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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                 AMENDMENT NO. 1
                                  FORM 10-KSB/A

(Mark One)

          |X|         ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                      EXCHANGE ACT OF 1934 For the fiscal year ended December
                      31, 2003


                                       OR

          |_|         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)

                    Issuer's Telephone Number: (858) 558-6064
        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                                  Common Stock
                                (Title of Class)


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
   --------          --------


Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for the most recent fiscal year were $1,617,318.


<PAGE>


The aggregate market value of the voting common stock held by non-affiliates of
the issuer on March 10, 2004 was $14,930,630. Stock held by directors, officers
and shareholders owning 5% or more of the outstanding common stock (as reported
on Schedules 13D and 13G) were excluded as they may be deemed affiliates. This
determination of affiliate status is not a conclusive determination for any
other purpose.


The number of shares of the registrant's common stock outstanding as of March
10, 2004 was 37,100,857.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the following document are incorporated by reference in Part III of
this report:

Definitive Proxy Statement to be filed with the Commission no later than April
29, 2004 with respect to the registrant's 2004 Annual Meeting of Stockholders.
Transitional Small Business Disclosure Format:     Yes           No   X
                                                      ---------    --------
================================================================================


<PAGE>


                                 EXPLANATORY NOTE

Protein Polymer Technologies, Inc. is filing this Amendment No. 1 (the
"Amendment") to its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003, as filed with the Securities and Exchange Commission on March
30, 2004 (the "Annual Report") to amend and restate Items 6 and 7 to the Annual
Report for the purpose of restating financial information contained in the
Management's Discussion and Analysis and in the Financial Statements and Notes
to Financial Statements in order to include additional non-cash imputed dividend
expense related to the issuance of convertible preferred stock and warrants
during 2003 as more fully described in Note 1 to Financial Statements included
in Item 7 of this Amendment. The complete text of Items 6 and 7 are included in
this Amendment pursuant to Rule 12b-15 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The consent of the independent
registered public accounting firm with respect to the financial statements
contained in this Amendment is attached to this Amendment as Exhibit 23.1.

In addition, the Amendment includes the certifications required pursuant to
Rules 13a-14(a)/15d-14(a) and Rules 13a-14(b)/15d-14(b) of the Exchange Act,
which have been re-executed and re-filed as of the date of this Amendment. The
certifications of our Chief Executive Officer (principal executive officer) and
Director of Finance, Controller (principal financial officer) are attached to
this Amendment as Exhibits 31.1, 31.2 and 32.1.

With the exception of the amended and restated financial information relative to
the inclusion of additional non-cash imputed dividend expense related to the
issuance of convertible preferred stock and warrants during 2003, this Amendment
continues to speak as of the date of the Annual Report and we have not updated
the disclosure contained herein to reflect events that have occurred since the
filing of the Annual Report.


                                       1
<PAGE>


Item 6. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Forward Looking Statements

       Certain statements contained or incorporated by reference in this Annual
Report on Form 10-KSB 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

        Protein Polymer Technologies, Inc., is a development-stage biotechnology
company engaged in the research, development, production and clinical testing of
medical products based on materials created from our patented technology to
produce proteins of unique design. Since 1992, we have focused primarily on
developing technology and products to be used for soft tissue augmentation,
tissue adhesives and sealants; wound healing support; and drug delivery devices.
We have been unprofitable to date, and as of December 31, 2003 had an
accumulated deficit of $(48,684,377).

        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. Our
primary goal is to develop medical products for use inside the body with
significantly 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,
and tissue adhesive formulations for the repair of spinal discs damaged due to
injury or aging. We currently are devoting the majority of our resources to the
development and FDA approval 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 International for
the use of our materials 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 milestone payments,
and eventually royalties on the sale of products. For development and
commercialization of our spinal disc repair product, we entered into agreements
with Spine Wave, Inc., that will provide us with both near term research and
development support and eventually royalties on the sale of licensed products.
We have retained manufacturing rights under the Spine Wave agreements.


                                       2
<PAGE>


Restatement of Previously Issued Financial Statements

        As a result of a recommendation by the Company's independent auditors,
the Company has restated its financial statements as of December 31, 2003 in
connection with the accounting treatment of certain transactions related to the
issuance of convertible preferred stock and warrants during 2003 as described
below.

        In March and May 2003 the Company issued a total of 32,550 shares of
Series I Convertible Preferred Stock, priced at $100 per share, with warrants to
purchase an aggregate of 2,582,669 shares of common stock to certain
institutional and accredited investors. Each share of Series I Convertible
Preferred Stock is convertible at any time at the election of the holder into
approximately 181 shares of common stock at a conversion price of $0.55 per
share, subject to certain anti-dilution adjustments. In connection with this
transaction, the Company recorded non-cash imputed dividend expense of
$1,373,247 based on the intrinsic value of the beneficial conversion feature
resulting from the difference between the fair market value of the common stock
and the conversion price of the preferred stock. As the calculation of the
beneficial conversion feature was based on the stated conversion price of $0.55
per share, instead of the effective conversion price, which is determined after
an allocation of proceeds between the convertible shares and warrants, the value
of the beneficial conversion was understated by a total of $554,991.

        In June 2003, certain investors exercised a total of 2,590,000 warrants
that were due to expire in August 2003 at exercise prices of $0.10 and $0.40. As
an incentive, the Company offered each holder who exercised their warrants new
warrants in an amount equal to the number exercised, exercisable through March
26, 2004, at an exercise price of $0.55. In connection with this transaction,
the Company failed to record the fair value of the newly issued warrants which,
using a Black-Scholes valuation model, was subsequently determined to be
$656,342.

        As a result of these transactions, the Company has included additional
non-cash imputed dividend expense totaling $1,211,333 in the restated financial
statements for 2003. The effects of the additional imputed dividend on the 2003
financial statements are as follows:

Balance Sheet at December 31, 2003:
  o   Increase in deficit accumulated during development stage        $1,211,333
  o   Increase in additional paid in capital                          $1,211,333

Income Statement for the year ended December 31, 2003:
  o   Increase in undeclared and/or paid dividend on preferred stock  $1,211,333
  o   Increase in net loss applicable to common shareholders          $1,211,333
  o   Increase in net loss per common share - basic and diluted       $     0.04


Significant Collaborative Agreements

        Our collaborative development agreements generally contain provision for
specific payments for defined activities, services, royalties on the sales of
developed products, and/or the accomplishment of performance benchmarks. These
agreements also may provide for equity investments or other financial
incentives. Technology license agreements usually are associated with
collaborative development agreements, but occasionally we will agree to a
license without an accompanying development agreement.

Spine Wave
----------

        In April 2001, we entered into agreements with Spine Wave, Inc., to
develop and commercialize an injectable protein-based formulation for the repair
of spinal discs damaged either by injury or aging. As consideration for entering
into an exclusive, worldwide license agreement with Spine Wave, we received one
million shares of the founding common stock in Spine Wave, valued initially at
$10,000. The shares of founding common stock were subject to a vesting schedule;
however, Spine Wave's right to repurchase unvested shares terminated in 2002
upon their merger with VERTx, Inc. Royalties from the sale or sublicensing of
licensed products will be determined in the future based on the gross margin
(sales revenue less the cost of goods) realized by Spine Wave from the sale of
the products.

        In connection with the license agreement, we entered into 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 pre-clinical
and clinical testing. Spine Wave, in


                                       3
<PAGE>


return, agreed to reimburse us for both our direct costs and the associated
overhead costs for the services provided. During 2001, we recognized contract
revenues of $450,000 related to activities performed under the collaborative
agreement.

        In March 2002, we executed additional agreements with Spine Wave that
expanded our contractual research and development relationship, and that offered
us additional equity incentives in the form of Spine Wave common stock and
warrants. Under the amended supply and services agreement, we, on behalf of
Spine Wave, are proceeding with pre-clinical safety and performance studies of a
product for spinal disc repair to support Spine Wave's filing of an
investigational device exemption with the FDA to obtain approval to initiate
human clinical testing. During the subsequent period leading to regulatory
marketing approval, our contractual responsibilities include the supply of
product to be used in clinical testing and preparation for commercial
manufacturing operations. Research and development services performed for Spine
Wave are reimbursed including both direct costs and associated overhead costs.
Spine Wave is responsible for clinical testing, regulatory approvals, and
commercialization. For the year ended December 31, 2003 and for the period of
project inception to date we received $1,584,000 and $4,461,000, respectively,
in contract revenue from Spine Wave which represents the reimbursement of direct
costs plus overhead costs allocated to the research and development resources
used in performing the collaborative activities.

        Additional equity incentives offered in conjunction with the expanded
supply and services agreement of March 17, 2002 consist of a three year warrant
to purchase 1,000,000 shares of Spine Wave common stock at an exercise price of
$0.50 per share (recently issued Spine Wave preferred stock was also priced at
$0.55 per share), and 400,000 shares of common stock valued at $0.05 per share
subject to repurchase at cost until each of three performance goals is achieved.
The performance goals consist of: (i) completion of certain studies for filing
an investigational device exemption application (100,000 shares); (ii)
completion of additional studies for filing of the investigational device
exemption and provision of inventory for the pilot clinical study (150,000
shares); and (iii) completion of certain manufacturing arrangements, and
production of certain quantities of product (150,000 shares). As of December 31,
2003, the first of the three performance goals had been met.
        In October 2003, we executed a second amendment to the supply and
services agreement with Spine Wave. The amendment, effective for one year,
extended Spine Wave's right to certain research and development services, and
further defined the cost basis for reimbursement of services provided by us to
Spine Wave.


Significant License Agreements

        Our license agreements usually include provision for up-front
compensation and eventual royalties on the sale of licensed products. Terms of
license agreements typically commence as of the date executed and continue for a
period of the greater of twenty (20) years from execution date or the date upon
which the last of the patented technology under license expires.
Femcare, Ltd.
-------------

        In January 2000, we entered into an agreement with Femcare, Ltd.
("Femcare"), for the commercialization in Europe and Australia of our product
for treatment of stress urinary incontinence. Under the terms of the license
agreement, Femcare paid a $1 million non-refundable license fee in exchange for
the patented technology and a three year commitment from us to provide support
to Femcare in its efforts to clinically test our products in Great Britain and
to achieve European regulatory approval. We have not incurred any research and
development costs associated with our support efforts to date. As a result of
the arrangement, we recognized approximately $333,000 in deferred license fee
revenue for each of 2000, 2001, and 2002. In accordance with the agreement, we
will receive a royalty on net product sales generated by Femcare, and we have
the right to manufacture commercial product for Femcare. The agreement
terminates on the greater of 20 years or upon which the last of the licensed
patents expire.

Genencor International, Inc.
----------------------------

        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. In
October 2002, the license agreement was


                                       4
<PAGE>


amended to provide Genencor with an additional one-year option to initiate
development of products in the field of non-medical personal care. As a result
of the agreements, Genencor may 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
and the field of non-medical personal care products.

