<PAGE>
================================================================================

                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-QSB


(Mark One)

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

                 For the quarterly period ended March 31, 2001


[   ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

   For the transition period from ___________________ to ____________________

                         Commission file number 0-19724



                       PROTEIN POLYMER TECHNOLOGIES, INC.
       (Exact name of small business issuer as specified in its charter)


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


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

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


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act  during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes  X     No
                                                              -----      -----


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:   As of May 10, 2001, 21,569,313
shares of common stock were outstanding.

Transitional Small Business Disclosure Format (check one):    Yes    No  X
                                                                 ---    ---

================================================================================
<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.

                                  FORM 10-QSB

                                     INDEX



<TABLE>
<CAPTION>
                                                                                                     Page No.
                                                                                                     --------
<S>                                                                                                 <C>

  PART I.   FINANCIAL INFORMATION

  Item 1.    Financial Statements (unaudited)

     Condensed Balance Sheets -
      March 31, 2001 and December 31, 2000......................................................        3

     Condensed Statements of Operations -
      For the Three Months ended March 31, 2001 and 2000
      and the period July 6, 1988 (inception) to March 31, 2001.................................        4

     Condensed Statements of Cash Flows -
      For the Three Months ended March 31, 2001 and 2000
      and the period July 6, 1988 (inception) to March 31, 2001.................................        5

      Notes to Condensed Financial Statements...................................................        7

  Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations.......................................        9

  PART II.  OTHER INFORMATION

  Item 6.  Exhibits and Reports on Form 8-K.....................................................       15

           Signature............................................................................       16
</TABLE>
<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                            Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                           March 31,        December 31,
                                                                             2001              2000
                                                                     ------------------------------------
<S>                                                                    <C>                <C>
Assets
Current assets:
 Cash and cash equivalents                                                 $  2,021,899      $    866,220
 Other current assets                                                            54,022            55,180
                                                                           ------------------------------
Total current assets                                                          2,075,921           921,400

 Deposits                                                                        73,977            71,177
 Notes receivable from officers                                                 140,000           140,000
 Equipment and leasehold improvements, net                                      215,790           250,257
                                                                           ------------------------------

                                                                           $  2,505,688      $  1,382,834
                                                                           ==============================

Liabilities and stockholders' equity
Current liabilities:
 Accounts payable                                                          $    244,880      $    206,981
 Notes payable                                                                  800,000                 -
 Accrued employee benefits                                                       86,847            69,657
 Other accrued expenses                                                          37,733            47,418
 Current portion capital lease obligations                                        4,117            25,088
 Deferred revenue                                                               333,333           333,333
 Deferred rent                                                                   98,440            96,191
                                                                           ------------------------------
Total current liabilities                                                     1,605,350           778,668
Long-term portion deferred revenue                                              250,000           333,334
Long-term portion capital lease obligations                                           -                 -

Stockholders' equity:
 Convertible Preferred Stock, $.01 par value, 5,000,000 shares
  authorized, 80,076 shares issued and outstanding at March 31,
  2001 and December 31, 2000 - liquidation preference of
  $8,007,600 at March 31, 2001 and December 31, 2000                          7,662,272         7,662,272
 Common stock, $.01 par value, 40,000,000 shares authorized,
  21,409,313 and 18,910,313 shares issued and outstanding at
  March 31, 2001 and December 31, 2000, respectively                            214,105           189,115
 Additional paid-in capital                                                  33,388,647        32,163,017
 Deficit accumulated during development stage                               (40,614,686)      (39,743,572)
                                                                           ------------------------------
Total stockholders' equity                                                      650,338           270,832
                                                                           ------------------------------
                                                                           $  2,505,688      $  1,382,834
                                                                           ==============================
</TABLE>
See accompanying notes.

