<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 September 30, 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 November 9, 2001, 21,735,420
shares of common stock were outstanding.

Transitional Small Business Disclosure Format (check one):  Yes [_]  No  [X]

================================================================================


                                       1

<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 -
   September 30, 2001 and December 31, 2000 ..............................   3

   Condensed Statements of Operations -
   For the Three Months and Nine Months ended September 30, 2001 and 2000
       and the period July 6, 1988 (inception) to September 30, 2001 .....   4

   Condensed Statements of Cash Flows -
   For the Nine Months ended September 30, 2001 and 2000
       and the period July 6, 1988 (inception) to September 30, 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 ........................................................  14
</TABLE>



                                       2

<PAGE>

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

                            Condensed Balance Sheets

<TABLE>
<CAPTION>

                                                                 September 30,        December 31,
                                                                     2001                 2000
                                                               -------------------------------------
<S>                                                            <C>                  <C>
Assets                                                            (unaudited)
Current assets:
   Cash and cash equivalents                                   $       683,675      $       866,220
   Other current assets                                                108,867               55,180
                                                               -------------------------------------
Total current assets                                                   792,542              921,400

   Deposits                                                             73,977               71,177
   Notes receivable from officers                                      140,000              140,000
   Equipment and leasehold improvements, net                           242,098              250,257
                                                               -------------------------------------

                                                               $     1,248,617      $     1,382,834
                                                               =====================================
Liabilities and stockholders' equity

   Current liabilities:
   Accounts payable                                            $       191,340      $       206,981
   Accrued employee benefits                                           109,197               69,657
   Other accrued expenses                                               43,599               47,418
   Current portion capital lease obligations                                 -               25,088
   Deferred revenue                                                    333,333              333,333
   Deferred rent                                                        97,474               96,191
                                                               -------------------------------------
Total current liabilities                                              774,943              778,668

Long-term portion deferred revenue                                      83,333              333,334

Stockholders' equity:
   Convertible Preferred Stock, $.01 par value, 5,000,000
    shares authorized, 88,259 and 80,076 shares issued and
    outstanding at September 30, 2001 and December 31,
    2000, respectively; liquidation preference of
    $8,825,900 and $8,007,600 at September 30, 2001 and
    December 31, 2000, respectively                                  8,480,530            7,662,272

   Common stock, $.01 par value, 40,000,000 shares
    authorized, 21,735,420 and 18,910,313 shares issued and
    outstanding at September 30, 2001 and
    December 31, 2000, respectively                                    217,365              189,115

Additional paid-in capital                                          33,789,995           32,163,017
Deficit accumulated during development stage                       (42,097,549)         (39,743,572)
                                                               -------------------------------------
Total stockholders' equity                                             390,341              270,832
                                                               -------------------------------------

                                                               $     1,248,617      $     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                   Nine months ended              (inception) to
                                         September 30,                        September 30,                  Sept. 30,
                                    2001               2000               2001              2000                2001
                                  ------------------------------------------------------------------------------------------
<S>                               <C>                <C>             <C>                 <C>             <C>
Revenues:
   Contract revenue               $    283,333       $    103,333    $      550,000      $      593,240  $       6,014,681
   Interest income                      12,175             22,543            38,857              68,194          1,238,216
   Product and other income                  -                  -                38               3,011            687,367
                                  ------------------------------------------------------------------------------------------
Total revenues                         295,508            125,876           588,895             664,445          7,940,264

