UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C.   20549 FORM 10-Q x
  QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001OR ̈
  TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission
  File Number: 0-21022 SHAMAN PHARMACEUTICALS, INC.(Exact name of registrant as specified in
its charter) Delaware
  94-3095806(State or other
  jurisdiction of incorporation or organization)
  (I.R.S. Employer
  Identification Number)213 East Grand Avenue, South San Francisco, CA
  94080(Address of principal
  executive offices)
  (ZIP Code)
 Registrant's telephone number, including
area code:  650-952-7070 Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 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. YesxNo ̈ Number of shares of Common Stock, $.001
par value, outstanding as of May 11, 2001: 
103,464,136   SHAMAN PHARMACEUTICALS, INC.

INDEX FOR FORM 10-Q

March 31, 2001



PART I
  FINANCIAL INFORMATIONItem
  1.
  Financial
  Statements and NotesStatements of
  Net Assets in Liquidation as of March 31, 2001 (unaudited) and December 31,
  2000Statements of Operations for
  the three months ended March 31, 2001 and March 31, 2000 (unaudited)Condensed Statements
  of Cash Flows for the three months ended March 31, 2001 and March 31, 2000
  (unaudited)Notes
  to Condensed Financial StatementsItem
  2.
  Managements
  Discussion and Analysis of Financial Condition and Results of OperationsItem
  3.
  Quantitative
  and Qualitative Disclosures About Market RiskPART II
  OTHER
  INFORMATIONItem 1.
  Legal ProceedingsItem
  2.
  Changes
  in Securities; Use of ProceedsItem 3.
  Defaults in
  Senior SecuritiesItem
  4.
  Submission
  of Matters to a Vote of Security HoldersItem 5.
  Other InformationItem 6.
  Exhibits
  and Reports on Form 8-KSIGNATURES

All information contained in this
Report on Form 10-Q reflects a 1-for-20 reverse stock split of the common stock
effected on June 22, 1999 and a 1-for-50 reverse stock split of the common
stock effected on January 31, 2000.

PART I   FINANCIAL INFORMATION

SHAMAN PHARMACEUTICALS, INC.
(Debtor-In-Possession)STATEMENTS OF NET ASSETS IN
LIQUIDATION

Statements of Net AssetsIn
  Liquidation As OfMarch 31, 2001
  December 31, 2000A S S
  E T S
  (unaudited)Current
  assets:Cash and cash equivalents
  $92,353
  $75,285Restricted cash
  -
  214,186Accounts receivable
  18,992
  36,600Property and equipment, net, held for
  sale
  19,444
  1,159,389Lease receivable
  684,759
  -Other assets
  126,164
  190,032Total assets
  $941,712
  $1,675,492LIABILITIES, PREFERRED STOCK, AND STOCKHOLDERS DEFICIENCYLiabilities not subject to compromise:Accounts payable and other accrued
  expenses
  $335,496
  $1,307,290Bridge loans
  561,845
  780,000Deferred gain on lease assignment
  226,722
  -Accrued reorganization costs
  448,942
  1,000,000Accrued clinical trial costs
  -
  627,882Accrued professional fees
  -
  713,702Accrued compensation
  -
  268,133Accrued interest
  -
  144,375Accrued restructuring costs
  -
  1,800,000Liabilities subject to compromise
  7,324,106
  -Current installments of long-term
  obligations
  -
  2,821,980Total liabilities
  8,897,111
  9,463,362Preferred stock
  2,192,000
  2,197,000Stockholders
  deficiency:Common stock
  103,464
  102,226Additional paid-in capital
  193,141,185
  193,127,430Deferred compensation and other
  adjustments
  (404,478)
  (476,536)Accumulated deficit
  (202,987,570)
  (202,737,990)Total stockholders deficiency
  (10,147,399)
  (9,984,870)Total liabilities and stockholders
  deficiency
  $941,712
  $1,675,492NOTE:  The statement
of net assets in liquidation at December 31, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.

See Notes to condensed financial statements.

