 Note by issuing a new note (the “1/09/08 Note”) in the principal amount of $6,415,000. This amount included the then $5,876,000 outstanding balance plus the then outstanding $539,000 of accrued interest on the 4/13/06 Note. The 1/09/08 Note bears annual interest at the rate 8%, the same as did the 4/13/06 Note, and matures on September 1, 2008. The 1/09/08 Note is secured in the same manner as was the 4/13/06 Note. As consideration for the lender agreeing to accept the 1/09/08 Note as payment for the 4/13/06 Note, the Company i) issued the lender three-year warrants to purchase an aggregate of 2,438,000 shares of the Company’s common stock at $0.061 per share, ii) lowered the exercise price of the 4/13/06 Warrant from $0.30 per share to $0.061 per share, and iii) extended the term of the 4/13/06 Warrant from April 30, 2009 to January 31, 2011.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

In accordance with Accounting Principals Board Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, the relative fair value of the warrants issued in connection with the 1/09/08 Note, estimated to be approximately $117,000, was recorded as debt discount. In addition, the change in fair value of the 4/13/06 Warrant resulting from the modification of the terms, estimated at $18,000, was also recorded as debt discount. The total debt discount recorded will be amortized as interest expense over the term of the 1/09/08 Note using the effective interest method. During the six months ended June 30, 2008, the Company recorded approximately $90,000, based on the debt discount amortization during the period, and as of June 30, 2008, the unamortized debt discount balance was approximately $45,000.

Note 5.

Notes Payable

In December 2005, in connection with a license agreement with Surgica Corporation, the Company allegedly assumed several notes payable agreements. The notes bear interest at rates ranging from 6% to 10%, and mature at various dates through January 2009. As of June 30, 2008 the entire balance of the outstanding notes payable is reflected as a current liability, as all of the notes have maturity dates prior to June 30, 2009.

Year Ending December 31,	Notes Payable Maturities
2008	$	419,000
2009		100,000
Total maturities	$	519,000

Based on what the Company believes, among other things, to be a failure of consideration relating to the license agreement, the Company believes that it has no liability for these notes. An attorney representing the note holders has made a claim against the Company by letter. The Company has rejected this claim. Until a final determination is made with respect to the disposition of the notes, the Company will continue to carry them on its balance sheet.

Note 6.

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, 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 our 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 as of September 27, 2007, 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 110% of the purchase price paid by the purchase.

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

As of November 28, 2007, the SPA was amended so that on and after that date the warrants are exercisable at 100% of the price of the shares that are purchased. 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. The Company is not subject to liquidated damages or other penalties in the event that it fails to meet the registration obligations included in the RRA.

For the six months ended June 30, 2008, the Company received aggregate proceeds of $1,220,000 for the purchase of 23,662,221 shares of common stock and 23,662,221 warrants, subject to the terms of the SPA and RRA.

Note 7.

Stock Options

The Company did not grant options during the six months ended June 30, 2008. Stock option activity for the six months ended June 30, 2008 is as follows:

	Options Outstanding			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2007		11,497,486			0.65			5.3
Issued		-			-
Cancelled		(74,339	)		(0.91	)
Exercised		-			-
Outstanding at June 30, 2008		11,423,147		$	0.65			4.9
Exercisable at June 30, 2008		11,325,248		$	0.66			4.8

During the three and six month periods ended June 30, 2008, the Company recognized approximately $3,000 and $4,300, respectively, in stock-based compensation expense. The charges in the comparable periods ended June 30, 2007 were $28,000 and $109,000, respectively. As of June 30, 2008, there was approximately $10,700 of unrecognized compensation expense related to unvested shared-based compensation arrangements which is expected to be fully recognized by the end of 2009.

Note 8.

Warrants to Purchase Common Stock

During the three and six months ended June 30, 2008, the Company granted warrants to purchase an aggregate of 9,201,813 and 23,662,221, respectively, of the Company’s common stock pursuant to the terms of a stock purchase agreement dated September 27, 2007 (See Note 6). Such warrants are exercisable at prices ranging from $0.04 to $0.07 per share and expire at various times through May 2013.

The Company also granted warrants to purchase an aggregate of 2,438,000 shares of the Company’s common stock pursuant to the terms of a note agreement dated January 9, 2008 (see Note 4). Such warrants are exercisable at a price of $0.061 per share and expire in January 2011.

In addition, the Company extended the expiration date of warrants to acquire 500,000 shares of the Company’s common stock from April 2009 to January 2011, and reduced the exercise price from $0.30 per share to $0.061 per share (see Note 4).

Protein Polymer Technologies, Inc.