Expenses:
   Research and development            677,861            579,041         1,880,382           1,775,779         28,956,437
   Selling, general and
   administrative                      299,845            273,537         1,062,490           1,012,981         17,132,990
                                  ------------------------------------------------------------------------------------------
Total expenses                         977,706            852,578         2,942,872           2,788,760         46,089,427
                                  ------------------------------------------------------------------------------------------
Net loss                              (682,198)          (726,702)       (2,353,977)         (2,124,315)       (38,149,163)
Undeclared, imputed and/or paid
   dividends on preferred stock         69,980             69,220           207,659             207,659          5,724,952
                                  ------------------------------------------------------------------------------------------
Net loss applicable to common
   shareholders                   $   (752,178)      $   (795,922)   $   (2,561,636)     $   (2,331,974) $     (43,874,115)
                                  ==========================================================================================
Basic and diluted net loss per
   common share                   $      (0.03)      $      (0.04)   $        (0.12)     $        (0.13)
                                  ======================================================================
Shares used in computing basic
   and diluted net loss per
   common share                     21,735,420         18,503,655        20,749,940          17,404,729
                                  ======================================================================
</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
                                                                    Nine months ended                 (inception)
                                                                       September 30,                  to Sept. 30,
                                                                 2001                2000                 2001
                                                            ----------------------------------------------------------
<S>                                                         <C>                   <C>              <C>
Operating activities
Net loss                                                    $    (2,353,977)   $    (2,124,315)    $   (38,149,163)
Adjustments to reconcile net loss to net cash used for
   operating activities:
     Stock issued for compensation and interest                           -                  -             476,759
     Depreciation and amortization                                  107,828            119,709           2,149,806
     Write-off of purchased technology                                    -                  -             503,500
     Changes in assets and liabilities:
       Deposits                                                      (2,800)           (20,800)            (73,977)
       Notes receivable from officers                                     -                  -            (140,000)
       Other current assets                                         (53,687)            (7,763)           (108,867)
       Accounts payable                                             (15,641)          (190,749)            191,340
       Accrued employee benefits                                     39,540            (23,679)            109,197
       Other accrued expenses                                        (3,819)            26,871              43,599
     Deferred revenue                                              (250,001)           750,000             416,666
     Deferred rent                                                    1,283             15,029              97,474
                                                            ----------------------------------------------------------
 Net cash used for operating activities                          (2,531,274)        (1,455,697)        (34,483,666)

Investing activities
Purchase of technology                                                    -                  -            (570,000)
Purchase of equipment and improvements                              (99,669)           (36,154)         (1,955,796)
Purchases of short-term investments                                       -                  -         (16,161,667)
Sales of short-term investments                                           -                  -          16,161,667
                                                            ----------------------------------------------------------
Net cash provided by (used for) investing activities
                                                            $       (99,669)   $       (36,154)    $    (2,525,796)
</TABLE>

See accompanying notes.


                                       5

<PAGE>

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

                  Condensed Statements of Cash Flows, continued
<TABLE>
<CAPTION>


                                                                                           For the period
                                                                                            July 6,1988
                                                              Nine months ended            (inception) to
                                                                September 30,                 Sept. 30,
                                                           2001                2000             2001
                                                     ---------------------------------------------------------
<S>                                                  <C>                 <C>               <C>
Financing activities
Net proceeds from exercise of options and warrants,
   and sale of common stock                          $     1,255,228     $     2,354,032     $    21,163,459
Net proceeds from issuance and conversion of
   preferred stock                                         1,218,258                   -          15,508,418
Net proceeds from convertible notes and detachable
   warrants                                                        -                   -           1,068,457
Payment on capital lease obligations                         (25,088)            (59,197)           (288,770)
Payment on note payable                                            -                   -            (242,750)
Proceeds from note payable                                         -                   -             484,323
                                                     ---------------------------------------------------------
Net cash provided by financing activities                  2,448,398           2,294,835          37,693,137
                                                     ---------------------------------------------------------
Net increase (decrease) in cash and cash
   equivalents                                              (182,545)            802,984             683,675

Cash and cash equivalents at beginning of period             866,220             155,692                   -
                                                     ---------------------------------------------------------

Cash and cash equivalents at end of period           $       683,675     $       958,676       $     683,675
                                                     =========================================================

Supplemental disclosures of cash flow information
Equipment purchased by capital leases                $             -     $             -       $     288,772
Interest paid                                                  3,924               6,124             129,039
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                                                     400,000             698,800           2,512,550
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)

                               September 30, 2001



1. Basis of Presentation

The condensed financial statements of Protein Polymer Technologies, Inc. (the
"Company") for the three months and the nine months ended September 30, 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 September
30, 2001 and the results of operations for the three months and the nine months
ended September 30, 2001 and 2000. The results of operations for the three
months and the nine months ended September 30, 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 our 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, we are 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 include 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 and nine months ended
September 30, 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 effect is anti-dilutive, 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, we are not obligated to refund
payments previously received. Milestone payments are recorded as revenue when
received as they have not been refundable and we have 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 from Officer

A loan for $140,000, secured by a pledge of stock, was made to one of our
officers 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, 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.