SHAMAN PHARMACEUTICALS, INC.
Debtor-In-PossessionSTATEMENTS OF OPERATIONS
(UNAUDITED)

Three
  Months Ended March 31,2001
  2000Revenues:Product Sales
  $31,858
  $52,869License agreements
  200,000
  -Total revenues
  231,858
  52,869Operating expenses:Cost of goods sold
  -
  13,366Research and development
  -
  993,161Marketing, general and administrative
  490,667
  1,221,135Restructuring costs
  -
  -Total operating expense
  490,667
  2,227,662Loss from operations
  (258,809)
  (2,174,793)Interest income
  -
  16,193Interest expense  (cash) (contractual interest $65,065 for
  the quarter in 2001)
  (21,645)
  (153,519)Interest expense (non-cash)
  -
  (2,880,161)Gain from lease assignment and sales
  of fixed assets
  30,874
  -Net (loss)
  (249,580)
  (5,192,280)Preferred  Stock dividends
  -
  (2,478,520)Net loss applicable to common
  stockholders
  $(249,580)
  $(7,670,800)Basic and diluted net loss per common
  share
  -
  (0.32)Shares used in the calculation of
  basic  and diluted net loss per common
  share
  102,465,183
  24,217,000See Notes to condensed financial statements.

SHAMAN PHARMACEUTICALS, INC.
Debtor-In-PossessionCONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)

Three
  Months Ended March 31,2001
  2000Operating activities:Net loss
  $(249,580)
  $(5,192,280)Adjustments to
  reconcile net loss applicable to Common Stockholders to net cash used in
  operating activities:Depreciation
  149,705
  169,574Amortization of deferred
  compensation
  72,058
  -Gain from assignment of lease and
  sales of fixed assets
  (30,875)
  -Non cash interest expense on
  amortization of debt discounts and beneficial conversion
  -
  2,870,455Reorganization costs
  (551,058)
  -Payment of interest in Common Stock
  -
  13,947Issuance of  convertible promissory notes to
  consultants for services rendered
  -
  150,000Changes in operating assets and
  liabilities:Trade accounts receivable
  17,608
  8,353Inventory
  -
  (160,608)Prepaid expenses, current
  assets and other assets
  63,868
  (76,831)Accounts payable, accrued professional fees, accrued
  compensation, accrued clinical trial costs and deferred gain
  57,639
  (150,703)Net cash used in
  operating activities
  (470,635)
  (2,368,093)Investing activities:Proceeds from sales of fixed assets
  16,703
  -Capital expenditures
  -
  (7,337)Employee loans, net of repayments
  and forgiveness of interest
  -
  13,023Net cash provided by
  investing activities
  16,703
  5,686Financing activities:Proceeds from issuance of secured
  promissory notes
  461,000
  -Other Preferred Stock costs
  -
  (18,143)Proceeds from exercise of stock
  options and warrants
  10,000
  739,670Principal payments on long-term
  obligations
  -
  (651,412)Proceeds from the issuance of
  convertible notes
  -
  3,350,000Net cash provided by
  financing activities
  471,000
  3,420,115Net increase in cash
  and cash equivalents
  17,068
  1,057,708Cash and cash equivalents
  at beginning of period
  75,285
  1,171,798Cash and cash
  equivalents at end of period
  $92,353
  $2,229,506See Notes to condensed financial statements.

SHAMAN PHARMACEUTICALS, INC.
(Debtor-In-Possession)

NOTES TO FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)

(1)Reorganization and Basis of Presentation

On
January 5, 2001, we filed a Chapter 11 reorganization petition (the
Reorganization) for protection under federal bankruptcy law in the United
States Bankruptcy Court, Northern District of California (San Francisco) (the
Bankruptcy Court).  As part of this
Reorganization, we have petitioned the Bankruptcy Court to sell certain of the
tangible and intellectual property assets of the Company in order to generate
sufficient funds to pay existing, qualified creditors.  In addition, we anticipate filing our Plan
of Reorganization with the Bankruptcy Court sometime in the second quarter of
2001.  We believe this plan will give us
the best chance to the maximize value of specified products and/or assets
currently in Shaman.  A more detailed
discussion of the Reorganization will be available in our plan to be filed
sometime in the second quarter of 2001.

