<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 June 30, 2000

    [_] 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
    incorporation or organization)                       Identification No.)

                 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 August 11, 2000, 18,467,071
shares of common stock were outstanding.

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

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<PAGE>

                       PROTEIN POLYMER TECHNOLOGIES, INC.

                                   FORM 10-QSB

                                      INDEX

                                                                        Page No.
                                                                        --------

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements (unaudited)

          Condensed Balance Sheets -
           June 30, 2000 and December 31, 1999........................... 3

          Condensed Statements of Operations -
           For the Three Months and Six Months ended June 30, 2000
            and 1999 and the period July 6, 1988 (inception) to
             June 30, 2000............................................... 4

          Condensed Statements of Cash Flows -
           For the Six Months ended June 30, 2000 and 1999
            and the period July 6, 1988 (inception) to June 30, 2000..... 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.............................. 14

          Signature..................................................... 15

                                       2
<PAGE>

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

                            Condensed Balance Sheets
<TABLE>
<CAPTION>

                                                         June 30,     December 31,
                                                           2000           1999
                                                      ------------    ------------
                                                       (unaudited)
<S>                                                   <C>             <C>
Assets
Current assets:
   Cash and cash equivalents ......................   $  1,758,714    $    155,692
   Other current assets ...........................         50,328          49,266
                                                      ------------    ------------
Total current assets ..............................      1,809,042         204,958

   Deposits .......................................         36,977          36,177
   Notes receivable from officers .................        140,000         140,000
   Equipment and leasehold improvements, net ......        304,523         360,005
                                                      ------------    ------------
                                                      $  2,290,542    $    741,140
                                                      ============    ============
Liabilities and stockholders' equity
   Current liabilities:
   Accounts payable ...............................   $    193,150    $    385,932
   Accrued employee benefits ......................         62,401          84,335
   Other accrued expenses .........................         63,294          17,118
   Current portion capital lease obligations ......         65,320          79,593
   Deferred revenue ...............................        333,333            --
   Deferred rent ..................................        107,408          95,973
                                                      ------------    ------------
Total current liabilities .........................        824,906         662,951

Long-term portion deferred revenue ................        500,000            --
Long-term portion capital lease obligations .......           --            25,088

Stockholders' equity:
Convertible Preferred Stock, $.01 par value,
   5,000,000 shares authorized, 84,077  and 91,065
   shares issued and outstanding at June 30, 2000
   and December 31, 1999, respectively; liquidation
   preference - $8,407,700 at June 30, 2000 .......      8,062,272       8,761,072

Common stock, $.01 par value, 40,000,000 shares
   authorized,18,378,010 and 13,443,510 shares
   issued and outstanding at June 30, 2000 and
   December 31, 1999, respectively ................        183,792         134,447
Additional paid-in capital ........................     31,362,679      28,403,077
Deficit accumulated during development stage ......    (38,643,107)    (37,245,495)
                                                      ------------    ------------
Total stockholders' equity ........................        965,636          53,101
                                                      ------------    ------------
                                                      $  2,290,542    $    741,140
                                                      ============    ============
</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              Six months ended          (inception)
                                             June 30,                       June 30,              to June 30,
                                      2000             1999           2000            1999          2000
                                    ------------    ------------    ------------   -------------   ------------
<S>                                 <C>             <C>             <C>            <C>             <C>
Revenues:
   Contract revenue .............   $    103,333    $       --      $    489,907   $        --     $  4,847,192
   Interest income ..............         31,842           6,556          45,651          19,559      1,165,923
   Product and other income .....            145          13,868           3,012          36,516        687,329
                                    ------------    ------------    ------------   -------------   ------------

Total revenues ..................        135,320          20,424         538,570          56,075      6,700,444

Expenses:
   Research and development......        642,551         746,126       1,196,738       1,460,257     25,950,819
   Selling, general and
   administrative ...............        411,911         445,620         739,444         873,239     15,444,347
                                    ------------    ------------    ------------   -------------   ------------
Total expenses ..................      1,054,462       1,191,746       1,936,182       2,333,496     41,395,166
                                    ------------    ------------    ------------   -------------   ------------