        In return for the licensed rights, Genencor paid us an up-front license
fee of $750,000, and will pay royalties on the sale of any products
commercialized by Genencor under the agreement. The licensed technology was
transferred to Genencor upon execution of the license agreement without any
further product development obligation on our part. Future royalties on the net
sales of products incorporating the technology under license and developed by
Genencor will be calculated based on a royalty rate to be determined at a later
date. In addition, we are entitled to receive up to $5 million in milestone
payments associated with Genencor's achievement of various industrial product
development milestones incorporating the licensed technology. There is no
limitation on the amount of milestone payments we can receive from Genencor for
Genencor's product development in the field of non-medical personal care
products. In December 2002 we received a license milestone payment of $250,000
from Genencor for Genencor's initiation of a product development project based
on technology licensed from us.

        In connection with the license agreement, Genencor was issued two
warrants, each convertible by formula into $500,000 of our common stock. The
first warrant could be converted into 442,478 shares at an exercise price of
$1.13 per share. The second warrant could be converted into 1,250,000 shares at
an exercise price of $0.40 per share. As a result of the collaboration, in 2000
we recognized $750,000 in license fee revenue (less the issuance of warrants to
purchase $1 million of our common stock valued at $319,000). The agreement
terminates on the date of expiration of the last remaining patent.


Research and Development

        We currently maintain detailed project costs (direct costs plus
allocated overhead) for contractual research and development services. However,
we do not maintain cost breakdowns for our internal research and development
projects due to the extensive degree of overlap between our tissue augmentation
projects such as common manufacturing, quality control, and developmental
product testing.

        Our product for the treatment of female stress urinary incontinence is
in pilot human clinical testing. Due to the rate of patient enrollment, we now
project beginning pivotal clinical testing during 2005. We expect these trials,
including patient follow-up, will take approximately 24 months, and the
subsequent Food and Drug Administration review of our pre-market approval
submission may take an additional 12 months. Assuming this schedule is met and
the product is approved, U.S. sales of the product are projected to begin in
2007. Commercial manufacturing process development and completion of the
clinical trials are estimated to cost approximately $10 million. Femcare, Ltd.,
our licensee for this product in Europe and Australia, has advised us that
commercialization of the product in Europe potentially can occur at least one
year in advance of U.S. commercialization.

        Our tissue augmentation product for use in cosmetic and reconstructive
surgery applications is in pilot human clinical testing. We recently obtained
FDA approval to expand the pilot clinical study to obtain additional data in
support of our application to begin a pivotal clinical study. We now project
beginning pivotal clinical testing during 2005. We expect these trials,
including patient follow-up, will take approximately 15 months, and the
subsequent Food and Drug Administration review of our pre-market approval
submission may take up to an additional 12 months. Assuming this schedule is met
and the product is approved, U.S. sales are projected to begin in 2007. Our
estimate for the pivotal clinical trial has been updated and is now projected to
cost approximately $3.2 million. This product is based on the same manufacturing
technology as our product for the treatment of female stress urinary
incontinence, and thus, the incremental cost of manufacturing development is
estimated to be approximately $0.1 million.

        We currently do not have sufficient cash to complete the development of
these products. We anticipate obtaining the necessary cash either by additional
equity financings, or by sharing the cost of development with potential
marketing partners, or a combination of both methods. If we are unable to obtain
the necessary cash, it will have a material adverse effect on us.
        Our spinal disc repair product being developed for our licensee, Spine
Wave, Inc., is


                                       5
<PAGE>


in pre-clinical testing. The timing of this project is under the control of
Spine Wave. Under our contract with Spine Wave, we are responsible for
development of the formulated product, its manufacturing process, and product
production for both clinical trials and commercialization. Spine Wave is
responsible for funding all expenses associated with these activities. Contract
revenue received from Spine Wave is approximately equal to our cost (direct
project costs plus allocated laboratory and corporate overhead expenses) of the
work performed. Total research and development costs for the year ended December
31, 2003 and for the period of project inception to date are approximately
$1,584,000 and $4,461,000 respectively.

        To the extent sufficient capital resources are available, we continue to
research the use of our patented technology to produce proteins of unique design
for other tissue repair and medical device applications, principally for use in
supporting the wound healing process, including devices based on tissue
engineering, and in drug delivery devices. Our strategy for 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 payments and milestone payments, we
expect to continue incurring operating losses for the next several years.


Results of Operations

        Contract and Licensing Revenue. We received $1,597,000 in contract and
licensing revenue for the year ended December 31, 2003 as compared to $3,011,000
for the year ended December 31, 2002, and $783,000 for the year ended December
31, 2001. Contract revenue for the past year primarily represents payments of
$1,584,000 from Spine Wave, for materials and services provided in the
development of an adhesive product for the repair of spinal discs. We received
$2,427,000 and $450,000 in contract revenue from Spine Wave in 2002 and 2001
respectively. We received no licensing revenue in 2003. Licensing revenue in
2002 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 for the commercial rights to our incontinence product in Europe and
Australia, and a license milestone payment of $250,000 from Genencor for
Genencor's initiation of a product development project based on technology
licensed from us. Licensing revenue in 2001 comprised the amortized license
payments from Femcare.

        Interest Income. Interest income was $20,000 for the year ended December
31, 2003, as compared to $7,000 for 2002 and $41,000 for 2001. The year-to-year
variability resulted from the amount and timing of the receipt of equity capital
and the amounts of excess cash available for investment.

        Research and Development Expenses. Research and development expenses for
the year ended December 31, 2003 were $2,360,000, compared to $2,699,000 for
2002, and $2,611,000 in 2001. The fluctuations are primarily due to variations
in clinical testing and regulatory consulting costs. The cost of conducting
human clinical testing began in December 1999 for our product for the treatment
of stress urinary incontinence, and in 2001 for our tissue augmentation product
for use in cosmetic and reconstuctive surgery. Other related expenses include
those for expanded manufacturing capacity and manufacturing process development,
quality assurance efforts, and outside testing services. We expect our research
and development expenses will increase in the future, to the extent additional
capital is obtained, due to the expansion of product-directed development
efforts including preclinical development of our surgical sealants, increased
human clinical testing, increased manufacturing requirements, increased use of
outside testing services, and increased research and development services for
Spine Wave.

        Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 2003 were $1,451,000, as
compared to $1,336,000 for 2002, and $1,366,000 in 2001. Although these expenses
have been fairly consistent over the past three years, we did experience some
increases during 2003 in these areas of insurance
coverage and legal services. To the extent possible, we continue to concentrate
on controlling costs reflected in reduced travel, office supplies, and
non-regulatory consulting costs. We expect our selling, general and
administrative expenses will increase in the future, to the extent additional
capital is obtained, consistent with supporting our research and development
efforts and as business development, patent, legal and investor relations
activities require.


                                       6
<PAGE>


        Operating Losses. For the year ended December 31, 2003, we recorded a
net loss applicable to common shareholders of $5,055,458, or $0.15 per share, as
compared to $1,294,000, or $0.05 per share for 2002, and $3,424,000, or $0.16
per share for 2001. The difference in the net losses and the losses per share
between 2003 and 2002, and 2001, is primarily due to differences in license and
contract fees received from collaborative partners, and in 2003 an "imputed
dividend" expense associated with the sale of preferred stock. In connection
with the sale of Series I Convertible Preferred Stock in March and May 2003, we
recorded a non-cash "imputed dividend" expense of $1,928,237 in order to account
for the difference between the fair market value of the common stock and the
conversion price of the preferred stock into common stock. The 2003, 2002 and
2001 losses and per share calculations also include $278,000 of undeclared
dividends in each year with respect to our preferred stock.

        We expect to incur increasing operating losses for the next several
years, to the extent additional capital is obtained, based upon the continuation
of the development and testing of our product for the treatment of female stress
urinary incontinence and our product for the correction of dermal contour
deficiencies, the associated FDA approval process, and the tissue adhesives
program, as well as expected increases in our other research and development,
manufacturing and business development activities. Our results depend in part 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. Our results
will also fluctuate from period to period due to timing differences. Inflation

        To date, we believe that inflation and changing prices have not had a
material impact on our continuing operations. However, given the State of
California's recent energy crisis, our utility costs have increased
significantly over the past year, and these increases are expected to continue
for the foreseeable future.

Liquidity and Capital Resources

        As of December 31, 2003, we had cash, cash equivalents and short-term
investments totaling $1,085,000, as compared to $734,000 at December 31, 2002.
As of December 31, 2003, we had working capital of $1,192,000, compared to
$189,000 at December 31, 2002.

        We do not have any off balance sheet financing activities and do not
have any special purpose entities. We had no long-term capital lease obligations
as of December 31, 2003 or December 31, 2002. For the year ended December 31,
2003, our cash expenditures for capital equipment and leasehold improvements
totaled $90,058, compared with $32,000 for the same period in the prior year. To
the extent capital is available, we anticipate that these expenditures will be
increased in 2003 for laboratory renovations and additional equipment required
to meet the FDA's applicable Quality System regulation as we scale up our
manufacturing operations to meet product requirements for expanded clinical
testing. We may enter into capital equipment lease arrangements in the future if
available at appropriate rates and terms.

        We believe our existing available cash, cash equivalents and short-term
investments as of December 31, 2003, in combination with continuing contractual
commitments will be sufficient to meet our anticipated capital requirements
through May 2004. Substantial additional capital resources will be required to
fund continuing expenditures related to our research, development, manufacturing
and business development activities. In addition we are pursuing a number of
alternatives available to meet the continuing capital requirements of our
operations, such as collaborative agreements and public or private financings.
Further, we are continuing our reimbursed services to Spine Wave. We are
currently in discussions with potential financing sources and collaborative
partners, and additional funding in the form of equity investments, license
fees, milestone payments or research and development payments could be
generated. There can be no assurance that any of these fundings will be
consummated in the timeframes 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 would likely have to sell or
license out significant portions of our technology, and possibly cease
operations.


                                       7
<PAGE>


Item 7.        Financial Statements


        Filed herewith are the following Audited Financial Statements for
Protein Polymer Technologies, Inc. (a Development Stage Company):


<TABLE>
<CAPTION>

        Description                                                                    Page
        -----------                                                                    ----


<S>                                                                                    <C>
        Report of Peterson & Co., LLP, Independent Registered Public Accounting Firm...F-2

        Balance Sheets at December 31, 2003 and 2002...................................F-3

        Statements of Operations for the years ended December 31, 2003, 2002
        and 2001 and the period July 6, 1988 (inception) to December 31, 2003..........F-4

        Statements of Stockholders Equity for the period July 6, 1988 (inception)
        to December 31, 2003...........................................................F-5

        Statements of Cash Flows for the years ended December 31, 2003, 2002
        and 2001 and the period July 6, 1988 (inception) to December 31, 2003..........F-8

        Notes to Financial Statements..................................................F-10
</TABLE>


                                       F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders

Protein Polymer Technologies, Inc.