                                       3
<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                       Condensed Statements of Operations
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                         For the period
                                                                                          July 6, 1988
                                                          Three months ended             (inception) to
                                                              March 31,                     March 31,
                                                         2001                2000              2001
                                              ----------------------------------------------------------
<S>                                             <C>                 <C>                 <C>
Revenues:
 Contract and licensing revenue                       $    83,333         $   386,574       $  5,548,014
 Interest income                                            8,230              13,809          1,207,589
 Product and other income                                      38               2,866            687,367
                                                      --------------------------------------------------
Total revenues                                             91,601             403,249          7,442,970

Expenses:
 Research and development                                 604,902             554,187         27,680,957
 Selling, general and administrative                      357,813             327,532         16,428,314
                                                      --------------------------------------------------
Total expenses                                            962,715             881,719         44,109,271
                                                      --------------------------------------------------
Net loss                                                 (871,114)           (478,470)       (36,666,301)

Undeclared dividends on preferred stock                    68,459              69,220          5,585,752
                                                      --------------------------------------------------

Net loss applicable to common shareholders            $  (939,573)        $  (547,690)      $(42,252,053)
                                                      ==================================================

Net loss per common share - basic and diluted         $     (0.05)        $     (0.04)
                                                      ===============================
Shares used in computing net loss per common
 share - basic and diluted                             18,914,202          15,320,744
                                                      ===============================
</TABLE>


See accompanying notes.

                                       4
<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                       Condensed Statements of Cash Flows
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                       For the period
                                                                                        July 6, 1988
                                                         Three months ended            (inception) to
                                                             March 31,                    March 31,
                                                        2001               2000             2001
                                              --------------------------------------------------------
<S>                                             <C>                <C>                <C>
Operating activities
Net loss                                               $(871,114)         $(478,470)      $(36,672,220)
Adjustments to reconcile net loss to net cash
 used for operating activities:
  Stock issued for compensation and interest                   -                  -            476,759
  Depreciation and amortization                           34,467             43,963          2,082,365
  Write-off of purchased technology                            -                  -            503,500
  Changes in assets and liabilities:
   Deposits                                               (2,800)                 -            (73,977)
   Notes receivable from officers                              -                  -           (140,000)
   Other current assets                                    1,158           (545,093)           (54,022)
   Accounts payable                                       37,899            (95,890)           244,880
   Accrued employee benefits                              17,190            (23,693)            86,847
   Other accrued expenses                                 (9,685)            44,660             37,733
   Deferred revenue                                      (83,334)           916,667            583,333
   Deferred rent                                           2,249              6,780             98,440
                                                    --------------------------------------------------
Net cash used for operating activities                  (873,970)          (131,076)       (32,826,362)
Investing activities
Purchase of technology                                         -                  -           (570,000)
Purchase of equipment and improvements                         -            (23,951)        (1,856,127)
Purchases of short-term investments                            -                  -        (16,161,667)
Sales of short-term investments                                -                  -         16,161,667
                                                    --------------------------------------------------
Net cash used for investing activities
                                                       $       -          $ (23,951)      $ (2,426,127)
                                                    --------------------------------------------------

</TABLE>

                                       5
<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                 Condensed Statements of Cash Flows, continued
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                    For the period
                                                                                     July 6, 1988
                                                      Three months ended            (inception) to
                                                          March 31,                    March 31,
                                                   2001               2000               2001
                                             ------------------------------------------------------
<S>                                          <C>                <C>                <C>
Financing activities
Net proceeds from exercise of options and
 warrants, and sale of common stock                $1,250,620         $2,173,299        $21,158,851
Net proceeds from issuance of preferred
 stock                                                      -                  -         14,290,160
Net proceeds from convertible notes and
 detachable warrants                                        -                  -          1,068,457
Payments on capital lease obligations                 (20,971)           (20,071)          (284,653)
Payment on notes payable                                    -                  -           (242,750)
Proceeds from note payable                            800,000                  -          1,284,323
                                             ------------------------------------------------------
Net cash provided by financing activities           2,029,649          2,153,228         37,274,388
                                             ------------------------------------------------------
Net increase in cash and cash equivalents           1,155,679          1,998,201          2,021,899
Cash and cash equivalents at beginning of
 period                                               866,220            155,692                  -
                                             ------------------------------------------------------