Net loss ........................       (919,142)     (1,171,322)     (1,397,612)     (2,277,421)   (34,694,722)
Undeclared, imputed and/or paid
   dividends on preferred stock..         69,220          69,220         137,678         137,678      5,377,332
                                    ------------    ------------    ------------   -------------   ------------

Net loss applicable to common
   shareholders .................   $  (988,362)    $ (1,240,542)   $ (1,535,290)  $  (2,415,099)  $(40,072,054)
                                    ===========     ============    ============   =============   ============


Basic and diluted net loss per
   common share .................   $      (0.05)   $      (0.10)   $      (0.09)  $       (0.21)
                                    ============    ============    ============   =============

Shares used in computing basic
   and diluted net loss per
   common share .................     18,377,713      12,505,778      16,849,228      11,727,586
                                    ============    ============    ============   =============

</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
                                                       Six months ended        (inception) to
                                                           June 30,               June 30,
                                                     2000            1999           2000
                                                  -----------    -----------    ------------
<S>                                               <C>            <C>            <C>
Operating activities
Net loss ......................................   $(1,397,612)   $(2,277,421)   $(34,700,641)
Adjustments to reconcile net loss to net
   cash used for operating activities:
     Stock issued for compensation and interest       112,149         18,000         243,665
     Depreciation and amortization ............        85,600        156,023       1,978,437
     Write-off of purchased technology ........          --             --           503,500
     Deferred revenue .........................       833,333           --           833,333
     Deferred rent ............................        11,435           --           107,408
     Changes in assets and liabilities:
       Deposits ...............................          (800)          (800)        (36,977)
       Notes receivable from officers .........          --            1,000        (140,000)
       Other current assets ...................        (1,062)         3,862         (50,328)
       Accounts payable .......................      (192,782)        21,997         193,150
       Accrued employee benefits ..............       (21,934)       (83,669)         62,401
       Other accrued expenses .................        46,176         14,511          63,294
                                                  -----------    -----------    ------------
 Net cash used for operating activities .......      (525,497)    (2,146,497)    (30,942,758)

Investing activities
Purchase of technology ........................          --             --          (570,000)
Purchase of equipment and improvements ........       (30,118)       (22,282)     (1,840,932)
Purchases of short-term investments ...........          --             --       (16,161,667)
Sales of short-term investments ...............          --             --        16,161,667
                                                  -----------    -----------    ------------
Net cash provided by (used for) investing
   activities..................................   $   (30,118)   $   (22,282)   $ (2,410,932)
</TABLE>

See accompanying notes.

                                       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
                                                     Six months ended         (inception) to
                                                         June 30,                June 30,
                                                    2000           1999            2000
                                                -----------    ------------    ------------
<S>                                             <C>            <C>             <C>
Financing activities
Net proceeds from exercise of options
   and warrants, and sale of common stock ...   $ 2,197,998    $    939,755    $ 19,735,664
Net proceeds from issuance and conversion
   of preferred stock .......................          --              --        14,290,160
Net proceeds from convertible notes and
   detachable warrants ......................          --              --         1,068,457
Payment on capital lease obligations ........       (39,361)        (12,852)       (223,450)
Payment on note payable .....................          --              --          (242,750)
Proceeds from note payable ..................          --              --           484,323
                                                -----------    ------------    ------------
Net cash provided by (used for) financing
   activities................................     2,158,637         926,903      35,112,404
                                                -----------    ------------    ------------

Net increase (decrease) in cash and cash
   equivalents...............................     1,603,022      (1,241,876)      1,758,714


Cash and cash equivalents at beginning of
   period....................................       155,692       1,383,148            --
                                                -----------    ------------    ------------
Cash and cash equivalents at end of period...   $ 1,758,714    $    141,272    $  1,758,714
                                                ===========    ============    ============

Supplemental disclosures of cash flow
   information
Equipment purchased by capital leases .......   $      --      $       --      $    288,772
Interest paid ...............................         4,682           9,925         122,593
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         444,403       1,912,550
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)

                                  June 30, 2000

1.   Basis of Presentation

The condensed financial statements of Protein Polymer Technologies, Inc. (the
"Company") for the three months and for the six months ended June 30, 2000 and
1999 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 June 30,
2000 and the results of operations for the three months and the six months ended
June 30, 2000 and 1999. The results of operations for the six months ended June
30, 2000 are not necessarily indicative of the results to be expected for the
year ended December 31, 2000. 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, 1999, 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 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 months and the six
months ended June 30, 2000 and 1999 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 February 2000, 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 September, 2000. The exercise price was $0.50 per share.
As an inducement to exercise the warrant early, the Company offered each holder
a new one year warrant for a similar number of shares at an exercise price of
$1.50 per share. As a result the Company raised $2.1 million (less expenses).
The newly issued warrants will expire on the last day of February 2001.