7. Convertible Notes

During March 2001, we issued convertible notes to two current shareholders in
exchange for a total of $800,000. The notes provided for an interest rate of 7%
and both principal and interest were convertible into Series H Preferred at a
common equivalent price of $0.75 per share. The notes were converted in July
2001.

8. Series H Preferred

On July 24, 2001, we announced the closing of a private placement for $1.2
million with a small group of institutional and accredited investors of 12,182
shares of our Series H Convertible Preferred Stock and warrants to purchase an
aggregate of 304,550 shares of common stock.

Each share of Series H Preferred Stock is convertible at any time at the
election of the holder into 133 shares of common stock at a conversion price of
$0.75 per share, subject to certain anti-dilution adjustments. No underwriters
were engaged by us in connection with such issuance and, accordingly, no
underwriting discounts were paid. The offering is exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and met the requirements of Rule 506 of Regulation D promulgated under the
Securities Act. The Series H Preferred Stock, warrants and underlying common
stock have not been registered under the Securities Act and may not be offered
or sold in the United States absent registration or an applicable exemption from
registration requirements.

Each share of Series H Preferred Stock also received two common stock warrants.
One warrant is exercisable at any time for 15 shares of common stock at an
exercise price of $1.50 per share, and expires approximately 12 months after the
close of the offering; the other warrant is exercisable at any time for 10
shares of common stock at an exercise price of $2.00 per share, and expires
approximately 24 months after the close of the offering

9. Liquidity

We believe our existing available cash and cash equivalents as of September 30,
2001, plus contractual amounts receivable, is 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, clinical trials, and product marketing activities. 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.


                                       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. The company undertakes 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 September 30, 2001 had an accumulated deficit of
$ (42,098,000).

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.

                                       9

<PAGE>


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 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, SpineWave, 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.

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

Our strategy with most of our 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 21 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 provided for an interest rate of 7%
and both principal and interest were convertible into Series H Preferred at a
common equivalent price of $0.75 per share. The notes were converted into Series
H Preferred stock in July 2001 (see below).

In April 2001, we joined with Windamere Venture Partners and affiliates to form
a new orthopedic company, SpineWave, 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, SpineWave 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 SpineWave
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 SpineWave with a variety of research and development
services,

                                       10

<PAGE>

and to supply materials to SpineWave for pre-clinical and clinical testing,
and ultimately for commercial sale. If we are unable to meet the requirements
for product delivery, we agreed to make the manufacturing methods and materials
available to SpineWave as specified in a separate Escrow Agreement. SpineWave
will be responsible for product development, clinical testing, regulatory
approvals, and commercialization. We are represented on the SpineWave Board of
Directors, and have agreed to support the election of other Directors nominated
by SpineWave.

On July 24, 2001, we closed a private placement for $1.2 million with a small
group of institutional and accredited investors of 12,182 shares of the
Company's Series H Convertible Preferred Stock and warrants to purchase an
aggregate of 304,550 shares of common stock.

Each share of Series H Preferred Stock is convertible at any time at the
election of the holder into 133 shares of common stock at a conversion price of
$0.75 per share, subject to certain anti-dilution adjustments. No underwriters
were engaged by us in connection with such issuance and, accordingly, no
underwriting discounts were paid. The offering is exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and met the requirements of Rule 506 of Regulation D promulgated under the
Securities Act. The Series H Preferred Stock, warrants and underlying common
stock have not been registered under the Securities Act and may not be offered
or sold in the United States absent registration or an applicable exemption from
registration requirements.

Each share of Series H Preferred Stock also received two common stock warrants.
One warrant is exercisable at any time for 15 shares of common stock at an
exercise price of $1.50 per share, and expires approximately 12 months after the
close of the offering; the other warrant is exercisable at any time for 10
shares of common stock at an exercise price of $2.00 per share, and expires
approximately 24 months after the close of the offering.