We have audited the accompanying balance sheets of Protein Polymer Technologies,
Inc. (a Development Stage Company) as of December 31, 2003 and 2002, and the
related statements of operations, stockholders' equity (deficit), and cash flows
for the years then ended and for the period July 6, 1988 (inception) to December
31, 2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Protein Polymer Technologies,
Inc. (a Development Stage Company) as of December 31, 2003 and 2002, and the
results of its operations and its cash flows for the years then ended and for
the period July 6, 1988 (inception) to December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, Protein Polymer
Technologies, Inc. (a Development Stage Company) has reported accumulated losses
during the development stage aggregating ($48,684,000) and without additional
financing, lacks sufficient working capital to fund operations beyond May 2004,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans as to these matters are described in Note 1. The 2003
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.

As discussed in Note 1, the financial statements at December 31, 2003 and for
the year then ended have been restated for the matters set forth therein.

                                                       /s/ Peterson & Co., LLP

                                                       PETERSON & CO., LLP

San Diego, California
March 8, 2004
(March 25, 2005 as to the effects of the restatements described in Note 1)


                                      F-2
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                                 Balance Sheets


<TABLE>
<CAPTION>

                                                                                December 31,
                                                                            2003*           2002
                                                                       -------------------------------
<S>                                                                    <C>              <C>
Assets
Current assets:
  Cash and cash equivalents                                            $    1,085,314   $    733,978
  Contracts receivable                                                        252,026              -
  Rent receivable                                                             184,527              -
  Prepaid expenses                                                             25,799         30,619
  Other current assets                                                              -            154
                                                                       -------------------------------
Total current assets                                                        1,547,666        764,751

Deposits                                                                       29,679         29,679
Equipment and leasehold improvements, net                                     114,411         80,928
                                                                       -------------------------------

                                                                       $    1,691,756   $    875,358
                                                                       ===============================

Liabilities and stockholders' equity (deficit)
Current liabilities:
  Accounts payable                                                     $      168,659   $    389,109
  Accrued expenses                                                            162,609        162,244
  Deferred rent                                                                24,111         24,111
                                                                       -------------------------------
Total current liabilities                                                     355,379        575,464

Long-term portion deferred rent                                                     -         24,111

Commitments (Notes 5 and 7)

Stockholders' equity:
  Convertible Preferred Stock, $.01 par value, 5,000,000 shares
  authorized, 86,095 and 76,120 shares issued and outstanding at
  December 31, 2003 and 2002, respectively - liquidation
    preference of $8,609,500 and $7,612,000 at December 31, 2003
    and December 31, 2002, respectively                                     8,064,917      7,266,780
  Common stock, $.01 par value, 120,000,000 shares authorized,
    36,830,857 and 29,731,535 shares issued and outstanding at
    December 31, 2003 and 2002, respectively                                  368,319        297,327
  Additional paid-in capital                                               41,587,518     36,618,235
  Deficit accumulated during development stage                            (48,684,377)   (43,906,559)
                                                                       -------------------------------
Total stockholders' equity                                                  1,336,377        275,783
                                                                       -------------------------------

                                                                       $    1,691,756   $    875,358
                                                                       ===============================
</TABLE>

* Restated (see Note 1) See accompanying notes.


                                      F-3
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                            Statements of Operations


<TABLE>
<CAPTION>


                                                                                      For the period
                                                                                       July 6, 1988
                                                                                      (inception) to
                                                Years ended December 31,               December 31,
                                          2003*            2002            2001            2003
                                    ------------------------------------------------------------------
<S>                                 <C>              <C>              <C>             <C>
Revenues:
  Contract and licensing revenue    $    1,597,415   $    3,010,571   $     783,334   $  10,856,001
  Interest income, net                      19,903            6,810          40,778       1,266,850
  Product and other income                       -            1,500           5,950         694,779
                                    ------------------------------------------------------------------
Total revenues                           1,617,318        3,018,881         830,062      12,817,630

Expenses:
  Research and development               2,359,643        2,698,733       2,611,317      34,745,748
  Selling, general and
  administrative                         1,450,914        1,336,306       1,365,574      20,223,295
                                    ------------------------------------------------------------------
Total expenses                           3,810,557        4,035,039       3,976,891      54,969,043
                                    ------------------------------------------------------------------

Net loss                                (2,193,239)      (1,016,158)     (3,146,829)    (42,151,413)

Undeclared and/or paid dividends on
  preferred stock                        2,862,219          277,639         277,639       8,934,790
                                    ------------------------------------------------------------------

Net loss applicable to common
  shareholders                      $   (5,055,458)  $   (1,293,797)  $  (3,424,468)  $ (51,086,203)
                                    ==================================================================

Net loss per common share - basic
  and diluted                       $         (.15)  $         (.05) $         (.16)
                                    ==================================================

Shares used in computing net loss
  per common share - basic and
  diluted                               34,362,427       27,659,838      20,964,233
                                    ==================================================
</TABLE>


* Restated (see Note 1) See accompanying notes.


                                      F-4
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                       Statements of Stockholders' Equity

          For the period July 6, 1988 (inception) to December 31, 2003


<TABLE>
<CAPTION>


                                                                                  Common stock              Preferred stock
                                                                        ------------------------------------------------------------
                                                                             Shares         Amount       Shares         Amount
                                                                        ------------------------------------------------------------
<S>                                                                    <C>              <C>            <C>          <C>
  Issuance of common stock at $.01 per share for cash                         400,000   $     4,000            -    $         -
  Issuance of common stock at $.62 per share for cash and receivables       1,116,245        11,162            -              -
  Receivables from sale of common stock                                             -             -            -              -
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1988                                                1,516,245        15,162            -              -
  Repayment of receivables from sale of common stock                                -             -            -              -
  Issuance of common stock at $.62 per share                                  359,136         3,594            -              -
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1989                                                1,875,381        18,756            -              -
  Exercise of common stock options at $.01 per share for cash                  60,000           600            -              -
  Issuance of common stock at $.68 per share for cash and                       5,000            50            -              -
    compensation
  Common stock repurchased at $.01 per share for cash                         (25,000)         (250)           -              -
  Common stock issued at $.68 per share for cash and compensation              25,000           250            -              -
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1990                                                1,940,381        19,406            -              -
  Exercise of common stock options at $.68 per share for cash                   5,000            50            -              -
  Exercise of warrants for common stock                                       483,755         4,837            -              -
  Conversion of notes payable to common stock                                 339,230         3,391            -              -
  Conversion of notes payable to preferred stock                                    -             -      278,326          2,783
  Issuance of preferred stock at $2.00 per share for cash, net of
    issuance costs                                                                  -             -      400,000          4,000
  Issuance of warrants for cash                                                     -             -            -              -
  Issuance of warrants in connection with convertible notes payable                 -             -            -              -
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1991                                                2,768,366        27,684      678,326          6,783
  Initial public offering at $6.50 per unit, net of issuance costs          1,667,500        16,676            -              -
  Conversion of Series B preferred stock into common stock in
    connection with initial public offering                                   678,326         6,783     (678,326)        (6,783)
  Conversion of Series A preferred stock into common stock at
    $1.13342 per share                                                        713,733         7,137            -              -
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1992                                                5,827,925        58,280            -              -
  Exercise of common stock options at $.68 per share                            3,000            30            -              -
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1993                                                5,830,925        58,310            -              -
  Issuance of preferred stock at $100 per share for cash, net of
    issuance costs                                                                  -             -       21,600      2,073,925
  Net loss                                                                          -             -            -              -
                                                                        ------------------------------------------------------------
Balance at December 31, 1994                                                5,830,925        58,310       21,600      2,073,925
  Issuance of preferred stock at $100 per share for cash and
    cancellation of bridge loan,  net of issuance costs                             -             -       25,000      2,432,150
  Series C dividends paid in Series D preferred stock                               -             -        2,539        253,875
  Interest paid in Series D preferred stock                                         -             -           48          4,795
  Exercise of common stock options at $.53 per share                           2,000            20            -              -
  Net loss                                                                         -             -            -              -
                                                                       -------------------------------------------------------------
Balance at December 31, 1995                                               5,832,925   $    58,330       49,187    $  4,764,745

<CAPTION>

                                                                                             Deficit
                                                                                           accumulated   Receivables
                                                                                             during     from sales of      Total
                                                                           Additional      development     common       Stockholders
                                                                         paid-in capital     stage         stock           equity
                                                                       -------------------------------------------------------------
<S>                                                                    <C>                 <C>            <C>          <C>
  Issuance of common stock at $.01 per share for cash                  $             -     $         -    $       -    $     4,000
  Issuance of common stock at $.62 per share for cash and receivables          681,838               -            -        693,000
  Receivables from sale of common stock                                              -               -      (86,000)       (86,000)
  Net loss                                                                           -        (322,702)           -       (322,702)
                                                                       -------------------------------------------------------------
Balance at December 31, 1988                                                   681,838        (322,702)     (86,000)       288,298
  Repayment of receivables from sale of common stock                                 -               -       86,000         86,000
  Issuance of common stock at $.62 per share                                   219,358               -            -        222,952
  Net loss                                                                           -        (925,080)           -       (925,080)
                                                                       -------------------------------------------------------------
Balance at December 31, 1989                                                   901,196      (1,247,782)           -       (327,830)
  Exercise of common stock options at $.01 per share for cash                        -               -            -            600
  Issuance of common stock at $.68 per share for cash and                        3,350               -            -          3,400
    compensation
  Common stock repurchased at $.01 per share for cash                                -               -            -           (250)
  Common stock issued at $.68 per share for cash and compensation               16,750               -            -         17,000
  Net loss                                                                           -      (1,501,171)           -     (1,501,171)
                                                                       -------------------------------------------------------------
Balance at December 31, 1990                                                   921,296      (2,748,953)           -     (1,808,251)
  Exercise of common stock options at $.68 per share for cash                    3,350               -            -          3,400
  Exercise of warrants for common stock                                        295,493               -            -        300,330
  Conversion of notes payable to common stock                                  508,414               -            -        511,805
  Conversion of notes payable to preferred stock                               553,869               -            -        556,652
  Issuance of preferred stock at $2.00 per share for cash, net of
    issuance costs                                                             703,475               -            -        707,475
  Issuance of warrants for cash                                                  3,000               -            -          3,000
  Issuance of warrants in connection with convertible notes payable             28,000               -            -         28,000
  Net loss                                                                           -      (1,143,119)           -     (1,143,119)
                                                                       -------------------------------------------------------------
Balance at December 31, 1991                                                 3,016,897      (3,892,072)           -       (840,708)
  Initial public offering at $6.50 per unit, net of issuance costs           8,911,024               -            -      8,927,700
  Conversion of Series B preferred stock into common stock in
    connection with initial public offering                                          -               -            -              -
  Conversion of Series A preferred stock into common stock at
    $1.13342 per share                                                       1,717,065               -            -      1,724,202
  Net loss                                                                           -      (3,481,659)           -     (3,481,659)
                                                                       -------------------------------------------------------------
Balance at December 31, 1992                                                13,644,986      (7,373,731)           -      6,329,535
  Exercise of common stock options at $.68 per share                             2,010               -            -          2,040
  Net loss                                                                           -      (3,245,436)           -     (3,245,436)
                                                                       -------------------------------------------------------------
Balance at December 31, 1993                                                13,646,996     (10,619,167)           -      3,086,139
  Issuance of preferred stock at $100 per share for cash, net of
    issuance costs                                                                   -               -            -      2,073,925
  Net loss                                                                           -      (3,245,359)           -     (3,245,359)
                                                                       -------------------------------------------------------------
Balance at December 31, 1994                                                13,646,996     (13,864,526)           -      1,914,705
  Issuance of preferred stock at $100 per share for cash and
    cancellation of bridge loan,  net of issuance costs                              -               -            -      2,432,150
  Series C dividends paid in Series D preferred stock                                -        (253,875)           -              -
  Interest paid in Series D preferred stock                                          -               -            -          4,795
  Exercise of common stock options at $.53 per share                             1,040               -            -          1,060
  Net loss                                                                           -      (2,224,404)           -     (2,224,404)
                                                                       -------------------------------------------------------------
Balance at December 31, 1995                                             $  13,648,036   $ (16,342,805)           -   $  2,128,306
</TABLE>