As
a result of our Chapter 11 petition, we are operating as a Debtor-In-Possession
under the Untied States Bankruptcy Code (the Code), which protects us from
our creditors pending reorganization under the jurisdiction of the Bankruptcy
Court.  As Debtor-In-Possession, we are
authorized to operate our business but may not engage in transactions outside the
ordinary course of business without approval from the Bankruptcy Court.  As part of the Reorganization process, we
have attempted to notify all known or potential creditors of the Chapter 11
filing for the purpose of identifying all pre-petition claims.

In
the Chapter 11 case, substantially all of our liabilities as of the filing date
are subject to settlement under a plan of reorganization.  Generally, actions to enforce or otherwise
effect repayment of all pre-petition liabilities as well as all pending
litigation against the Company are stayed while the Company continues its
business operations as a Debtor-In-Possession. 
The Company files schedules with the Bankruptcy Court setting forth our
assets and liabilities as of the filing date as reflected in the Companys
accounting records.  Differences between
amounts reflected in such schedules and claims filed by creditors will be
investigated and amicably resolved or adjudicated before the Bankruptcy Court.  The ultimate amount and settlement terms for
such liabilities are subject to a plan of reorganization, and accordingly, are
not presently determinable and may differ significantly from the amounts
currently recorded. Under the Code, the Company may elect to assume or reject
real estate leases, employment contracts, personal property leases, service
contracts and other executory pre-petition contracts, subject to Bankruptcy
Court review.  The Company cannot
presently determine or reasonably estimate the ultimate liability that may
result from rejecting leases or from filing of claims for any rejected
contracts, and no provisions have been made for these items.

The
Companys financial statements have been prepared in accordance with the
American Institute of Certified Public Accountants (AICPA) Statement of
Position 90-7 (SOP 90-7), Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code.  In
addition, the financial statements have been prepared using accounting
principles applicable to a liquidation, as the Company is in the process of
selling off the majority of its assets. 
All assets in the accompanying financial statements have been stated at
estimated realizable values based on the lower of managements best estimate of
market or cost.  Similarly, liabilities
have been reflected at estimated settlement amounts, with those secured by
specific assets being offset against such assets.  The estimated realizable values and settlement amounts may be
different from the proceeds ultimately received or payments made. As a result
of the Chapter 11 filing, such realization of assets and liquidation of
liabilities is subject to uncertainty. Certain accounting and business
practices have been adopted that are applicable to companies that are operating
under Chapter 11.

The
statements include reclassifications made to reflect the liabilities which have
been deferred under the Chapter 11 proceedings as Liabilities Subject to
Compromise.  As a result of the
Reorganization, liabilities in the amount of $7.3 million are subject to
compromise under the Plan of Reorganization. 
The composition of the liabilities subject to compromise is outlined
below:

Liabilities subject
  to CompromiseAccount
  Payable and accruals
  $2,805,000Notes
  payable
  2,596,000Contacts
  payable
  1,800,000Interest
  payable
  123,0007,324,000While
management believes the Company has made adequate provision for the liabilities
to be incurred in connection with Chapter 11 claims, there can be no assurance
as to the amount of the ultimate liabilities, the impact of such liabilities on
a plan of reorganization or how such liabilities will be treated in a plan of
reorganization.

We
anticipate filing our Plan of Reorganization with the Bankruptcy Court during
the second quarter of 2001.  We believe
this plan will give us the best chance to maximize the value of specified
products and/or assets currently in Shaman. 
We anticipate the sale of a majority of Shaman's assets, to include both
tangible and intellectual property assets. 
Assets to be sold may include Shamans public shell and associated net
operating losses, pharmaceutical and dietary supplement patents and trademarks,
plant material and rights to products currently in the product development
pipeline.  Shaman is winding down its
business and selling off its assets.  This
wind-down is expected to be completed in mid-2001.

Shaman
anticipates receiving cash ranging from $1.5 million to $10.0 million from the
sales of the tangible and intellectual property assets.  These amounts include the $1.0 million
received in April 2001 from the assignment of our master lease. The high end of
the range could be achieved if a "purchaser" of Shaman's public shell
were able to realize and compensate Shaman for utilization of its approximately
$175 million of Net Operating Loss carry-forwards.  No assurance can be provided that such a purchase will be
identified or that proceeds received by Shaman will exceed those already
received.