Cash and cash equivalents at end of period         $2,021,899         $2,153,893        $ 2,021,899
                                             ======================================================

Supplemental disclosures of cash flow
 information
Equipment purchased by capital leases              $        -          $       -        $   288,772
Interest paid                                             449              2,731            125,564
Imputed dividend on Series E stock                          -                  -          3,266,250
Conversion of Series D preferred stock to
 common stock                                               -                  -          2,142,332
Conversion of Series E preferred stock to
 common stock                                               -            698,800          2,312,550
Series D stock issued for Series C stock                    -                  -          2,073,925
Series C dividends paid with Series D stock                 -                  -            253,875
Series D dividends paid with common stock                   -                  -            422,341
</TABLE>


See accompanying notes.

                                       6
<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                    Notes to Condensed Financial Statements
                                  (unaudited)



  1.  Basis of Presentation

  The condensed financial statements of Protein Polymer Technologies, Inc. (the
  "Company") for the three months ended March 31, 2001 and 2000 are unaudited.
  These financial statements reflect all adjustments, consisting of only normal
  recurring adjustments which, in the opinion of management, are necessary to
  state fairly the financial position at March 31, 2001 and the results of
  operations for the three months ended March 31, 2001 and 2000. The results of
  operations for the three months ended March 31, 2001 are not necessarily
  indicative of the results to be expected for the year ended December 31, 2001.
  For more complete financial information, these financial statements and the
  notes thereto should be read in conjunction with the audited financial
  statements included in the Company's Annual Report on Form 10-KSB for the year
  ended December 31, 2000, filed with the Securities and Exchange Commission.

  2.  Net Loss Per Share

  Net loss per share is computed using the weighted average number of common
  shares outstanding during the period. The loss figures used for this
  calculation recognize accumulated dividends on the Company's Series D and
  Series F Preferred Stock. Such dividends are payable when declared by the
  Board of Directors in cash or common stock.

  3.  Basic and Diluted Loss Per Share

  In accordance with FAS No. 128, the Company is required to present basic and
  diluted earnings per share if applicable. Basic and diluted earnings per share
  are determined based on the weighted average number of shares outstanding
  during the period. Diluted earnings per share also includes potentially
  dilutive securities such as options and warrants outstanding and securities
  convertible into common stock.

  Both the basic and diluted loss per share for the three months ended March 31,
  2001 and 2000 are based on the weighted average number of shares of common
  stock outstanding during the periods. Since potentially dilutive securities
  have not been included in the calculation of the diluted loss per share for
  both periods as their affect is antidilutive, there is no difference between
  the basic and diluted loss per share calculations.

  4.  Revenue and Expense Recognition

  License fees and research and development contract revenues are recorded as
  earned based on the performance requirements of the contracts. If the research
  and development activities are not successful, the Company is not obligated to
  refund payments previously received. Milestone payments are recorded as
  revenue when received as they have not been refundable and the Company has no
  future performance obligations. Payments received in advance of amounts earned
  are recorded as deferred revenue. Research and development costs are expensed
  as incurred.

                                       7
<PAGE>

  5.  Note Receivable with Officer

  A loan for $140,000, secured by a pledge of stock, was made to an officer of
  the Company on April 16, 1997, solely to meet tax obligations arising from the
  exercise of a stock option. Interest accrues at the annual rate of 8% on the
  unpaid principal balance. In July 1999, the loan term was extended until April
  2005.