                                      F-5
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                       Statements of Stockholders' Equity

          For the period July 6, 1988 (inception) to December 31, 2003


<TABLE>
<CAPTION>


                                                                                Common stock              Preferred stock
                                                                       ---------------------------------------------------------
                                                                           Shares         Amount       Shares         Amount
                                                                       -----------------------------------------------------------
<S>                                                                    <C>               <C>            <C>           <C>
  Exercise of common stock warrants at $1.25 per share                      932,960      $    9,330            -      $        -
  Exercise of common stock warrants at $2.50 per share, net of
    issuance costs                                                          322,663           3,226            -               -
  Exercise of common stock warrants at $1.00 per share                       25,000             250            -               -
  Exercise of common stock options                                          136,000           1,360            -               -
  Stock repurchases                                                         (16,320)           (163)           -               -
  Net loss                                                                        -               -            -               -
                                                                       -----------------------------------------------------------
Balance at December 31, 1996                                              7,233,228          72,333       49,187       4,764,745
  Issuance of common stock at $2.50 per share, net of issuance costs      1,904,000          19,040            -               -
  Exercise of common stock options                                           28,000             280            -               -
  Issuance of common stock under stock purchase plan                         15,036             151            -               -
  Conversion of Series D preferred stock into common stock                1,032,537          10,325      (20,973)     (2,097,342)
  Series D dividends paid in common stock                                   207,921           2,079            -               -
  Net loss                                                                        -               -            -               -
                                                                       -----------------------------------------------------------
Balance at December 31, 1997                                             10,420,722         104,208       28,214       2,667,403
  Issuance of common stock under stock purchase plan                         36,715             368            -               -
  Exercise of common stock options                                           12,000             120            -               -
  Issuance of common stock at $1.60 per share, net of issuance costs         23,439             234            -               -
  Issuance of Series E preferred stock, net of issuance costs                     -               -       54,438       5,277,813
  Grant of stock to finder                                                   64,000             640            -               -
  Conversion of Series D and E preferred stock into common stock            270,364           2,704       (3,450)       (344,990)
  Net Loss                                                                        -               -            -               -
                                                                       -----------------------------------------------------------
Balance at December 31, 1998                                             10,827,240         108,274       79,202       7,600,226
  Issuance of common stock under stock purchase plan                         19,429             194            -               -
  Issuance of common stock and warrants for services rendered and
     debt issued                                                             16,941             180            -               -
  Issuance of Series G preferred stock, net of issuance costs                     -               -       21,000       2,074,596
  Conversion of Series E preferred stock into common stock                  731,000           7,310       (9,138)       (913,750)
  Exercise of common stock and Series E warrants at $.50 per share        1,848,900          18,489            -               -
  Net Loss and comprehensive loss                                                 -               -            -               -
                                                                       -----------------------------------------------------------
Balance at December 31, 1999                                             13,443,510         134,447       91,064       8,761,072
  Issuance of common stock under stock purchase plan                        287,303           2,873            -               -
  Issuance of warrants and stock options for services rendered                    -               -            -               -
  Exercise of common stock options                                           85,500             855            -               -
  Exercise of common stock warrants at $.50 per share                     4,215,000          42,150            -               -
  Conversion of Series E preferred stock into common stock                  879,000           8,790      (10,988)     (1,098,800)
  Net Loss and comprehensive loss                                                 -               -            -               -
                                                                       -----------------------------------------------------------
Balance at December 31, 2000                                             18,910,313      $  189,115      80,076     $  7,662,272

<CAPTION>

                                                                                             Deficit
                                                                                           accumulated   Receivables
                                                                                             during     from sales of      Total
                                                                           Additional      development     common       Stockholders
                                                                         paid-in capital     stage         stock           equity
                                                                       -----------------------------------------------------------
<S>                                                                      <C>             <C>             <C>        <C>
  Exercise of common stock warrants at $1.25 per share                   $   1,156,870   $            -  $    -     $  1,166,200
  Exercise of common stock warrants at $2.50 per share, net of
    issuance costs                                                             779,413                -       -          782,639
  Exercise of common stock warrants at $1.00 per share                          24,750                -       -           25,000
  Exercise of common stock options                                              91,650                -       -           93,010
  Stock repurchases                                                            (81,437)               -       -          (81,600)
  Net loss                                                                           -       (2,864,432)      -       (2,864,432)
                                                                       -----------------------------------------------------------
Balance at December 31, 1996                                                15,619,282      (19,207,237)      -        1,249,123
  Issuance of common stock at $2.50 per share, net of issuance costs         4,601,322                -       -        4,620,362
  Exercise of common stock options                                              20,200                -       -           20,480
  Issuance of common stock under stock purchase plan                            29,950                -       -           30,101
  Conversion of Series D preferred stock into common stock                   2,087,017                -       -                -
  Series D dividends paid in common stock                                      420,262         (422,341)      -                -
  Net loss                                                                           -       (4,453,933)      -       (4,453,933)
                                                                       -----------------------------------------------------------
Balance at December 31, 1997                                                22,778,033      (24,083,511)      -        1,466,133
  Issuance of common stock under stock purchase plan                            38,010                -       -           38,378
  Exercise of common stock options                                               7,920                -       -            8,040
  Issuance of common stock at $1.60 per share, net of issuance costs            37,266                -       -           37,500
  Issuance of Series E preferred stock, net of issuance costs                3,266,250       (3,266,250)      -        5,277,813
  Grant of stock to finder                                                      79,360                -       -           80,000
  Conversion of Series D and E preferred stock into common stock               342,286                -       -                -
  Net Loss                                                                           -       (5,638,203)      -       (5,638,203)
                                                                       -----------------------------------------------------------
Balance at December 31, 1998                                                26,549,125      (32,987,964)      -        1,269,661
  Issuance of common stock under stock purchase plan                            15,111                -       -           15,305
  Issuance of common stock and warrants for services rendered and
     debt issued                                                                26,440                -       -           26,620
  Issuance of Series G preferred stock, net of issuance costs                        -                -       -        2,074,596
  Conversion of Series E preferred stock into common stock                     906,440                -       -                -
  Exercise of common stock and Series E warrants at $.50 per share             905,961                -       -          924,450
  Net Loss and comprehensive loss                                                    -       (4,257,531)      -       (4,257,531)
                                                                       -----------------------------------------------------------
Balance at December 31, 1999                                                28,403,077      (37,245,495)      -           53,101
  Issuance of common stock under stock purchase plan                           186,096                -       -          188,969
  Issuance of warrants and stock options for services rendered                 345,244                -       -          345,244
  Exercise of common stock options                                              73,240                -       -           74,095
  Exercise of common stock warrants at $.50 per share                        2,065,350                -       -        2,107,500
  Conversion of Series E preferred stock into common stock                   1,090,010                -       -                -
  Net Loss and comprehensive loss                                                    -       (2,498,077)      -       (2,498,077)
                                                                       -----------------------------------------------------------
Balance at December 31, 2000                                             $  32,163,017   $  (39,743,572) $    -     $    270,832
</TABLE>


See accompanying notes


                                      F-6
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                       Statements of Stockholders' Equity

          For the period July 6, 1988 (inception) to December 31, 2003

<TABLE>
<CAPTION>

                                                                                Common stock              Preferred stock
                                                                       ---------------------------------------------------------
                                                                           Shares         Amount       Shares         Amount
                                                                       -------------------------------------------------------------
<S>                                                                     <C>             <C>              <C>          <C>
  Issuance of Series H preferred stock, net of issuance costs                       -               -       12,182       1,218,258
  Issuance of common stock under stock purchase plan                           14,837             148            -               -
  Issuance of stock options for services rendered                                   -               -            -               -
  Exercise of common stock options                                              3,500              35            -               -
  Exercise of common stock warrants at $.50 per share                       2,492,000          24,920            -               -
  Conversion of Series E preferred stock into common stock                    320,000           3,200       (4,000)       (400,000)
  Net Loss and comprehensive loss                                                   -               -            -               -
                                                                       -------------------------------------------------------------
Balance at December 31, 2001                                               21,740,650    $    217,418       88,258    $  8,480,530

  Conversion of Series E preferred stock into common stock                    515,000           5,150       (6,438)       (643,750)
  Conversion of Series G preferred stock into common stock                  1,140,000          11,400       (5,700)       (570,000)
  Exercise of common stock warrants, net of associated costs                6,260,000          62,600            -               -
  Issuance of common stock under stock purchase plan                           47,385             474            -               -
  Exercise of common stock options                                             28,500             285            -               -
  Net Loss and comprehensive loss                                                   -               -            -               -
                                                                       -------------------------------------------------------------
Balance at December 31, 2002                                               29,731,535    $    297,327       76,120    $  7,266,780

  Issuance of Series I preferred stock, net of issuance costs                       -               -       32,550       2,889,650
  Conversion of Series E preferred stock into common stock                  4,175,000          41,750      (20,875)     (1,921,513)
  Conversion of Series G preferred stock into common stock                     30,000             300         (150)        (15,000)
  Conversion of Series I preferred stock into common stock                    281,818           2,818       (1,550)       (155,000)
  Exercise of common stock warrants at $.10 and $.40 per share              2,590,000          25,900            -               -
  Issuance of common stock under stock purchase plan                           20,504             204            -               -
  Exercise of common stock options                                              2,000              20            -               -
  Net Loss and comprehensive loss                                                   -               -            -               -
                                                                       -------------------------------------------------------------
Balance at December 31, 2003                                               36,830,857    $    368,319       86,095    $  8,064,917
                                                                       =============================================================