Managements
estimate of expenditures, for which a provision has been recorded at December
31, 2000, to be incurred in connection with the Reorganization through June 30,
2001 is as follows (in thousands):

Category
  Estimated
  Expenditures
  Net
  Cash
  Outflow
  Accrued
  Balance
  at March 31,
  2001Salaries and benefits
  $800
  453
  347Legal costs
  120
  65
  55Other professional
  fees
  80
  33
  47Total
  $1,000
  551
  449Unless
we are successful in our efforts to sell both tangible and intellectual
property assets, we will be unable to fund our current operations beyond second
quarter of 2001, which may result in the cessation of operations.   Even if we are successful in these efforts
to sell both tangible and intellectual property assets, such funds may not be
adequate to fund our operations on a long-term basis as cash resources will be
used to satisfy our existing liabilities.

The
accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X.  Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.  In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included.  The results of operations for the interim periods shown herein
are not necessarily indicative of operating results for the entire year. This
unaudited financial data should be read in conjunction with the audited
financial statements and notes thereto included in our Annual Report on Form
10-K and 10-K/A for the fiscal year ended December 31, 2000.

2. Secured Bridge Promissory Notes

In
January 2001, Shaman executed Secured Bridge Promissory Notes  (the Bridge Notes) in the aggregate amount
of $278,000 in favor of certain of its officers, directors, stockholders and
outside non-bankruptcy legal counsel. 
Each Bridge Note bore interest at the annual rate of 6.35% per annum and
was due and payable on or before March 5, 2001.  Each Bridge Note was secured by a lien on certain assets of the
Company. The Bridge Notes were re-paid in April 2001.

Also
in January 2001, Shaman executed Secured Promissory Notes (the IP Notes) in
the aggregate amount of $561,845 (including the extension of some existing
indebtedness) in favor of certain of its officers, directors, and stockholders.
Each IP Note bears interest at the annual rate of 6.3% per annum and is due and
payable on or before June 20, 2001. 
Each IP Note is secured by Shamans SP-303 property.  The proceeds of both the Bridge Notes and
the IP Notes will be used to finance operations during the commencement of
bankruptcy proceedings and to pay the costs of the bankruptcy.

In
February 2001, with the approval of the Bankruptcy Court, Shaman borrowed
$188,000 from a related party.  The note
bore interest at the annual rate of 10% per annum and was due and payable on or
before April 1, 2001.  The note was
secured by Shamans SP-303 and Diabetes intellectual properties. The note was
re-paid in April 2001.

3. Assumption and Assignment Lease

In
March 2001, Shaman entered into an agreement with Tularik, Inc. wherein Shaman
agreed to assign the Industrial Lease Agreement dated January 1, 1993, as
amended (the Lease) to Tularik.  The
lease receivable is reflected on the balance sheet net of the notes payable
secured by the proceeds from the lease assignment.  In April 2001, Tularik paid Shaman approximately $1.1 million for
the assignment of the Lease.  Pursuant
to this agreement, Tularik will lease space in this building back to Shaman
without cost for six months. 
Accordingly, the excess of the lease assignment proceeds over the
carrying value of leasehold improvements has been recorded as a deferred gain,
which will be recognized ratably over the six-month period.

4. License and Sales Agreement

In
March 2001, Shaman amended the License and Sale Agreement between Shaman and
Metabolex, Inc. entered into in August 1999, whereby Metabolex Inc. will have
additional commercialization rights, including the Nutritional Area but not
including the area of Dietary Supplements with the exception of one previously
licensed technology, made in October 1999, for which commercialization rights
for dietary supplements was granted. 
Also in March 2001, Shaman entered into an Asset Purchase Agreement with
Metabolex, whereby Metabolex purchased, for $200,000, certain diabetes related
assets of plants, extracts and compounds for research.