As of September 30, 2001, we had cash and cash equivalents totaling $684,000. We
believe our available cash and cash equivalents, accounts receivable, and future
contractual research and development payments will be sufficient to meet our
anticipated capital requirements until 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

The Company received $283,000 in contract and licensing revenue for the three
months ended September 30, 2001 and $550,000 for the nine months ended September
30, 2001 as compared to $103,000 and $593,000 respectively in contract and
licensing revenue for the three months and nine months ended September 30, 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
potential incontinence product in Europe and Australia, and payments from our
affiliate, SpineWave, Inc., for R&D associated with the development of a product
for the repair of spinal disks for the treatment of lower back pain. The
decrease in contract and licensing revenue over the nine-month period primarily
reflects the one-time payment in 2000 from Sanyo Chemical Industries Ltd. for a
license to our in vitro cell culture business and existing product inventory.

Interest income was $12,000 and $39,000, respectively, for the three months and
nine months ended September 30, 2001 versus $23,000 and $68,000 respectively for
the same periods in 2000.

Research and development expenses for the three months ended September 30, 2001
were $678,000 compared to $579,000 for the same period in 2000. Research and
development expenses for the nine-month period ended September 30, 2001 were
$1,880,000 as compared to $1,776,000 for the same period in 2000. We expect, in
general, that our research and


                                       11

<PAGE>

development, human clinical testing, and manufacturing expenses will increase
over time if our incontinence and dermal products, and other products in
development, successfully progress and additional capital is obtained.

Selling, general and administrative expenses for the three months and the nine
months ended September 30, 2001 were $300,000 and $1,062,000 respectively, as
compared to $274,000 and $1,013,000 for the same periods in 2000. 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, regulatory and manufacturing efforts require additional resources
and to the extent additional capital is obtained.

For the three months ended September 30, 2001, we recorded a net loss applicable
to common shareholders of $752,000, or $0.03 per share as compared to a loss of
$796,000, or $0.04 per share for the same period in 2000. For the nine-month
period ended September 30, 2001, our net loss applicable to common shareholders
was $2,562,000, or $0.12 per share as compared to $2,332,000, or $0.13 per share
for the same period in 2000. Also included in each of the three month periods of
2001 and 2000 were $70,000 and $208,000 for each of the nine-month periods,
respectively, for undeclared dividends related to our 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, pre-clinical 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. In addition, following the tragic events of
September 11, we are being notified in advance by our various insurance carriers
to expect both changes in coverage and/or increased rates.

Liquidity and Capital Resources

As of September 30, 2001, we had cash and cash equivalents of $684,000 as
compared to $866,000 at December 31, 2000. As of September 30, 2001, we had
working capital of $18,000 as compared to $143,000 at December 31, 2000.

We had no long-term debt obligations as of September 30, 2001 or as of December
31, 2000. We had $100,000 in expenditures for capital equipment and leasehold
improvements for the nine months ending September 30, 2001, compared to $36,000
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.

We believe our existing available cash, cash equivalents and accounts
receivable, in combination with anticipated contract research payments and
revenues received from the transfer of clinical testing materials, will 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.

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<PAGE>

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 or cease our operations, and may have to sell or
license out significant portions of our technology or potential products.

                           PART II. OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits:

   Exhibit
   Number     Description
   ------     -----------
   10.37      Series H Securities Purchase Agreement

b. Reports on Form 8-K

   None.



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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  November 13, 2001                 By  /s/  J. Thomas Parmeter
           -----------------                     -------------------------------
                                                 J. Thomas Parmeter
                                                 Chairman of the Board, Chief
                                                 Executive Officer, President

     Date  November 13, 2001                 By  /s/  Janis Y. Neves
           -----------------                     -------------------------------
                                                 Janis Y. Neves
                                                 Director of Finance, Controller
                                                 and Assistant Secretary


                                       14

<PAGE>

                                  EXHIBIT INDEX

   Exhibit                                                        Sequentially
   Number     Description                                         Numbered Page
   ------     -----------                                         -------------
   10.37      Series H Securities Purchase Agreement

                                       15