  6.  Exercise and Exchange of Series G Warrants

  During March 2001, certain holders of warrants issued in connection with the
  sale of Series G Preferred Stock exercised their warrants to purchase common
  stock, which were due to expire in February, 2001, but which had been extended
  by the Board of Directors until February 2002. The original exercise price was
  $1.50 per share. As an inducement to exercise the warrant early, the Company
  offered to reduce the exercise price to $0.50 and offer each holder a new one
  year warrant for a similar number of shares at an exercise price of $1.00 per
  share. As a result the Company raised $1,246,000 (less expenses). The newly
  issued warrants will expire on the last day of February 2002.

  7. Convertible Notes

  During March 2001, the Company issued convertible notes to two current
  shareholders in exchange for a total of $800,000. The notes bear an interest
  rate of 7% and both principal and interest are convertible into stock, either
  a Series H Preferred at a common equivalent price of not less than $0.50 nor
  greater then $2.00 per share, or if the Company fails to close a Series H
  Preferred Stock before August 31, 2001, then into common stock at a price of
  $0.50 per share.

  8.  Liquidity

  The Company believes its existing available cash and cash equivalents as of
  March 31, 2001, plus contractual amounts receivable, is sufficient to meet its
  anticipated capital requirements until January 2002. Substantial additional
  capital resources will be required to fund continuing expenditures related to
  the Company's research, development, clinical trials, and product marketing
  activities. If adequate funds are not available, the Company will be required
  to significantly curtail its operating plans and may have to sell or license
  out significant portions of the Company's technology or potential products.

                                       8
<PAGE>

  Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS

  Forward Looking Statements

  Certain statements contained or incorporated by reference in this Quarterly
  Report on Form 10-QSB constitute "forward-looking statements" within the
  meaning of the Private Securities Litigation Reform Act of 1995. Such forward-
  looking statements involve known and unknown risks, uncertainties and other
  factors which may cause actual results, performance or achievements of the
  company, or industry results, to be materially different from any future
  results, performance or achievements expressed or implied by forward-looking
  statements.  Such risks and uncertainties include, among others, history of
  operating losses, raising adequate capital for continuing operations, early
  stage of product development, scientific and technical uncertainties,
  competitive products and approaches, reliance upon collaborative partnership
  agreements and funding, regulatory testing and approvals, patent protection
  uncertainties and manufacturing scale-up and required qualifications. While
  these statements represent management's current judgment and expectations for
  the company, such risks and uncertainties could cause actual results to differ
  materially from any future results suggested herein. We undertake no
  obligation to release publicly the results of any revisions to these forward-
  looking statements to reflect events or circumstances arising after the date
  hereof.

  General Overview

  Incorporated in 1988, Protein Polymer Technologies, Inc., a Delaware
  corporation with corporate offices and laboratories located in San Diego,
  California, is a development-stage biotechnology company engaged in the
  research, development, production and clinical testing of medical products
  based on its proprietary protein-based biomaterials technology. Since 1992, we
  have focused primarily on developing materials technology and products to be
  used in the surgical repair, augmentation, and regeneration of tissue:
  surgical adhesives and sealants; soft tissue augmentation products; matrices
  for wound healing and tissue engineering; drug delivery formulations; and
  surgical adhesion barriers. We have been unprofitable to date, and as of March
  31, 2001 had an accumulated deficit of $40,614,686.

  Protein polymers are synthetic proteins created "from scratch" through
  chemical DNA (gene) synthesis, and produced in quantity by traditional large-
  scale microbial fermentation methods. As a result, protein polymers contain no
  human or animal components that could potentially transmit or cause disease.
  Due to their synthetic design, protein polymers are capable of combining the
  biological functionality of natural proteins with the chemical functionality
  and exceptional physical properties of synthetic polymers. A common goal is to
  develop materials that beneficially interact with human cells, enabling cell
  growth and the regeneration of tissues with improved outcomes as compared to
  current products and practices.