<CAPTION>

                                                                                             Deficit
                                                                                           accumulated   Receivables
                                                                                             during     from sales of      Total
                                                                           Additional      development     common       Stockholders
                                                                         paid-in capital     stage         stock           equity
                                                                       -------------------------------------------------------------
<S>                                                                     <C>             <C>              <C>          <C>
  Issuance of Series H preferred stock, net of issuance costs                       -               -            -       1,218,258
  Issuance of common stock under stock purchase plan                            9,836               -            -           9,984
  Issuance of stock options for services rendered                               1,834               -            -           1,834
  Exercise of common stock options                                              1,610               -            -           1,645
  Exercise of common stock warrants at $.50 per share                       1,221,080               -            -       1,246,000
  Conversion of Series E preferred stock into common stock                    396,800               -            -               -
  Net Loss and comprehensive loss                                                   -      (3,146,829)           -      (3,146,829)
                                                                       -------------------------------------------------------------
Balance at December 31, 2001                                            $  33,794,177   $ (42,890,401)   $       -    $   (398,276)

  Conversion of Series E preferred stock into common stock                    638,600               -            -               -
  Conversion of Series G preferred stock into common stock                    558,600               -            -               -
  Exercise of common stock warrants, net of associated costs                1,601,950               -            -       1,664,550
  Issuance of common stock under stock purchase plan                           15,103               -            -          15,577
  Exercise of common stock options                                              9,805               -            -          10,090
  Net Loss and comprehensive loss                                                   -      (1,016,158)           -      (1,016,158)
                                                                       -------------------------------------------------------------
Balance at December 31, 2002                                            $  36,618,235   $ (43,906,559)   $       -         275,783
  Issuance of Series I preferred stock, net of issuance costs*              1,928,237      (1,928,237)           -       2,889,650
  Conversion of Series E preferred stock into common stock                  1,879,763               -            -               -
  Conversion of Series G preferred stock into common stock                     14,700               -            -               -
  Conversion of Series I preferred stock into common stock                    152,182               -            -               -
  Exercise of common stock warrants at $.10 and $.40 per share                327,600               -            -         353,500
  Imputed dividend associated with issuance of warrants*                      656,342        (656,342)           -               _
  Issuance of common stock under stock purchase plan                            9,879               -            -          10,083
  Exercise of common stock options                                                580               -            -             600
  Net Loss and comprehensive loss                                                   -      (2,193,239)           -      (2,193,239)
                                                                       -------------------------------------------------------------
Balance at December 31, 2003*                                           $  41,587,518   $ (48,684,377)   $       -    $  1,336,377
                                                                       =============================================================
* Restated (see Note 1)
See accompanying notes.
</TABLE>


                                      F-7
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                                  For the period
                                                                                                   July 6, 1988
                                                                                                  (inception) to
                                                        Years ended December 31,                   December 31,
                                                   2003              2002              2001             2003
                                            ----------------------------------------------------------------------
<S>                                         <C>               <C>               <C>               <C>
Operating activities
Net loss                                    $   (2,193,239)   $   (1,016,158)   $   (3,146,829)   $  (42,151,413)
Adjustments to reconcile net loss to net
  cash used for operating activities:
    Stock and warrants issued for services
       rendered and debt interest                        -                 -             1,836           472,676
    Depreciation and amortization                   56,576           155,885           154,601         2,414,960
    Write-off of purchased technology                    -                 -                 -           503,500
    Changes in assets and liabilities:
      Deposits                                           -                 -            41,498           (29,679)
      Notes receivable from officers                     -                 -           140,000                 -
      Other current assets                        (431,579)           26,747            (2,340)         (462,352)
      Accounts payable                            (220,450)           32,167           149,961           168,659
      Accrued employee benefits                     19,677            (6,273)           49,330           132,391
      Other accrued expenses                       (19,313)            6,133            (4,020)           30,218
      Deferred revenue                                   -          (333,333)         (333,334)                -
      Deferred rent                                (24,111)          (24,111)          (23,858)           24,111
                                            ----------------------------------------------------------------------
 Net cash used for operating activities         (2,812,439)       (1,158,943)       (2,973,155)      (38,896,929)

Investing activities
Purchase of technology                                   -                 -                 -          (570,000)
Purchase of equipment and improvements             (90,058)          (31,566)         (109,593)       (2,087,344)
Purchases of short-term investments                      -                 -                 -       (16,161,667)
Sales of short-term investments                          -                 -                 -        16,161,667
                                            ----------------------------------------------------------------------
Net cash used for investing activities             (90,058)          (31,566)         (109,593)       (2,657,344)

Financing activities

Net proceeds from issuance of common stock         364,183         1,690,216         1,257,629        23,220,259

Net proceeds from issuance of preferred
  stock                                          2,889,650                 -         1,218,258        18,398,068
Net proceeds from convertible notes and
  detachable warrants                                    -                 -                 -         1,068,457
Payments on capital lease obligations                    -                 -           (25,088)         (288,770)
Payment on note payable                                  -                 -                 -          (242,750)
Proceeds from note payable                               -                 -                 -           484,323
                                            ----------------------------------------------------------------------
Net cash provided by financing activities        3,253,833         1,690,216         2,450,799        42,639,587
                                            ----------------------------------------------------------------------

Net increase (decrease) in cash and cash
  equivalents                                      351,336           499,707          (631,949)        1,085,314
Cash and cash equivalents at beginning of
  the period                                       733,978           234,271           866,220                -
                                            ----------------------------------------------------------------------

Cash and cash equivalents at end of the
  period                                    $    1,085,314    $      733,978    $      234,271    $    1,085,314
                                            ======================================================================
</TABLE>


                                      F-8
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                            Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                                                     July 6, 1988
                                                                                                    (inception) to
                                                        Years ended December 31,                     December 31,
                                                   2003                2002                2001          2003
                                            ----------------------------------------------------------------------
<S>                                         <C>               <C>               <C>               <C>
Supplemental disclosures of cash flow
  information
Equipment purchased by capital leases       $            -    $            -    $            -    $      288,772
Interest paid                                          758             2,170            19,490           147,533
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                                  1,921,513           643,750           400,000         5,277,813
Conversion of Series G preferred stock to
   common stock                                     15,000           570,000                 -           585,000
Conversion of Series I preferred stock to
   common stock                                    155,000                 -                 -           155,000
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
Imputed dividends on Series I preferred stock*   1,928,237                 -                 -         1,928,237
Imputed dividends on warrants issued *             656,342                 -                 -           656,342
</TABLE>


* Restated (see Note 1)
See accompanying notes.

                                       F-9
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


1.  Organization and Significant Accounting Policies

Organization and business activities

Protein Polymer Technologies, Inc. ("PPTI" or the "Company") was established to
design, produce and market genetically engineered protein polymers for a variety
of biomedical and specialty materials applications. The Company was incorporated
in Delaware on July 6, 1988. For the period from its inception to date, the
Company has been a development stage enterprise, and accordingly, the Company's
operations have been directed primarily toward developing business strategies,
raising capital, research and development activities, conducting clinical
testing of its product candidates, exploring marketing channels and recruiting
personnel.

Restatement of Previously Issued Financial Statements

As a result of a recommendation by the Company's independent auditors, the
Company has restated its financial statements as of December 31, 2003 in
connection with the accounting treatment of certain transactions related to the
issuance of convertible preferred stock and warrants during 2003 as described
below.

In March and May 2003 the Company issued a total of 32,550 shares of Series I
Convertible Preferred Stock, priced at $100 per share, with warrants to purchase
an aggregate of 2,582,669 shares of common stock to certain institutional and
accredited investors. Each share of Series I Convertible Preferred Stock is
convertible at any time at the election of the holder into approximately 181
shares of common stock at a conversion price of $0.55 per share, subject to
certain anti-dilution adjustments. In connection with this transaction, the
Company recorded non-cash imputed dividend expense of $1,373,247 based on the
intrinsic value of the beneficial conversion feature resulting from the
difference between the fair market value of the common stock and the conversion
price of the preferred stock. As the calculation of the beneficial conversion
feature was based on the stated conversion price of $0.55 per share, instead of
the effective conversion price, which is determined after an allocation of
proceeds between the convertible shares and warrants, the value of the
beneficial conversion was understated by a total of $554,991.

In June 2003, certain investors exercised a total of 2,590,000 warrants that
were due to expire in August 2003 at exercise prices of $0.10 and $0.40. As an
incentive, the Company offered each holder who exercised their warrants new
warrants in an amount equal to the number exercised, exercisable through March
26, 2004, at an exercise price of $0.55. In connection with this transaction,
the Company failed to record the fair value of the newly issued warrants which,
using a Black-Scholes valuation model, was subsequently determined to be
$656,342.

As a result of these transactions, the Company has included additional non-cash
imputed dividend expense totaling $1,211,333 in the restated financial
statements for 2003. The effects of the additional imputed dividend on the 2003
financial statements are as follows:

Balance Sheet at December 31, 2003:
  o   Increase in deficit accumulated during development stage        $1,211,333
  o   Increase in additional paid in capital                          $1,211,333

Income Statement for the year ended December 31, 2003:
  o   Increase in undeclared and/or paid dividend on preferred stock  $1,211,333
  o   Increase in net loss applicable to common shareholders          $1,211,333
  o   Increase in net loss per common share - basic and diluted       $     0.04


Liquidity

As of December 31, 2003, the Company had cash, cash equivalents and short-term
investments totaling $1,085,000 as compared to $734,000 at December 31, 2002. As
of December 31, 2003, the


                                      F-10
<PAGE>


Company had a working capital of $1,192,000 compared to a working capital of
$189,000 at December 31, 2002.

The Company believes its available cash, cash equivalents and short-term
investments, in combination with anticipated additional contract and license
payments will be sufficient to meet its anticipated capital requirements through
May 2004. Prior to the commercialization of its products, substantial additional
capital resources will be required to fund continuing operations related to the
Company's research, development, manufacturing, clinical testing, and business
development activities. The Company believes there may be a number of
alternatives available to meet the continuing capital requirements of its
operations, such as collaborative agreements and public or private financings.
Further, the Company is currently in discussions with several potential
financing sources and collaborative partners and funding in the form of equity
investments, license fees, milestone payments or research and development
payments could be generated. There can be no assurance that any of these
fundings will be consummated in the time frames needed for continuing operations
or on terms favorable to the Company. If adequate funds in the future 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, and possibly cease operations.
Cash and cash equivalents

The Company considers all highly liquid investments purchased with a maturity of
three months or less at the time of purchase to be cash equivalents.