7.   Femcare Agreements

On January 26, 2000, PPTI and Femcare Ltd. ("Femcare"), headquartered in
Nottingham, Great Britain, executed three related agreements involving the grant
of a license to Femcare to register and market PPTI's urethral bulking agent for
the treatment of female stress urinary incontinence in Europe and Australia. In
addition to the License and Development Agreement, PPTI agreed in a separate
Supply Agreement to provide final product to Femcare, and if unable to do so,
agreed to make the manufacturing methods and materials available to Femcare as
specified in a separate Escrow agreement.

In addition to agreeing to purchase the final product from PPTI for a defined
percentage of the revenues received by Femcare from the sale of the incontinence
product, Femcare paid PPTI an up front license fee of $1 million in two
installments and agreed to pay PPTI a royalty on revenues received from the sale
of the incontinence product. The agreements specify the performance benchmarks
and timelines for each party, the definition of yearly minimum royalties and
minimum product purchases, and the methods and procedures for determining
product manufacturing requirements. The license grant from PPTI to Femcare is
for the greater of 20 years or the date upon which the last patent included
within the license grant for the territories covered expires, subject to meeting
various sales requirements, and is exclusive in the territories covered, subject
to certain conditions being maintained. The parties agreed to cooperate
extensively in the clinical testing and the registration of the product with the
appropriate governmental authorities. These activities are scheduled to take
place over a period of approximately three years. Accordingly, the Company has
recorded the $1 million up front payment as deferred revenue, and is recognizing
it as license revenue ratably over a period of three years. In the six months
ended June 30, 2000, the Company recognized approximately $167,000 of revenue
related to this agreement.

8.   Sale of In Vitro Cell Culture Business to Sanyo Chemical Industries, Ltd.

On February 18, 2000, PPTI and Sanyo Chemical Industries, Ltd. ("Sanyo") of
Kyoto, Japan, executed an agreement involving the grant of a royalty-free
license to Sanyo for exclusive worldwide rights to make and sell ProNectin(R) F
and ProNectin(R) L and derivative products for in vitro cell culture and related
applications. PPTI received net proceeds of $284,000 from Sanyo for the issuance
of the license, including assignment of the ProNectin(R) and SmartPlastic(R)
trademarks and transfer of remaining product inventory. The agreement remains in
effect until the last patent included within the license grant expires.

                                       8
<PAGE>

9.   Liquidity

The Company believes its existing available cash and cash equivalents as of June
30, 2000, plus contractual amounts receivable, is sufficient to meet its
anticipated capital requirements until January 2001. 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.

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. has concentrated its
research and development efforts on establishing a scientific and technical
leadership position in the production and development of unique protein-based
materials. The Company has identified biomedical market and product
opportunities for further research and development that management believes will
exploit the unique properties of the Company's technology to competitive
advantage. The Company has been unprofitable to date, and as of June 30, 2000
has an accumulated deficit of $38,643,000.

The Company's product candidates for surgical repair, augmentation and
regeneration of human tissues are in various stages of research and development.
Its more advanced programs are in the areas of 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. The Company currently is devoting the majority of its resources to
the development and registration of these products, with the greatest emphasis
on the incontinence product.

In December 1999, the Company initiated human clinical testing of its urethral
bulking agent for the treatment of female stress urinary incontinence. The
August 1999 approval by the U.S. Food and Drug Administration ("FDA") of the
Company's Investigational Device Exemption ("IDE")

                                       9
<PAGE>

allows PPTI 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. The Company estimates 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, PPTI's product is injected, typically in an
outpatient 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. The Company believes that its product 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, PPTI established a strategic alliance with Femcare, Ltd. 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 PPTI is
responsible for product manufacturing. 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 can be obtained.
See also "Femcare Agreements" in the Notes to the Financial Statements. PPTI
also is in discussions with several companies regarding the establishment of
strategic alliances for commercializing the incontinence product in the United
States and other markets outside the Femcare territories.