  Our product candidates for surgical repair, augmentation and regeneration of
  human tissues are in various stages of research and development. The more
  advanced programs are bulking agents for soft tissue augmentation,
  particularly for use in urethral tissue for the treatment of female stress
  incontinence and in dermal tissue for cosmetic and reconstructive procedures.
  We currently are devoting the majority of our resources to the development and
  registration of these products.

  Because of our technology's breadth of commercial opportunity, we are pursuing
  multiple routes for commercial development. Currently, we independently are
  developing the incontinence and the dermal augmentation products, which share
  similar technology and product characteristics. We have established a
  comprehensive license and development agreement with Genencor

                                       9
<PAGE>

  International for the use of our biomaterials and technology to develop,
  manufacture and commercialize products for industrial markets. Genencor
  International is one of the world's largest manufacturers of industrial
  enzymes and other biologically derived products. Through this arrangement, we
  will receive development payments, and eventually royalties on the sale of
  products. For development and commercialization of our spinal disc repair
  product, we have joined with Windamere Venture Partners to establish a new
  company, Spine Wave, Inc., that will provide us with both near term research
  and development support and eventually royalties on the sale of licensed
  products. Except for the industrial products, we have retained manufacturing
  rights.

  We began studies to identify our most promising biomaterial formulations for
  use in soft tissue augmentation products in 1996. We devoted increased
  resources to the program through 1997 and 1998, and with promising preclinical
  test results, we focused on preparations for human clinical testing in 1999.

  In December 1999, we initiated human clinical testing of our urethral bulking
  agent for the treatment of female stress urinary incontinence. This pilot
  clinical study is ongoing. The Investigational Device Exemption ("IDE")
  approved by the U.S. Food and Drug Administration ("FDA") allows us to test
  the safety and effectiveness of the incontinence product in women over the age
  of 40 who have become incontinent due to the shifting of their bladder or the
  weakening of the muscle at its base that controls the flow of urine, or both
  problems combined.

  We estimate that more than 2.5 million women begin to experience stress
  urinary incontinence in the United States each year. In most untreated cases,
  the problem becomes progressively more pronounced. Due to limited efficacy or
  invasiveness of current treatments, only a small proportion of the women
  experiencing stress urinary incontinence are clinically treated, relying
  instead on pads and plugs and the like that only address the symptoms. In
  contrast, our product is injected, typically in an out patient procedure, into
  urethral tissue at the base of the bladder forming a solid implant that
  provides support to the muscles controlling the flow of urine. We believe that
  our product, if approved, will prove to be easy for the physician to use,
  offer enduring effectiveness, and avoid most of the other limitations of
  urethral bulking products on the market or in development.

  In January 2000, we established a strategic alliance with Femcare, Ltd.
  ("Femcare") for the commercialization of the incontinence product in Europe
  and Australia. In the agreement, Femcare is responsible for clinical testing,
  regulatory approval, and product sales and marketing within these territories,
  and we are responsible for product manufacturing. In April 2001, Femcare
  received approval from the United Kingdom Medical Device Authority to begin
  clinical testing of the incontinence product with trials at several UK sites
  this summer. Contingent on successful clinical trials, commercialization of
  the product in Europe is expected to begin more than a year before approval
  for marketing the product in the United States could be obtained.

  The soft tissue augmentation materials and technology underlying the
  incontinence product have the potential to be effective and desirable in a
  number of other clinical applications. In November 2000, the FDA approved our
  IDE to begin human clinical testing of a tissue augmentation product for use
  in cosmetic and reconstructive surgery applications. The product is injected
  into or under the skin for the correction of contour deficiencies (facial
  lines, wrinkles, scars, etc.) caused by aging or disease. We initiated our
  pilot clinical study for this application in April 2001.

  We estimate that approximately 350,000 cosmetic tissue augmentation procedures
  using injected materials (e.g. collagen, fat) were performed in the U.S in
  1998, having grown over 20% compared to 1996. With a product demonstrating
  greater durability than currently available materials, we believe the number
  of procedures could grow dramatically.