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


1. Organization and Significant Accounting Policies (continued) Equipment and
Leasehold Improvements

Equipment and leasehold improvements are stated at cost, less accumulated
depreciation and amortization. Equipment is depreciated over the estimated
useful life of the asset, typically one to seven years, using the straight-line
method. Leasehold improvements are amortized over the shorter of the lease term
or life of the asset.

Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the fair value is less than the
carrying amount of the asset, a loss is recognized for the difference. Fair
value is determined based on market quotes, if available, or is based on
valuation techniques.


Revenue and Expense Recognition

Research and development contract revenues are recorded as earned in accordance
with the terms and performance requirements of the contracts. If the research
and development activities are not successful, the Company is not obligated to
refund payments previously received. Fees from the sale or license of technology
are recognized on a straight-line basis over the term required to complete the
transfer of technology or the substantial satisfaction of any performance
related responsibilities. License fee payments received in advance of amounts
earned are recorded as deferred revenue. Milestone payments are recorded as
revenue based upon the completion of certain contract specified events that
measure progress toward completion under certain long-term contracts. Royalty
revenue related to licensed technology is recorded when earned and in accordance
with the terms of the license agreement. Research and development costs are
expensed as incurred.

Significant Collaborative Agreements

The Company's collaborative development agreements generally contain provision
for specific payments for defined activities, services, royalties on the sales
of developed products,


                                      F-11
<PAGE>


and/or the accomplishment of performance benchmarks. These agreements also may
provide for equity investments or other financial incentives. Technology license
agreements usually are associated with collaborative development agreements, but
occasionally the Company will agree to a license without an accompanying
development agreement.


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


1. Organization and Significant Accounting Policies (continued)
Spine Wave, Inc. In April 2001, the Company entered into agreements with Spine
Wave, Inc. to develop and commercialize an injectable protein-based formulation
for the repair of spinal discs damaged either by injury or aging. As
consideration for entering into an exclusive, worldwide license agreement with
Spine Wave, the Company received one million shares of the founding common stock
in Spine Wave, valued initially at $10,000. The shares of founding common stock
were subject to a vesting schedule; however, Spine Wave's right to repurchase
unvested shares terminated in 2002 upon their merger with VERTx, Inc. Royalties
from the sale or sublicensing of licensed products will be determined in the
future based on the gross margin (sales revenue less the cost of goods) realized
by Spine Wave from the sale of the products.

In connection with the license agreement, the Company entered into 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 pre-clinical
and clinical testing. Spine Wave, in return, agreed to reimburse the Company for
both our direct costs and the associated overhead costs for the services
provided. During 2001, the Company recognized contract revenues of $450,000
related to activities performed under the collaborative agreement. In March
2002, the Company executed additional agreements with Spine Wave, Inc. that
expanded its contractual research and development relationship, and that offered
the Company additional equity incentives in the form of Spine Wave common stock
and warrants. Under the amended supply and services agreement, the Company, on
behalf of Spine Wave, is proceeding with pre-clinical safety and performance
studies of a product for spinal disc repair to support Spine Wave's filing of an
investigational device exemption with the FDA to obtain approval to initiate
human clinical testing. During the subsequent period leading to regulatory
marketing approval, the Company's contractual responsibilities include the
supply of product to be used in clinical testing and preparation for commercial
manufacturing operations. Research and development services performed for Spine
Wave are reimbursed including both direct costs and associated overhead costs.
Spine Wave is responsible for clinical testing, regulatory approvals, and
commercialization. For the year ended December 31, 2003 and for the period of
project inception to date the Company received $1,584,000 and $4,461,000,
respectively, in contract revenue from Spine Wave which represents the
reimbursement of direct costs plus overhead costs allocated to the research and
development resources used in performing the collaborative activities.
Additional equity incentives offered in conjunction with the expanded supply and
services agreement of March 17, 2002 consist of a three year warrant to purchase
1,000,000 shares of Spine Wave common stock at an exercise price of $0.50 per
share (recently issued Spine Wave preferred stock was also priced at $0.50 per
share), and 400,000 shares of common stock valued at $0.05 per share subject to
repurchase at cost until each of three performance goals is achieved. The
performance goals consist of: (i) completion of certain studies for filing an
investigational device exemption application (100,000 shares); (ii) completion
of additional studies for filing of the investigational device exemption and
provision of inventory for the pilot clinical study (150,000 shares); and (iii)
completion of certain manufacturing arrangements, and production


                                      F-12
<PAGE>


                       Protein Polymer Technologies, Inc.
                         (A Development Stage Company)

                         Notes to Financial Statements


1. Organization and Significant Accounting Policies (continued)
of certain quantities of product (150,000 shares). As of December 31, 2003, the
first of the three performance goals had been met.

In October 2003, a second amendment to Supply and Services Agreement was
executed. The amendment, effective for one year, extended Spine Wave's right to
certain research and development services, and further defined the cost basis
for reimbursement of services by Spine Wave.

 Significant License Agreements

The Company's license agreements usually include provision for up-front
compensation and eventual royalties on the sale of licensed products. Terms of
license agreements typically commence as of the date executed and continue for a
period of the greater of twenty (20) years from execution date or the date upon
which the last of the patented technology under license expires.
Femcare, Ltd . In January 2000, The Company entered into an agreement with
Femcare, Ltd. ("Femcare"), for the commercialization in Europe and Australia of
the Company's product for treatment of stress urinary incontinence. Under the
terms of the license agreement, Femcare paid a $1 million non-refundable license
fee in exchange for the patented technology and a three year commitment from the
Company to provide support to Femcare in its efforts to clinically test the
products in Great Britain and to achieve European regulatory approval. The
Company has not incurred any research and development costs associated with its
support efforts to date. As a result of the arrangement, the Company recognized
approximately $333,000 in deferred license fee revenue for years ended December
31, 2000, 2001 and 2002. In accordance with the agreement, the Company will
receive a royalty on net product sales generated by Femcare, and has the right
to manufacture commercial product for Femcare. The agreement terminates on the
greater of 20 years or upon which the last of the licensed patents expire.
Genencor International, Inc. In December 2000, the Company 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. In October 2002, the license agreement was
amended to provide Genencor with an additional one-year option to initiate
development of products in the field of non-medical personal care. As a result
of the agreements, Genencor may 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
and the field of non-medical personal care products.

In return for the licensed rights, Genencor paid the Company an up-front license
fee of $750,000, and will pay royalties on the sale of any products
commercialized by Genencor under the agreement. The licensed technology was
transferred to Genencor upon execution of the license agreement without any
further product development obligation on our part. Future royalties on the net
sales of products incorporating the technology under license and developed by
Genencor will be calculated based on a royalty rate to be


                                      F-13
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


1. Organization and Significant Accounting Policies (continued)
the determined at a later date. In addition, the Company is entitled to receive
up to $5 million in milestone payments associated with Genencor's achievement of
various industrial product development milestones incorporating the licensed
technology. There is no limitation on the amount of milestone payments Company
can receive from Genencor for Genencor's product development in the field of
non-medical personal care products. In December 2002 the Company received a
license milestone payment of $250,000 from Genencor for Genencor's initiation of
a product development project based on technology licensed from the Company.
In connection with the license agreement, Genencor was issued two warrants, each
convertible by formula into $500,000 of our common stock. The first warrant
could be converted into 442,478 shares at an exercise price of $1.13 per share.
The second warrant could be converted into 1,250,000 shares at an exercise price
of $0.40 per share. As a result of the collaboration, in 2000 the Company
recognized $750,000 in license fee revenue (less the issuance of warrants to
purchase $1 million of the Company's common stock valued at $319,000). The
agreement terminates on the date of expiration of the last remaining patent.
Accounting for Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation", encourages but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value (See SFAS 148 below under Recently Issued
Accounting Pronouncements). The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees", and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock. Had compensation cost for the Company's stock option
awards been determined based upon the fair value at the grant date and
recognized on a straight-line basis over the related vesting period, in
accordance with the provisions of SFAS No. 123, the Company's net loss and
earnings per share would have been reduced to the proforma amount indicated on
the following page:


                                      F-14
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements

1. Organization and Significant Accounting Policies (continued)


<TABLE>
<CAPTION>

                                                        2003            2002            2001
                                                 --------------- ---------------  --------------
<S>                                              <C>             <C>              <C>
    Net loss as reported                         $ (5,055,458)   $ (1,293,797)    $ (3,424,468)

    Deduct: Total stock-based employee
    compensation expense determined under fair
    value based method for all awards, net of
    related tax effects                              (454,620)       (162,883)       (127,583)
                                                 --------------- ---------------  --------------
    Pro forma net loss                           $ (5,510,078)   $ (1,456,680)    $ (3,552,051)
                                                 =============== ===============  ==============


    Earnings per share:
          Basic - as reported                       $ (0.15)        $ (0.05)        $ (0.16)
          Basic - pro forma                         $ (0.16)        $ (0.05)        $ (0.17)
</TABLE>


The fair value was estimated using the following weighted-average assumptions: a
risk free interest rate of 3.77% for 2003, 3.9% for 2002 and 5.0% for 2001; a
volatility factor of the expected market price of the Company's common stock of
124% for 2003 214% for 2002, and 23% for 2001; expected option lives of 10 years
for 2003, 10 years for 2002, 5 years for 2001; and no dividend yields for all
years.

The Black-Scholes option valuation model was originally developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
The pro forma effect on net loss for 2003, 2002 and 2001 is not representative
of the pro forma effect on net loss in future years because it does not take
into consideration pro forma compensation expense from option grants made prior
to 1995.

The Company accounts for stock options granted to consultants in accordance with
Emerging Issues Task Force, or EITF, Issue 96-18, "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling Goods or Services.

Net loss per common share

Basic earnings per share is calculated using the weighted-average number of
outstanding common shares during the period. Diluted earnings per share is
calculated using the weighted-average number of outstanding common shares and
dilutive common equivalent shares outstanding during the period, using either
the as-if


                                      F-15
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


1. Organization and Significant Accounting Policies (continued)
-converted method for convertible notes and convertible preferred stock or the
treasury stock method for options and warrants.

The net loss per common share for the years ended December 31, 2003, 2002 and
2001 is based on the weighted average number of shares of common stock
outstanding during the periods. Potentially dilutive securities include options,
warrants and convertible preferred stock; however, such securities have not been
included in the calculation of the net loss per common share as their effect is
antidilutive. Since this is the case, there is no difference between the basic
and dilutive net loss per common share for any of the periods presented and none
of the prior periods were required to be restated. For purposes of this
calculation, net loss in 2003, 2002 and 2001 has been adjusted for accumulated
and/or paid dividends on the preferred stock.