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

Overview

Overview of
current business

We
are focused on the discovery, development and marketing of novel, proprietary
botanical dietary supplements derived from tropical plant sources.  In September 1999, we began implementing our
commercialization efforts.  Our
commercialization plans focus on the use of community building initiatives on
the Internet and other distribution channels and is based on marketing our
exclusive access to proprietary branded products.  We also have available for out-licensing a pipeline of botanical
product candidates, as well as novel pharmaceutical product candidates for
major human diseases developed by isolating active compounds from tropical
plants with a history of medicinal use.

Overview of
our new business plan and bankruptcy proceedings

On
January 5, 2001, we filed a Chapter 11 reorganization petition (the
Reorganization) for protection under federal bankruptcy law in the United
States Bankruptcy Court, Northern District of California (San Francisco) (the
Bankruptcy Court).  As part of this
Reorganization, we have petitioned the Bankruptcy Court to sell certain of the
tangible and intellectual property assets of the Company in order to generate
sufficient funds to pay existing, qualified creditors. We anticipate the sale
of certain Shaman assets to include both tangible and intellectual property
assets.  Assets to be sold may include
Shamans public shell and associated net operating losses, pharmaceutical and
dietary supplement patents and trademarks, plant material and rights to
products currently in the product development pipeline.  In addition, we anticipate filing our Plan
of Reorganization with the Bankruptcy Court sometime in the second quarter of
2001.  We believe this plan will give us
the best chance to maximize the value of specified products and/or assets
currently in Shaman.  A more detailed discussion
of the Reorganization will be available in our plan to be filed sometime in the
second quarter of 2001.

As
a result of our Chapter 11 petition, we are operating as a Debtor-In-Possession
under the Untied States Bankruptcy Code (the Code), which protects us from
our creditors pending reorganization under the jurisdiction of the Bankruptcy
Court.  As a Debtor-In-Possession, we
are authorized to operate our business but may not engage in transactions
outside the ordinary course of business without approval from the Bankruptcy
Court.  As part of the Reorganization
process, we have attempted to notify all known or potential creditors of the
Chapter 11 filing for the purpose of identifying all pre-petition claims.

In
the Chapter 11 case, substantially all of our liabilities as of the filing date
are subject to settlement under a plan of reorganization.  Generally, actions to enforce or otherwise
effect repayment of all pre-petition liabilities as well as all pending
litigation against the Company are stayed while the Company continues its business
operations as a debtor-in-possession. 
The Company files schedules with the Bankruptcy Court setting forth our
assets and liabilities as of the filing date as reflected in the Companys
accounting records.  Differences between
amounts reflected in such schedules and claims filed by creditors will be
investigated and amicably resolved or adjudicated before the Bankruptcy
Court.  The ultimate amount and
settlement terms for such liabilities are subject to a plan of reorganization,
and accordingly, are not presently determinable and may differ significantly
from the amounts currently recorded. Under the Code, the Company may elect to
assume or reject real estate leases, employment contracts, personal property
leases, service contracts and other executory pre-petition contracts, subject
to Bankruptcy Court review.  The Company
cannot presently determine or reasonably estimate the ultimate liability that
may result from rejecting leases or from filing of claims for any rejected
contracts, and no provisions have been made for these items.

Results of Operations for the Quarters Ended March 31, 2001
and 2000

Net
sales from our botanical dietary supplement products, Normal Stool Formula
(NSF) and Syn X Bar were $32,000 for the quarter ended March 31, 2001 and
$53,000 (NSF only) for the quarter ended March 31, 2000.

We
recorded license revenues of  $200,000
for the quarter ended March 31, 2001. 
No license revenues were recognized for the quarter in 2000.  Revenues for 2001 resulted from the sale of
certain diabetes related assets of plants, extracts and compounds to Metabolex,
Inc.

As
a result of the Reorganization, we incurred no research and development
expenses in the first quarter of 2001. We incurred  $993,000 in the first quarter of 2000, all of which was related
to product enhancement.

We
incurred marketing, general and administrative expenses of $486,000 and $1.2
million for the quarter ended March 31, 2001 and 2000, respectively.  These expenses include administrative
salaries, consulting, advertising, legal, travel and other operating expenses.
Marketing, general and administrative expenses decreased $735,000 in 2001
compared to 2000, and were primarily due to the Reorganization.