                                       10
<PAGE>

  Between 1994 and 1997, our efforts were focused predominantly on the
  development of surgical adhesive and sealant technology. As part of this
  effort, we targeted the establishment of a strategic alliance with a market
  leader in the field of surgical wound closure products which led to the
  execution of comprehensive license, supply and development agreements in
  September 1995, with Ethicon, Inc. ("Ethicon"), a subsidiary of the Johnson &
  Johnson Company ("J&J"). Ethicon elected to terminate these agreements in
  December 1997.

  We have demonstrated both the adhesive performance and the biocompatibility of
  our product formulations in animal models, including the resorption of the
  adhesive matrix in conjunction with the progression of wound healing. We are
  committed to the commercial development of our adhesive and sealant
  technology. Subsequent to the termination of the Ethicon agreement, we have
  worked to determine the most significant market and product opportunities for
  its use.

  In April 2001, we joined with Windamere Venture Partners and affiliates to
  form a new orthopedic company, Spine Wave, Inc., to develop and commercialize
  an injectable protein-based formulation for the repair of spinal discs damaged
  either by injury or aging. Based on Protein Polymer's proprietary tissue
  adhesive technology, the product under development has potential to be an
  effective outpatient surgical treatment for chronic low back pain.

  As a result of the agreements we executed, Spine Wave has acquired a license
  to Protein Polymer's technology for use in spinal and other defined orthopedic
  applications. We received approximately 33% of the founding stock in Spine
  Wave and will receive royalties on the sale or sublicensing of licensed
  products. In addition to the License Agreement, we agreed in a separate Supply
  and Services Agreement to provide Spine Wave with a variety of research and
  development services, and to supply materials to Spine Wave for preclinical
  and clinical testing, and ultimately for commercial sale. If unable to meet
  the requirements for product delivery, we agreed to make the manufacturing
  methods and materials available to Spine Wave as specified in a separate
  Escrow agreement. Spine Wave will be responsible for product development,
  clinical testing, regulatory approvals, and commercialization. We will be
  represented on the Spine Wave Board of Directors, and have agreed to support
  the election of other Directors nominated by Spine Wave.

  Low back pain is the leading cause for healthcare expenditures in the United
  States and the fastest growing major segment of the orthopedic industry with a
  current market of $2.1 billion in revenues and a growth rate of more than 25%
  annually, according to a February 2000 Viscogliosi Bros., LLC, Spine Industry
  Analysis Series report. The leading surgical treatments for spine include
  spinal fusions, discectomies, and laminectomies, but we expect the market for
  disc replacement and nucleus repair to grow more rapidly than other treatments
  as new products are approved over the next five years. Within the overall
  spine market, we estimate that the potential market for treatment or
  replacement of spinal discs will surpass $1 billion by 2007.

  In December 2000, we signed a broad-based, worldwide exclusive license
  agreement with Genencor International, Inc. ("Genencor") enabling Genencor to
  potentially develop a wide variety of new products for industrial markets. As
  a result of the agreement, Genencor can use our patented protein polymer
  design and production technology, in combination with Genencor's extensive
  gene expression, protein design, and large-scale manufacturing technology, to
  design and develop new products with improved performance properties for
  defined industrial fields. We retain all rights to the technology for use in
  medical products. In return for the licensed rights, Genencor paid to us an
  up-front license fee of $750,000, and will pay royalties on the sale of
  products commercialized by Genencor under the agreement, if any. In addition,
  we may receive up to $5 million in milestone payments associated with the
  achievement of various product development milestones. We may provide certain
  funded research and development

                                       11
<PAGE>

  services to Genencor if negotiated in a separate agreement at a later date.
  Genencor received warrants to acquire up to $1 million of our common stock.

  To the extent sufficient resources are available, the Company continues to
  research the use of its protein polymers for other tissue repair and medical
  device applications, principally for use in tissue engineering matrices and
  drug delivery devices.