The tissue augmentation materials and technology underlying the incontinence
product have the potential to be effective and desirable in a number of other
clinical applications. Assuming additional financial resources are available,
the Company intends to submit an additional IDE to the FDA in 2000 to obtain
approval to begin human clinical testing of its dermal bulking agent for use in
cosmetic and reconstructive surgery applications. PPTI began studies to identify
its most promising biomaterial formulations for use in these soft tissue
augmentation products in 1996, devoted increasing resources through 1997, 1998
and 1999, and at present is focused primarily on completing human clinical
testing of the incontinence product.

The Company's first commercial products, ProNectin F and SmartPlastic, are used
by biologists and cell culture laboratories, principally to grow mammalian cells
for biomedical research purposes. In February 2000, the Company licensed the
rights for the manufacture and sale of these products for use in in vitro cell
culture, including the transfer of all existing inventory, to a third party. See
also "Sale of In Vitro Cell Culture Business to Sanyo Chemical Industries, Ltd."
in the Notes to the Financial Statements.

The Company's other advanced product technology is in the area of tissue
adhesives and sealants. Currently the Company's research and development in this
area is focused on the repair of spinal discs for the treatment of lower back
pain. The Company's strategy with most of its programs is to enter into
collaborative development agreements with major medical 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.

As of June 30, 2000 the Company had cash and cash equivalents totaling
$1,759,000. The Company believes its available cash and cash equivalents and
future contractual R&D payments would be sufficient to meet its anticipated
capital requirements through January 2001. The Company 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.

                                       10
<PAGE>

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.

PPTI is aggressively pursuing domestic and international patent protection for
its 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 18 patents to the
Company, four of which have been issued in 2000. In addition, PPTI has filed
corresponding patent applications in other relevant commercial jurisdictions.

During February 2000, 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 September, 2000. The exercise price was $0.50 per share.
As an inducement to exercise the warrant early, the Company offered each holder
a new one year warrant for a similar number of shares at an exercise price of
$1.50 per share. As a result the Company raised $2.1 million (less expenses).
The newly issued warrants will expire on the last day of February 2001.

Results of Operations

The Company received $103,000 in contract and licensing revenue for the three
months ended June 30, 2000 and $490,000 for the six months ended June 30, 2000
as compared to no contract or licensing revenue for the three months or six
months ended June 30, 2000. The increase in 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 PPTI's incontinence product in Europe and
Australia, payments from Sanyo Chemical Industries Ltd. for the comprehensive
license to PPTI's in vitro cell culture business and existing product inventory,
and R&D payments from Perkin-Elmer for a development project. The lack of
revenue in 1999 reflects primarily the termination of research and development
reimbursements from various operating entities of the Johnson & Johnson Company,
including Ethicon, Inc.

Interest income was $32,000 for the three months and $46,000 for the six months
ended June 30, 2000 versus $7,000 and $20,000 for the same periods in 1999.

The Company received no sales and licensing revenues from the Company's
ProNectin(R) and SmartPlastic(R) products for the three months and $3,000 for
the six months ended June 30, 2000 as compared to $14,000 and $37,000
respectively for the same periods in 1999. The Company incurred no cost of sales
nor royalty payments for the three months or the six months ended June 30, 2000,
compared to royalty expenses of $6,000 and $12,000 for the three month and six
month period ended June 30, 1999, respectively. The decline in all of these
items was due to the sale of this business to Sanyo Chemical Industries, Ltd. in
February 2000.

Research and development expenses for the three months ended March 31, 2000 were
$643,000 and $1,197,000 for the six months ended June 30, 2000, compared to
$746,000 and $1,460,000 respectively for the same periods in 1999, representing
decreased expenditures of 14% and 18% respectively. The decreases were primarily
attributable to downsizing reductions in personnel and expenditures implemented
in June 1999, and completion of external contracts and consulting services
related to the Company's soft tissue augmentation program, including preclinical
testing and preparation of the Investigational Device Exemption approved by the
Food and Drug Administration ("FDA") in 1999 granting permission to begin human
clinical testing. The Company expects, in general, that its research and
development, human clinical testing, and

                                       11
<PAGE>

manufacturing expenses will increase over time if its incontinence product and
other products in development successfully progress and additional capital is
obtained.