We
recorded no interest income for the quarter ended March 31, 2001.  Interest income was $16,000 for the quarter
ended March 31, 2000. Interest expense was $22,000 and $3.0 million for the
quarter ended March 31, 2001 and 2000, respectively.  Interest expense in 2000 was primarily due to a $3.0 million
non-cash interest expense related to beneficial conversion features and
warrants issued in connection with the issuance of convertible promissory
notes.

Reorganization and Restructuring Expenses

In
connection with the Plan of Reorganization discussed above and in Note 1 to the
Financial Statements, Shaman has recorded a provision of $1.0 million for costs
to be incurred during 2001 to execute this plan.

Managements
estimate of expenditures, for which a provision has been recorded at December
31, 2000, to be incurred in connection with the Reorganization through June 30,
2001 is as follows (in thousands):

Category
  Estimated
  Expenditures
  Net
  Cash
  Outflow
  Accrued
  Balance
  at March 31,
  2001Salaries and benefits
  $800
  453
  347Legal costs
  120
  65
  55Other professional
  fees
  80
  33
  47Total
  $1,000
  551
  449Shaman
anticipates receiving cash ranging from $1.5 million to $10.0 million from the
sales of our tangible and intellectual property assets.  These amounts include the $1.0 million
received in April 2001 from the assignment of our master lease. The high end of
the range could be achieved if a "purchaser" of Shaman's public shell
were able to realize and compensate Shaman for utilization of its approximately
$175 million of Net Operating Loss carry-forwards.  No assurance can be provided that such a purchase will be
identified or that proceeds received by Shaman will exceed those already
received.

On
February 1, 1999, we initiated a restructuring plan in which we closed down the
operations of our pharmaceutical business. The 1999 restructuring plan
included: cessation of pharmaceutical research and development activities and
related operations; outlicensing of all of our current pharmaceutical research
programs; reduction in force of approximately 60 employees (65% of workforce);
sale or disposal of all of our fixed assets that are not needed for our
botanicals business; and sub-lease of a portion of our facility.

The
termination of 60 employees occurred on February 1, 1999.  The following table summarizes Shamans
restructuring activities as of March 31, 2001 (in thousands).

Category
  Total
  Restructuring
  Charges
  Net
  Cash
  (Outflow)
  Inflow
  Non-Cash
  Items
  Accrued
  Balance at
  March 31, 2001Severance and related
  charges
  $325
  $(325)
  -
  $-Cancellation of
  contracts
  1,310
  (300)
  790
  1,800Lipha S.A. settlement
  of claims
  1,031
  (1,031)
  -
  -Gain on disposal of
  fixed assets
  (38)
  38
  -
  -Reversal of estimated
  liabilities related to pharmaceutical operations
  (450)
  -
  450
  -$2,178
  $(1,618)
  1,240
  $1,800At
June 30, 1999, we had approximately $969,000 recorded as deferred revenue in
connection with the advanced payment received from Lipha S.A. in December 1998,
which we had not yet earned.  In August
1999, we issued 133,334 shares of Series R Preferred Stock, having a value of
$2.0 million, to Lipha S.A. in partial settlement of claims made by Lipha S.A.
in connection with the Research Agreement. 
Out of the $2.0 million, we applied $969,000 to deferred revenue and the
balance to restructuring expenses. In December 1999, we entered into a
settlement agreement with Lipha S.A. for the discontinuation of the Research
Agreement. We will receive no further payments for research and development
from Lipha S.A.

Liquidity and Capital Resources

As
of March 31, 2001, our cash, cash equivalents and investments totaled
approximately $92,000, compared with $75,000 at December 31, 2000. We invest
excess cash according to our investment policy which provides guidelines with
regard to liquidity, type of investment, credit ratings and concentration
limits.

Cash
used in operating activities for the quarter ended March 31, 2001 of $471,000
was due primarily to the net loss of $250,000 plus additional Reorganization
costs of $551,000, offset by depreciation of $150,000. Cash used in investing
activities for the quarter ended March 31, 2001 was $17,000.  Cash provided by financing activities for
the quarter ended March 31, 2001 of $471,000 was due primarily to the issuance
of secured promissory notes.