Notes to Condensed Financial Statements

(unaudited)

No warrants were exercised during the three and six months ended June 30, 2008. A summary of warrant activity for the six months ended June 30, 2008 is as follows:

	Number of Warrants Outstanding and Exercisable			Weighted- Average Exercise Price
Outstanding, December 31, 2007		21,771,220		$	0.40
Granted		26,100,221		$	0.06
Exercised		—		$	—
Expired		(2,798,996	)	$	(0.19	)
Outstanding, June 30, 2008		45,072,445		$	0.18

At June 30, 2008, the weighted-average remaining contractual life of the warrants was approximately 3.4 years.

Note 9.

Commitments and Contingencies

Facilities Lease Agreement

The Company leased its office and research facilities totaling 27,000 square feet under an operating lease which expired on April 30, 2008. The Company did not renew the facilities lease and has vacated the premises. As of June 30, 2008, the Company had accrued $14,000 in repair and maintenance costs related to the termination of this facilities lease. We are currently exploring arrangements to relocate our administrative offices and outsource our laboratory and production facilities.

Through April 30, 2008, the Company subleased 6,183 square feet of its office and research facilities under a month-to-month arrangement for $13,000 per month plus utilities. As of June 30, 2008, our sub-lessee owed us approximately $200,000 for accrued unpaid rent. Due to the uncertainty regarding the collectibility of the amount owed, a reserve for the entire balance owed by the former sub-tenant has been recorded as of June 30, 2008.

Note 10.

Subsequent Events

Additional developments during the period July 1, 2008 through August 5, 2008 include the following:

The Company received proceeds of $355,000 for the purchase of 9,923,529 shares of common stock and 9,923,529 warrants pursuant to the SPA dated September 27, 2007.

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, 2007, 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-KSB for the year ended December 31, 2007. 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-KSB for the year ended December 31, 2007 and the caption “Risk Factors” in this Form 10-Q for the quarter ended June 30, 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” 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 extra-cellular 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

Contract and Licensing Revenue. Revenues from product sales for the three and six months ended June 30, 2008 were $7,000, compared to $132,000 and $268,000 respectively for contract and licensing revenue for the comparable periods in 2007. Future revenues are subject to future collaborative development and licensing agreements.

We cannot forecast with any degree of certainty which potential product lines will be subject to future collaborations or other strategic transactions, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. As a result, we cannot be certain when and to what extent we will receive cash inflows from the commercialization of product candidates or collaboration agreements, if at all.

Research and Development Expenses. Research and development expenses for the three and six months ended June 30, 2008 were $574,000 and $1,125,000 respectively, compared to $628,000 and $1,273,000, respectively, for the comparable periods in 2007. We expect further decline from 2007 as a result of significantly reduced activity levels of clinical testing and regulatory consulting costs in 2008. 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 and six months ended June 30, 2008 were $302,000 and $511,000, respectively, as compared to $352,000 and $671,000, respectively, for the comparable periods in 2007. We made significant reductions in administration expenses in the first two quarters of 2008. Several highly compensated positions were eliminated and all non-mission sensitive expenses were reviewed and either eliminated or reduced, including the cost of facilities. 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 June 30, 2008, we recorded a net loss applicable to common shareholders of $1,106,000 or $0.01 per share, as compared to a loss of $1,029,000 or $0.02 per share for the comparable period in 2007. For the six months ended June 30, 2008, we recorded a net loss applicable to common shareholders of $2,106,000 or $0.02 per share, as compared to a loss of $1,825,000 or $0.03 per share for the comparable period in 2007. The undeclared or imputed dividends in the six months ended June 30, 2008 was greater than the comparable period in 2007 as the result of a non-cash imputed dividend that resulted from repricing and extending the term of certain warrants in January 2008.

Inflation

To date, we believe that inflation and changing prices have not had a material impact on our continuing operations.

Liquidity and Capital Resources

As of June 30, 2008, we had cash totaling $8,000, as compared to $22,000 at December 31, 2007. As of June 30, 2008, we had a working capital deficit of $8,474,000 compared to working capital of $7,862,000 at December 31, 2007.

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 June 30, 2008. During the six months ended June 30, 2008, we did not purchase any capital equipment or leasehold improvements and do not anticipate that expenditures for these items will be increased significantly in 2008.