  The Company's strategy with most of its programs is to enter into
  collaborative development agreements with product marketing and distribution
  companies. Although these relationships, to the extent any are consummated,
  may provide significant near-term revenues through up-front licensing fees,
  research and development reimbursements and milestone payments, the Company
  expects to continue incurring operating losses for the next several years.

  We are aggressively pursuing domestic and international patent protection for
  our technology, making claim to an extensive range of recombinantly prepared
  structural and functional proteins, methods for preparing synthetic repetitive
  DNA, methods for the production and purification of protein polymers, end-use
  products incorporating such materials and methods for their use. To date, the
  United States Patent and Trademark Office ("USPTO") has issued 20 patents to
  us. In addition, we have filed corresponding patent applications in other
  relevant commercial jurisdictions.

  During March 2001, certain holders of warrants, issued in connection with the
  sale of Series G Preferred Stock, exercised their warrants to purchase common
  stock which were due to expire in February, 2001, but which had been extended
  by the Board of Directors until February 2002. The original exercise price
  was $1.50 per share. As an inducement to exercise the warrant early, we
  offered to reduce the exercise price to $0.50 and offer each holder a new one
  year warrant for a similar number of shares at an exercise price of $1.00 per
  share. As a result we raised $1,246,000 (less expenses). The newly issued
  warrants will expire on the last day of February 2002.

  During March 2001, we issued convertible notes to two current shareholders in
  exchange for a total of $800,000. The notes bear an interest rate of 7% and
  both principal and interest are convertible into stock, either a Series H
  Preferred at a common equivalent price of not less than $0.50 nor greater then
  $2.00 per share, or if we fail to close a Series H Preferred Stock before
  August 31, 2001, then into common stock at a price of $0.50 per share.

  As of March 31, 2001, we had cash and cash equivalents totaling $2,022,000. We
  believe our available cash and cash equivalents and future contractual
  research and development payments will be sufficient to meet our anticipated
  capital requirements through January 2002. We will continue to attempt to
  raise additional funds for continuing operations through private or public
  offerings and collaborative agreements. See "Liquidity and Capital Resources"
  below for additional information and a description of the associated risks.

  Results of Operations

  We received $83,000 in contract and licensing revenue for the three months
  ended March 31, 2001 as compared to $387,000 for the three months ended March
  31, 2000. The contract and licensing revenue primarily represents the
  amortized portion of an up front license payment of $1 million (being
  recognized ratably over a period of three years) from Femcare Ltd. for the
  commercial rights to our incontinence product in Europe and Australia. The
  decrease in contract and licensing revenue primarily reflects the one-time
  payment in 2000 from Sanyo Chemical Industries Ltd. for the comprehensive
  license to our in vitro cell culture business and existing product inventory.

                                       12
<PAGE>

  Interest income was $8,000 for the three months ended March 31, 2001 versus
  $14,000 for the same period in 2000.

  Research and development expenses for the three months ended March 31, 2001
  were $605,000, compared to $554,000 for the same period in 2000, an 11%
  increase. The increase was primarily attributable to our soft tissue
  augmentation program, including clinical testing and regulatory expenses for
  both the incontinence and the dermal products. We expect, in general, that our
  research and development, human clinical testing, and manufacturing expenses
  will increase over time if our incontinence products and other products in
  development successfully progress and additional capital is obtained.

  Selling, general and administrative expenses for the three months ended March
  31, 2001 were $358,000, as compared to $328,000 for the same period in 2000, a
  9% increase. This increase was due to increases in legal and other
  professional services primarily related to Securities and Exchange Commission
  filings and investor relations expenses. We expect that our selling, general
  and administrative expenses will remain largely unchanged in the near term,
  but may increase in the future as support for our research and development and
  manufacturing efforts require additional resources and to the extent
  additional capital is obtained.