In
March 2001, Shaman entered into an agreement with Tularik, Inc. wherein Shaman
agreed to assign the Industrial Lease Agreement dated January 1, 1993, as
amended (the Lease) to Tularik.  In
April 2001, Tularik paid Shaman approximately $1.1 million for the assignment
of the Lease.

In
March 2001, Shaman amended the License and Sale Agreement between Shaman and
Metabolex, Inc. entered into in August 1999, whereby Metabolex Inc. will have
additional commercialization rights, including the Nutritional Area but not
including the area of Dietary Supplements with the exception of one previously
licensed technology, made in October 1999, for which commercialization rights
for dietary supplements was granted. 
Also in March 2001, Shaman entered into an Asset Purchase Agreement with
Metabolex, whereby Metabolex purchased, for $200,000, certain diabetes related
assets of plants, extracts and compounds for research.

In
February 2001, Shaman borrowed $188,000 from a related party.  The note bears interest at the annual rate
of 10% per annum and is due and payable on or before April 1, 2001.  The note is secured by Shamans SP-303 and
Diabetes intellectual properties. The note was re-paid in April 2001.

In
January 2001, Shaman executed Secured Bridge Promissory Notes  (the Bridge Notes) in the aggregate amount
of $278,000 in favor of certain of its officers, directors, stockholders and
outside non-bankruptcy legal counsel. 
Each Bridge Note bears interest at the annual rate of 6.35% per annum
and is due and payable on or before March 5, 2001.  Each Bridge Note is secured by a lien on certain assets of the
Company. The Bridge Notes were re-paid in April 2001.

Also
in January 2001, Shaman executed Secured Promissory Notes (the IP Notes) in
the aggregate amount of $561,845 (including the extension of some existing
indebtedness) in favor of certain of its officers, directors and stockholders.
Each IP Note bears interest at the annual rate of 6.3% per annum and is due and
payable on or before June 20, 2001. 
Each IP Note is secured by Shamans SP-303 property.  The proceeds of both the Bridge Notes and
the IP Notes will be used to finance operations during the commencement of
bankruptcy proceedings and to pay the costs of the bankruptcy.

We
expect to continue to incur losses through 2001. We need substantial working
capital to fund our operations.   As of
March 31, 2001, we had cash and cash equivalents balances of approximately
$92,000. Additionally, we received approximately $1.1 million from the
assignment of our master lease in April 2001, of which we used approximately
$420,000 of the proceeds to pay off some of the secured promissory notes. On
January 5, 2001, Shaman filed a Chapter 11 reorganization petition for
protection under federal bankruptcy law. 
As part of the Reorganization, we have petitioned the Bankruptcy Court
to sell certain of the tangible and intellectual property assets in order to
generate sufficient funds to pay existing, qualified creditors.  In addition, we anticipate filing our Plan
of Reorganization with the Bankruptcy Court during the second quarter of
2001.  We believe this plan will give us
the best chance to maximize value of specified products and/or assets currently
in Shaman. We anticipate the sale of a majority of Shaman's assets, to include
both tangible and intellectual property assets.  Assets to be sold may include Shamans public shell and
associated net operating losses, pharmaceutical and dietary supplement patents
and trademarks, plant material and rights to products currently in the product
development pipeline. A more detailed discussion of the anticipated sale can be
found in our Application to employ Sutter Securities as a financial advisor to
sell our public shell and net operating losses and our Application to employ
DoveBid to sell our intellectual property filed with the Bankruptcy Court on March
22, 2001.  Unless we are successful in
our efforts to sell both tangible and intellectual property assets, we will be
unable to fund our current operations beyond the second quarter of 2001, which
may result in the cessation of operations.  
Even if we are successful in these efforts to sell both tangible and
intellectual property assets, such funds may not be adequate to fund our
operations on a long-term basis as cash resources will be used to satisfy our
existing liabilities.

Item 3. Quantitative and
Qualitative Disclosures About Market Risks

We
are exposed to market risk, including changes to interest rates.  A discussion of our accounting policies for
financial instruments and further disclosures relating to financial instruments
is included in the Summary of Significant Accounting Policies in the Notes to
Financial Statements.