Use of estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the amount of revenue and expense reported during
the period. Actual results could differ from those estimates.
Income Taxes

The Company records income taxes using the asset and liability method. Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their future respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are expected
to be recorded or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.

A valuation allowance is established to reduce the deferred tax asset if it is
more likely than not the related tax benefits will not be realized in the
future.

Reclassification

Certain account reclassifications have been made to the financial statements of
the prior year in order to conform to classifications used in the current year.
These changes had no impact on previously stated financial statements of the
Company.


                                      F-16
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


1. Organization and Significant Accounting Policies (continued) Recently issued
accounting pronouncements

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure, and amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123 to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. As the Company still uses the guidance under APB Opinion 25 to account
for stock based compensation, the adoption of SFAS 148 will not have a material
effect on the Company's financial statements.

2.  Equipment and Leasehold Improvements

Equipment and leasehold improvements consist of the following:


<TABLE>
<CAPTION>

                                                                       December 31,
                                                                    2003           2002
                                                              --------------------------------
<S>                                                           <C>              <C>
          Laboratory equipment                                $   1,349,000    $  1,803,000
          Office equipment                                           94,000         177,000
          Leasehold improvements                                    306,000         306,000
                                                              --------------------------------
                                                                  1,749,000       2,286,000
          Less accumulated depreciation and amortization         (1,635,000)     (2,205,000)
                                                              --------------------------------
                                                              $     114,000    $     81,000
                                                              ================================
</TABLE>


Depreciation expense was $57,000 and $156,000 for the years ended December 2003
and 2002, respectively. During the year ended December 31, 2003, the Company
wrote-off fully depreciated assets in the amount of $626,000 for assets no
longer in service.

3.  Rent Receivable

The Company subleases 6,183 square feet of its office and research facilities
under a month to month arrangement for $13,108 per month. Since December 2002,
the sub-lessee has not been able to make monthly rental payments due to a lack
of funding. At December 31, 2003, the amount due from the sub-lessee is
$184,527. Based on the sub-lessee's expectation to receive funding by April
2004, the Company believes that this amount is fully collectible and, therefore,
no reserve has been provided.


                                      F-17
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


4.  Accrued Expenses

Accrued expenses consist of the following:

                                                        December 31,
                                                   2003           2002
                                             ---------------------------------
           Payroll and employee benefits          $132,000        $113,000
           Legal and professional fees              22,000          31,000
           Property Tax                              9,000          11,000
           Other                                         -           7,000
                                             ---------------------------------
              Accrued expenses                    $163,000        $162,000
                                             =================================
5.  Stockholders' Equity

Convertible Preferred Stock

On March 25 and May 12, 2003, we raised a total of $3,255,000 (less expenses)
from the sale of 32,550 shares of our Series I Convertible Preferred Stock
("Series I Stock") priced at $100 per share, with warrants to purchase an
aggregate of 2,582,669 shares of common stock to a small group of institutional
and accredited investors. Each share of Series I Stock is convertible at any
time at the election of the holder into approximately 181 shares of common stock
at a conversion price of $0.55 per share, subject to certain anti-dilution
adjustments. In connection with this transaction, we recorded a non-cash
"imputed dividend" expense of $1,928,237 in order to account for the difference
between the fair market value of the common stock and the conversion price of
the preferred stock into common stock.

Each share of Series I Stock received two common stock warrants. One warrant is
exercisable at any time for approximately 27 shares of common stock at an
exercise price of $0.88 per share, and expires 18 months after the close of the
offering; the other warrant is exercisable at any time for approximately 18
shares of common stock at an exercise price of $1.65 per share, and expires 48
months after the close of the offering. In connection with the issuance of the
Series I Stock, additional warrants to purchase 819,543 shares of common stock
at an exercise price of $0.65 per share, expiring 18 months after the close of
the offering were issued, as well as warrants to purchase 204,998 shares of
common stock at an exercise price of $0.58 per share, warrants to purchase
27,340 shares of common stock at an exercise price of $0.68 per share, warrants
to purchase 30,748 shares of common stock at an exercise price of $0.92 per
share and warrants to purchase 20,500 shares of common stock at an exercise
price of $1.73 per share, each expiring 5 years after the close of the offering.

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.


                                      F-18
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


5. Stockholders' Equity (continued)

On July 24, 2001, the Company had a private placement of 12,182 shares of Series
H convertible Preferred Stock and warrants to purchase an aggregate of 304,550
shares of common stock with a small group of institutional and accredited
investors in exchange for cash and convertible notes totaling $1.2 million. Each
share of Series H Preferred Stock is convertible at any time at the election of
the holder into 133.33 shares of common stock at a conversion price of $0.75 per
share, subject to certain anti-dilution adjustments. No underwriters were
engaged by the Company in connection with such issuance and, accordingly, no
underwriting discounts were paid. The offering was 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.

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.

During March 2001, the Company 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 Stock at a common equivalent price of $0.75 per share. The notes
were converted in July 2001.

On August 16, 1999, the Company received $1,775,000 for 17,750 shares of Series
G Preferred Stock from several institutional and accredited individual
investors. On September 15, 1999, the Company received an additional $325,000
for 3,250 shares of Series G Preferred Stock, for a total of $2,100,000. Each
share of Series G Convertible Preferred Stock was priced at $100 per share. Each
share can be converted at any time by the holder into common stock at a price of
$0.50 per share, subject to certain antidilution adjustments. Each share of
Preferred Stock also receives a common stock warrant, exercisable for 12 months,
that allows the holder to acquire 200 shares of PPTI common stock at a price of
$0.50 per share.

In April 1999, the Company received approximately $508,000 from the exercise of
redeemable publicly traded warrants originally issued as part of PPTI's Initial
Public Offering. Following the close of business on April 15, 1999, the
remaining unexercised redeemable, publicly traded, warrants expired. On May 12,
1999, the Company received approximately $416,000 from the exercise of warrants
issued in conjunction with the private placement of the Company's Series E
Convertible Preferred Stock.

In 1998, the Company raised approximately $5.4 million from the sale of 54,437
shares of Series E Convertible Preferred Stock ("Series E Stock") priced at $100
per share, with warrants to purchase an aggregate of 3,266,250 shares of common
stock to a small group of institutional and accredited investors. In connection
with this transaction, the Company recorded a non-cash "imputed dividend"
expense of


                                      F-19
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


5. Stockholders' Equity (continued)

$3,266,250 in order to account for the difference between the fair market value
of the common stock and the conversion price of the preferred stock into common
stock.

Each share of Series E Stock was convertible at any time at the election of the
holder into 80 shares of common stock at a conversion price of $1.25 per share,
subject to certain antidilution adjustments. In March 2003, the Company offered
the holders of Series E Convertible Preferred Stock a reduction in the
conversion price to $0.50 per share with the provision that all holders of the
Series E Convertible Preferred stock agree to convert. As a result, all of the
shares of Series E Convertible Preferred Stock were converted into common stock.
Each share of Series E Stock received two common stock warrants. One warrant is
exercisable at any time for 40 shares of common stock at an exercise price of
$2.50 per share, and expired approximately 18 months after the close of the
offering; the other warrant was exercisable at any time for 20 shares of common
stock at an exercise price of $5.00 per share, and expired approximately 36
months after the close of the offering. In addition, an 18 month warrant to
acquire 200,000 common shares exercisable at $2.50 per share and a 36 month
warrant to acquire 100,000 common shares exercisable at $5.00 per share were
issued as a finder and document review fee paid to a lead investor. These
warrants have now expired. An 18 month warrant to acquire 32,000 common shares
exercisable at $2.50 per share, a 24 month warrant to acquire 16,000 common
shares exercisable at $5.00 per share, and 5 year warrants to acquire an
aggregate of 25,200 common shares exercisable at $2.50 per share were issued to
certain persons for service as finders in relation to the private placement. The
18 month and 24 month warrants have now expired.

In connection with the above private placement, the Company issued 26,420 shares
of its Series F Convertible Preferred Stock ("Series F Stock") in exchange for
the same number of shares of outstanding Series D Convertible Preferred Stock
("Series D Stock").

Each share of Series D and F Stock earns a cumulative dividend at the annual
rate of $10 per share, payable if and when declared by the Company's Board of
Directors, in the form of cash, common stock or any combination thereof. The
Series D and F Stock are convertible into common stock after two years from the
date of issuance at the holder's option. The conversion price at the time of
conversion is the lesser of $3.75 or the market price. The Series D and F Stock
are redeemable at the Company's option after four years from the date of
issuance. Automatic conversion of all of the Series D and F Stock will occur if:
(a) the Company completes a public offering of common stock at a price of $2.50
or higher; or (b) the holders of a majority thereof elect to convert. The
Company has the option to demand conversion of the Series D and F Stock if the
average market price of its common stock equals or exceeds $5.00 per share over
a period of twenty business days. The Series D and F Stock have a liquidation
preference of $100 per share plus accumulated dividends.

Series D, F, and H Convertible Preferred Stock have been designated as
non-voting stock.


                                      F-20
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


5. Stockholders' Equity (continued)

Exercise and Exchange of Warrants

In June 2003, certain holders of warrants exercised their warrants to purchase
common stock, these warrants were due to expire in August 2003. The exercise
prices of such warrants were $0.40 and $0.10 per share. As an incentive to
exercise the warrant early the Company offered each holder the issuance of a new
warrant, for a similar number of shares, at an exercise price of $0.55 per
share. As a result, the Company raised $353,500, through the exercise of
2,590,000 previously outstanding warrants, and issued 2,590,000 new warrants
that will expire on March 26, 2004. In connection with the issuance of new
warrants to the investors, the Company recorded an imputed dividend in the
amount of $656,342 to reflect the additional benefit created for these
investors.

In August 2002, 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 August 2003. The original exercise price was $0.40
per share. As an incentive to exercise the warrant early, the Company offered
each holder a reduced exercise price of $0.30 per share and the issuance of a
new warrant for a similar number of shares at an exercise price of $0.10 per
share. As a result, the Company raised $683,000.

During January 2002, 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 2002. The original exercise price was
$0.50 per share. As an incentive to exercise the warrant early, the Company
offered each holder a reduced exercise price of $0.25 and the issuance of a new
eighteen month warrant for a similar number of shares at an exercise price of
$0.40 per share. As a result the Company raised $990,000.

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 Company's Board of Directors originally until February 2002. The original
exercise price was $1.50 per share. As an incentive 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).

Employee Stock Purchase Plan

In September 1996 the Company established the Protein Polymer Technologies,
Inc., Employee Stock Purchase Plan ("Plan"). The Plan commenced January 2, 1997,
and allows for offering periods of up to two years with quarterly purchase dates
occurring the last business day of each quarter. The purchase price per share is
generally calculated at 85% of the lower of the fair market value on an eligible
employee's entry date or the quarterly purchase date. The maximum number of
shares available for issuance under the Plan is 500,000; an eligible employee
may purchase up to 5,000 shares per quarter. The Plan Administrator consists of
a committee of at least two non-employee directors of the Company. The Company's
Board of Directors may modify the Plan at any time. During 2003, a total of
20,504 shares were purchased under the Plan at prices ranging from $0.44 to
$0.55. The value of shares issued under the Plan as calculated in accordance
with Statement 123 is not significant and is not included in the following pro
forma information.