Our existing available cash as of June 30, 2008, and continuing contractual commitments, are insufficient to meet our anticipated funding requirements. 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 6 to the financial statements, the Company entered into a common stock purchase agreement (hereafter “SPA”) in September 2007 and has raised $1,790,000 as of June 30, 2008, as a result of that SPA. Pursuant to the SPA, which has been our only source of external financing since September 2007, the investors purchase shares of our common stock at the closing price of the stock on the day the investment is made. In addition, we issued a five-year warrant to each investor to purchase the same number of shares as those purchased by such investor at 110% of the price at which the shares are purchased. As of November 28, 2007, the SPA was amended so that warrants issued on and after that date are exercisable at 100% of the price at which the shares are purchased. We have also granted the investors demand and piggy-back registration rights covering the shares purchased and the sharers issuable upon exercise of the warrants. 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. This loan was outlined in previous filings and is further described in Note 4 to the financial statements. As with the Escrow Agreement relating to the Szulik Loan, the Stock Purchase Agreement provides that TAG Virgin Islands, Inc. (hereafter “TAG”), as agent for the equity investors, will advise the Board as to which of the Company’s expenses will be paid with the funds invested by these investors.

As of January 9, 2008, we replaced the Szulik Loan by issuing to Mr. Szulik a new note in the principal amount of $6,415,000. This amount included the then $5,876,000 outstanding principal balance plus the then outstanding $539,000 in accrued interest on the old note. The new note bears annual interest at the rate 8%, the same as did the old note, matures on September 1, 2008 and is secured in the same manner as was the old note. As consideration for Mr. Szulik agreeing to accept the new note, we issued him three-year warrants to purchase an aggregate of 2,438,000 shares of our common stock at $0.061 per share and lowered the exercise price of warrants to purchase 500,000 shares of our common stock that we had previously issued to him from $0.30 per share to $0.061 per share.

This funding was arranged by TAG, a registered investment advisor which advises a number of our stockholders in investment decisions, including decisions about whether to invest in our stock. These clients include Richard Adelson, Alan Farber and Kerry Kuhn, who are members of our Board of Directors, and Mr. Szulik and Redec & Associates, LLC, another of our principal stockholders. 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 as of September 27, 2007, prior to the stock purchases subject to the SPA of September 27, 2007. TAG has discretionary authority to vote or dispose of the shares of our common stock held in its client accounts and, therefore, may be deemed to be the beneficial owner of such shares in accordance with the Commission's Rules. TAG has informed us that James Tagliaferri is the natural person at TAG with such discretionary authority. TAG expressly disclaims beneficial ownership of any shares owned by its clients.

As noted above, we believe our existing available cash as of June 30, 2008 will not be sufficient to meet our anticipated capital requirements during 2008. 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. We currently owe our former chief executive officer's firm, R. I. Heller & Co., LLC, $175,000 for his services. 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.

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-KSB for the year ended December 31, 2007 (filed on May 12, 2008), Company management identified material weaknesses in our internal accounting control over financial reporting as of December 31, 2007, 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 resolve 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, 2007. During the six months ended June 30, 2008, and through the date of this Quarterly Report on Form 10-Q, we have begun to implement additional controls and procedures, as outlined in “Management’s Report on Internal Controls Over Financial Reporting” in our 2007 Annual Report on Form 10-KSB, intended to remediate the material weaknesses discussed above and are continuing to assess additional controls that may be required to remediate these weaknesses.

As of June 30, 2008, 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. Although the Company has begun to address its material weaknesses in internal control over financial reporting, we have not completed the implementation and testing of the changes in controls and procedures which we believe are necessary to conclude that the material weaknesses have been remediated. Accordingly, Company management has determined that it cannot assert that the reported material weaknesses have been effectively remediated as of June 30, 2008. 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 June 30, 2008.

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.

Other than the changes described above, there have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2008 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.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described under Item 1A – “Risk Factors” of Part 1 of our Annual Report on Form 10-KSB for the year ended December 31, 2007, which is incorporated by reference into this report. The risks described in our Annual Report have not materially changed.

You should carefully consider the risk factors discussed in our Annual Report on Form 10-KSB as well as the other information in this report before deciding whether to invest in shares of our common stock. The occurrence of any of the risks discussed in the Annual Report on Form 10-KSB or this report could harm our business, financial condition, results of operations or growth prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

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

During the six months ended June 30, 2008, we received an aggregate of $1,220,000 for the purchase of 23,662,221 common shares. In addition, between July 1, 2008 and August 5, 2008, we further received an aggregate of $355,000 for the purchase of 9,923,529 common shares. 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 5, 2008, we had used substantially all of the net proceeds which were generated from the sale of our securities pursuant to the SPA 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.

31.1		Certification of Interim 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 Interim 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 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, 2007, SEC File No. 000-19724, as filed with the Commission on May 12, 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, 2008	By:	/s/ James B. McCarthy
		James B. McCarthy
		Interim Chief Executive Officer

Date: August 19, 2008	By:	/s/ James B. McCarthy
		James B. McCarthy
		Interim Principal Financial Officer