Selling, general and administrative expenses for the three months ended June 30,
2000 were $412,000, as compared to $446,000 for the same period in 1999, a 8%
decrease, and were $739,000 for the six months ended June 30, 2000 as compared
to $873,000 for the same period in 1999, a 15% decrease. These decreases were
due primarily to the downsizing in 1999, and to a one year sublease of a portion
of the Company's laboratory to a third party. The Company expects its selling,
general and administrative expenses remain largely unchanged in the near term,
but will increase in the future as support for its research and development and
manufacturing efforts may require and to the extent additional capital is
obtained.

For the three months ended June 30, 2000, the Company recorded a net loss
applicable to common shareholders of $988,000, or $0.05 per share compared to a
loss of $1,241,000, or $0.10 per share for the same period in 1999. For the six
months ended June 30, 2000, the Company recorded a net loss applicable to common
shareholders of $1,535,000, or $0.09 per share compared to a loss of $2,415,000,
or $0.21 per share for the same period in 1999. Also included in each of the
three month periods of 2000 and 1999 was $69,000, respectively, for undeclared
dividends related to the Company's preferred stock, and for the six month
periods, the undeclared dividends for 2000 and 1999 were each, respectively,
$138,000.

In general, there can be significant fluctuation in revenue from quarter to
quarter due to variability in outside contract and licensing payments. In
general, the Company expects to incur increasing operating losses in the future
(to the extent additional capital is obtained), due primarily to increases in
the Company's soft tissue augmentation program's development, manufacturing and
business development activities. The Company's results depend on its 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 the Company believes that inflation and changing prices have not had a
material effect on its continuing operations.

Liquidity and Capital Resources

As of June 30, 2000, the Company had cash and cash equivalents of $1,759,000 as
compared to $156,000 at December 31, 1999. As of June 30, 2000, the Company had
working capital of $984,000 as compared to ($458,000) at December 31, 1999. The
differences are due primarily to the completion in January 2000 of the strategic
alliance with Femcare, Ltd, and in February 2000 from the sale of the in vitro
cell culture business to Sanyo Chemical Industries, Ltd., and the receipt of
$2,100,000 from the exercise of common stock warrants granted in association
with the Series G Convertible Preferred Stock.

The Company had no long-term debt obligations as of June 30, 2000, versus
$25,000 of capital lease obligations as of December 31, 1999. For the six months
ending June 30, 2000, the Company's expenditures for capital equipment and
leasehold improvements totaled $30,000 compared with $22,000 for the same period
last year. The Company is expecting to increase its capital expenditures in the
next few quarters (to the extent additional capital is obtained), as the Company
improves existing space to expand capacity to meet materials manufacturing
requirements for clinical testing. The Company may enter into additional capital
lease arrangements if available at appropriate rates and terms.

The Company believes its 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 its
anticipated capital requirements until January 2001.

                                       12
<PAGE>

Substantial additional capital resources will be required to fund continuing
expenditures related to the Company's research, development, manufacturing and
business development activities. The Company believes there may be a number of
alternatives to meeting the continuing capital requirements of its operations,
including additional collaborative agreements and public or private financings.
The Company is 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 the Company. 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.

                                       13
<PAGE>

                           PART II. OTHER INFORMATION

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

a.   Exhibits:

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

       27        Financial Data Schedule.


b.   Reports on Form 8-K

     None.

                                       14
<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  August 11, 2000              By  /s/  J. Thomas Parmeter
      ---------------                  -----------------------
                                       J. Thomas Parmeter
                                       Chairman of the Board, Chief
                                       Executive Officer, President


Date  August 11, 2000              By  /s/  Janis Y. Neves
      ---------------                  -------------------
                                       Janis Y. Neves
                                       Director of Finance, Controller
                                       and Assistant Secretary

                                       15
<PAGE>

                                  EXHIBIT INDEX


Exhibit                                                    Sequentially
Number   Description                                       Numbered Page
-------  -----------                                       -------------

  27     Financial Data Schedule.

                                       16