                                      F-21
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


5. Stockholders' Equity (continued)

Stock Options

In June 1996, the Company adopted the 1996 Non-Employee Directors Stock Option
Plan ("1996 Plan"), which provides for the granting of nonqualified options to
purchase up to 250,000 shares of common stock to directors of the Company. In
April 2003, the 1996 Plan was amended to increase the number of options
available for grant to 1,750,000, and the annual award to each Director to
80,000. Such grants of options to purchase 80,000 shares of common stock are
awarded automatically on the first business day of June during each calendar
year to every Participating Director then in office, subject to certain
adjustments. No Participating Director is eligible to receive more than one
grant per year. The purchase price of each option is set at the fair market
value of the common stock on the date of grant. Each option has a duration of
ten years, and is exercisable six months after the grant date. The Company's
Board of Directors (or a designated committee of the Board) administers the 1996
Plan. At December 31, 2003, 729,950 options to purchase common stock have been
granted under the 1996 Plan with 729,950 options exercisable. In April 2002, the
Company adopted the 2002 Stock Option Plan, which provides for the issuance of
incentive and non-statutory stock options for the purchase of up to 1,500,000
shares of common stock to its key employees and certain other individuals. In
April 2003, the plan was amended to increase the number of options available for
grant to 9,000,000. The options will expire ten years from their respective
dates of grant. Options become exercisable ratably over periods of up to three
years from the dates of grant. The purchase price of each option approximated
the fair market value of the common stock on the date of grant. At December 31,
2003, 5,848,500 options to purchase common stock had been granted under the 2002
plan with no options exercisable yet.

The Company adopted the 1992 Stock Option Plan, which provides for the issuance
of incentive and non-statutory stock options for the purchase of up to 1,500,000
shares of common stock to its key employees and certain other individuals. The
1992 Stock Option Plan expired as of December 31, 2002. The options granted will
expire ten years from their respective dates of grant. Options become
exercisable ratably over periods of up to five years from the dates of grant.
The purchase price of each option approximated the fair market value of the
common stock on the date of grant. At December 31, 2003, options to purchase
969,400 shares of common stock were exercisable.

The Company adopted the 1989 Stock Option Plan, which provided for the issuance
of incentive and non-statutory stock options for the purchase of up to 500,000
shares of common stock to key employees and certain other individuals. The 1989
Stock Option Plan expired as of March 17, 1999. The options granted will expire
ten years from their respective dates of grant. Options granted in the plan
became exercisable ratably over periods of up to five years from the date of
grant. At December 31, 2003, options for 302,500 shares were exercisable.
Since inception, the Company has granted non-qualified options outside the
option plans to employees, directors and consultants. At December 31, 2003,
options for 724,050 shares were exercisable.


                                      F-22
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


5. Stockholders' Equity (continued)

The following table summarizes the Company's stock option activity:


<TABLE>
<CAPTION>


                                                   Years ended December 31,
                          ---------------------------------------------------------------------------------
                                   2003                      2002                          2001
                          ------------------------  --------------------------  ---------------------------
                                         Weighted                    Weighted                    Weighted
                                         Average                     Average                     Average
                                         Exercise                    Exercise                    Exercise
                            Options       Price        Options        Price       Options         Price
                          -------------  ---------  --------------  ----------  -------------  ------------
<S>                         <C>            <C>         <C>             <C>        <C>            <C>
 Outstanding - beginning
        of year             2,605,500      $0.90       2,124,000       $1.09      1,917,000      $1.22

     Granted                6,988,500      $0.71         692,500       $0.35        521,500      $0.70
     Exercised                 (2,000)     $0.30         (28,500)      $0.35         (3,500)     $0.47
     Forfeited/Expired              -        -          (182,500)      $1.05       (311,500)     $1.21
                          -------------  ---------  --------------  ----------  -------------  ------------

 Outstanding - end of year  9,592,000      $0.76       2,605,500       $0.90      2,124,000      $1.09
                          =============  =========  ==============  ==========  =============  ============

 Exercisable - end of year  2,725,900      $0.91       1,936,000       $1.01      1,568,300      $1.23
                          =============  =========  ==============  ==========  =============  ============
</TABLE>


The exercise prices for options outstanding as of December 31, 2003 range from
$0.22 to $3.75. The weighted average remaining contractual life of these options
is approximately 8.42 years.

6.  Stockholder Protection Agreement

In 1997, the Company's Board of Directors adopted a Stockholder Protection
Agreement ("Rights Plan") that distributes Rights to stockholders of record as
of September 10, 1997. The Rights Plan contains provisions to protect
stockholders in the event of an unsolicited attempt to acquire the Company. The
Rights trade together with the common stock, and generally become exercisable
ten business days after a person or group acquires or announces the intention to
acquire 15% or more of the Company's outstanding shares of common stock, with
certain permitted exceptions. The Rights then generally allow the holder to
acquire additional shares of the Company's capital stock at a discounted price.
The issuance of the Rights is not a taxable event, does not affect the Company's
reported earnings per share, and does not change the manner in which the
Company's common stock is traded.

7   Commitments

The Company leases its office and research facilities totaling 27,000 square
feet under an operating lease, which expires in May 2008. The facilities lease
is subject to an annual escalation based upon the Consumer Price Index in 2004
and an adjustment of one hundred two percent (102%) of the previous year's rent
annually from 2005 through 2008. The lease provides for deferred rent payments;
however, for financial purposes rent expense is recorded on a straight-line
basis over the term of the lease. Accordingly, deferred


                                      F-23
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


7. Commitments (continued)

rent in the accompanying balance sheet represents the difference between rent
expense accrued and amounts paid under the lease agreement.

Annual future minimum operating lease payments are as follows:
                             Year Ending                     Operating
                            December 31,                       Leases
                            ------------                 ----------------
                               2004                          $ 656,000
                               2005                            673,000
                               2006                            686,000
                               2007                            699,000
                               2008                            713,000
                                                         ----------------
             Total minimum operating lease payments        $3,427,000
                                                         ================
Rent expense, net of rental income, was approximately $478,000, $457,000,
$380,000, and $5,320,000 for the years ended December 31, 2003, 2002 and 2001
and for the period July 6, 1988 (inception) through December 31, 2003,
respectively. Rental income was approximately $157,000, $163,000 and 219,000 for
the years ended December 31, 2003, 2002 and 2001, respectively and $604,000 for
the period July 6, 1988 (inception) through December 31, 2003.
8.  Income Taxes

At December 31, 2003, the Company had net operating loss carryforwards of
approximately $38,996,036 for federal income tax purposes, which may be applied
against future income, if any, and will begin expiring in 2004 unless previously
utilized. In addition, the Company had California net operating loss
carryforwards of approximately $15,252,124, which will begin expiring in 2004.
The difference between the tax loss carryforwards for federal and California
purposes is attributable to the capitalization of research and development
expenses for California tax purposes, certain limitations in the utilization of
California loss carryforwards, and the expiration of certain California tax loss
carryforwards.

The Company also has federal and California research and development tax credit
carryforwards of approximately $1,600,497 and $887,403, respectively, which will
begin expiring in 2004 unless previously utilized.

Some of these carryforward benefits may be subject to limitations imposed by the
Internal Revenue Code. The Company believes these limitations will not prevent
carryforward benefits from being realized.


                                      F-24
<PAGE>


                       Protein Polymer Technologies, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements


8. Income Taxes (continued)

Significant components of the Company's deferred tax assets as of December 31,
2003 are shown below. A valuation allowance of $16,931,000 has been recognized
to offset the deferred tax assets as realization of such assets is uncertain.
                                                     2003            2002
                                                --------------------------------
       Deferred tax assets:
       Net operating loss carryforwards          $ 14,526,000    $ 13,628,000
       Research and development credits             2,177,000       1,973,000
       Other, net                                     228,000         234,000
                                                --------------------------------
       Total deferred tax assets                   16,931,000      15,835,000
       Valuation allowance for deferred           (16,931,000)    (15,835,000)
       tax assets                               --------------------------------
       Net deferred tax assets                   $           -    $          -
                                                ================================
9.  Employee Benefits Plan

On January 1, 1993, the Company established a 401(k) Savings Plan for
substantially all employees who meet certain service and age requirements.
Participants may elect to defer up to 20% of their compensation per year,
subject to legislated annual limits. Each year the Company may provide a
discretionary matching contribution. As of December 31, 2003, the Company had
not made a contribution to the 401(k) Savings Plan.


                                      F-25
<PAGE>


                                    SIGNATURE


        In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                       PROTEIN POLYMER TECHNOLOGIES, INC.

March 30, 2005                           By:/s/ J. Thomas Parmeter
                                         ---------------------------
                                            J. Thomas Parmeter
                                            Chairman of the Board, Chief
                                            Executive Officer, President

       In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


Signature                     Capacity                                Date

/s/ J. Thomas Parmeter        Chairman of the Board, Chief        March 30, 2005
---------------------         Executive Officer, President
J. Thomas Parmeter            (Principal Executive Officer)

/s/ Janis Y. Neves            Director of Finance, Controller,    March 30, 2005
---------------------         and Secretary
Janis Y. Neves                (Principal Financial Officer)

/s/ Edward G. Cape            Director                            March 29, 2005
---------------------
Edward G. Cape

/s/ Donald S. Kaplan          Director                            March 30, 2005
---------------------
Donald S. Kaplan

/s/ Kerry L. Kuhn             Director                            March 30, 2005
---------------------
Kerry L. Kuhn

/s/ Steven M. Lamon           Director                            March 30, 2005
---------------------
Steven M. Lamon

/s/ Steve Peltzman            Director                            March 29, 2005
---------------------
Steve Peltzman

/s/ William N. Plamondon      Director                            March 30, 2005
---------------------
William N. Plamondon


                                       8
<PAGE>


                                  EXHIBIT INDEX


     23.1    Consent of Peterson & Co., Independent Registered Public Accounting
             Firm.
     31.1    Certification of Chief Executive Officer pursuant to
             Securities Exchange Act Rules 13a- 14(a)/15d-14(a), as adopted
             pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     31.2    Certification of Director of Finance (Principal Financial
             Officer) pursuant to Securities Exchange Act Rules 13a-
             14(a)/15d-14(a), as adopted pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002
     32.1    Certification of Chief Executive Officer and Director of
             Finance (Principal Financial Officer) pursuant to 18 U.S.C.
             Section 1350, as adopted pursuant to Section 906 of the
             Sarbanes-Oxley Act of 2002.