  For the three months ended March 31, 2001, we recorded a net loss applicable
  to common shareholders of $940,000, or $0.05 per share compared to a loss of
  $548,000, or $0.04 per share for the same period in 2000. Also included in
  each of the three month periods of 2001 and 2000 was $68,000 and $69,000
  respectively for undeclared dividends related to the Company's preferred
  stock.

  In general, there can be significant fluctuation in revenue from quarter to
  quarter due to variability in outside contract and licensing payments. In
  general, we expect to incur increasing operating losses in the future (to the
  extent additional capital is obtained), due primarily to increases in our soft
  tissue augmentation program's development, manufacturing and business
  development activities. Our results depend on our ability to establish
  strategic alliances and generate contract revenues, increased research,
  development and manufacturing efforts, preclinical and clinical product
  testing and commercialization expenditures, expenses incurred for regulatory
  compliance and patent prosecution, and other factors.

  To date we believe that inflation and changing prices have not had a material
  effect on our continuing operations. However, the sharp rise in utility costs
  may have an impact in the future

  Liquidity and Capital Resources

  As of March 31, 2001, we had cash and cash equivalents of $2,022,000 as
  compared to $866,000 at December 31, 2000. As of March 31, 2001, we had
  working capital of $471,000 as compared to $143,000 at December 31, 2000. The
  difference is due primarily to the receipt in March, 2001 of $1,246,000 from
  the exercise of common stock warrants granted in association with the Series G
  Convertible Preferred Stock, and from the issuance of convertible notes.

  We had no long-term debt obligations as of March 31, 2001 or as of December
  31, 2000. For the three months ending March 31, 2001, we had no expenditures
  for capital equipment and leasehold improvements, compared to $24,000 for the
  same period last year. We are expecting to increase our capital expenditures
  in the next few quarters (to the extent additional capital is obtained), as we
  improve existing space to expand capacity to meet materials manufacturing
  requirements for clinical testing. We may also enter into capital lease
  arrangements if available at appropriate rates and terms.

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<PAGE>

  We believe our existing available cash and cash equivalents, in combination
  with anticipated contract research payments and revenues received from the
  transfer of clinical testing materials, will be sufficient to meet our
  anticipated capital requirements until January 2002. Substantial additional
  capital resources will be required to fund continuing expenditures related to
  our research, development, manufacturing and business development activities.
  We believe there may be a number of alternatives to meeting the continuing
  capital requirements of our operations, including additional collaborative
  agreements and public or private financings. We are currently in discussions
  at various stages with several potential collaborative partners that, based on
  the results of various in vitro  and in vivo  product performance evaluations,
  could result in generating revenues in the form of license fees, milestone
  payments or research and development reimbursements. However, there can be no
  assurance that any of these fundings will be consummated in the necessary time
  frames needed for continuing operations or on terms favorable to us. If
  adequate funds are not available, we will be required to significantly curtail
  our operating plans and may have to sell or license out significant portions
  of our technology or potential products.

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<PAGE>

                          PART II.  OTHER INFORMATION



  Item 6.  EXHIBITS AND REPORTS ON FORM 8-K


a.   Exhibits:

     Exhibit
     Number  Description
     ------  -----------

     None.


  b. Reports on Form 8-K

     The Current Report on Form 8-K filed with the Securities and Exchange
     Commission on April 27, 2001.

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<PAGE>

                                   SIGNATURE


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


                            PROTEIN POLYMER TECHNOLOGIES, INC.



  Date:  May 14, 2001       By  /s/  J. Thomas Parmeter
         ------------           -------------------------------
                                 J. Thomas Parmeter
                                 Chairman of the Board, Chief
                                 Executive Officer, President


  Date:  May 14, 2001       By  /s/  Janis Y. Neves
         ------------           -------------------
                                 Janis Y. Neves
                                 Director of Finance, Controller
                                 and Assistant Secretary

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