Our
primary market risks include fluctuations in interest rates, variability in
interest rate spread relationships (i.e., Prime to LIBOR spreads).

We
believe that fluctuations in interest rates and currency exchange rates in the
near term would not materially affect our consolidated operating results,
financial position or cash flows as we have limited risks related to interest
rate fluctuations.

Certain Factors that May Affect Future Results

This Form 10–Q contains, in addition to
historical information, forward–looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties.  The Companys actual
results could differ materially from the results discussed in the forward–looking
statements.  Factors that could cause or
contribute to such differences include those discussed below and also in Risk
Factors, Managements Discussion and Analysis of Financial Condition and
Results of Operations, and elsewhere in our Form 10-K and Form
10-K/A  for the fiscal year ended
December 31, 1999.

Risks Associated with our Business

We recently filed for reorganization under the protection of
the Bankruptcy Courts.

In late 2000, the Company experienced a severe cash
shortage due to the inability to realize anticipated capital from the
assignment of our under-market property lease. 
In response to this lack of funding, we took immediate action to
restructure our organization and operations by filing in January 2001 a Chapter
11 reorganization petition for protection under federal bankruptcy law.  We currently operate our business as a
Debtor-In-Possession.  To the extent
that we are unable to effectuate the reorganization of our business, we may be
unable to fund our current operations beyond the second quarter of 2001, which
may result in the cessation of operations.

If we do not raise significant immediate capital, we will be
unable to fund continuing operations and will likely be forced to cease
operations

As
of March 31, 2001, we had cash and cash equivalents balances of approximately
$92,000. Additionally, we received approximately $1.1 million from the
assignment of our master lease in April 2001, of which we used approximately
$420,000 to pay off some of the secured debt. As described above, we filed a
Chapter 11 reorganization petition for protection under federal bankruptcy law.  As part of the Reorganization, we have
petitioned the Bankruptcy Court to sell certain of the tangible and
intellectual property assets in order to generate sufficient funds to pay
existing, qualified creditors.  In
addition, we anticipate filing a Plan of Reorganization with the Bankruptcy
Court during the second quarter of 2001. 
We believe this plan will give us the best chance to maximize value of
specified products and/or assets currently in Shaman.  Unless we are successful in our efforts to sell both tangible and
intellectual property assets, we will be unable to fund our current operations
beyond the second quarter of 2001, which may result in the cessation of
operations.   Even if we are successful
in these efforts to sell both tangible and intellectual property assets, such
funds may not be adequate to fund our operations on a long-term basis as cash
resources will be used to satisfy our existing liabilities.

We have a history of operating losses, expect continuing
losses and may never achieve profitability

We
have incurred significant losses in each year since our founding in 1989 and
expect to continue to incur losses for the foreseeable future.  We incurred a net loss of approximately
$250,000 for the quarter ended March 31, 2001. 
As of March 31, 2001, our accumulated deficit was approximately $203.0
million.

If
we are to become and remain profitable, we will first need to, among other
things, generate product revenues. To date, we have not generated any
significant product sales and do not anticipate generating significant product
sales in the near future.

Since we currently have no marketing staff, we may never
achieve adequate sales and revenues to achieve profitability

We
currently have no marketing staff, thus are unable to produce revenue to fund
our operations. We do not anticipate hiring marketing staff until our Plan of
Reorganization is successfully implemented and additional capital is in place.
There can be no assurance that either of these events will occur in a timely
fashion.

Product liability claims asserted against us in the future
could exceed our insurance coverage and result in substantial liability to
Shaman

Our
business exposes us to potential product liability risks that are inherent in
the development, testing, manufacture, marketing and sale of pharmaceutical and
dietary supplement products.  Product
liability insurance for the pharmaceutical and dietary supplement industries
generally is expensive.  Our present
product liability insurance coverage, which includes coverage for acts by third
parties, including manufacturers of our product candidates, may not be
adequate.  We will also need to increase
our insurance coverage as we further develop our products and we may be unable
to obtain adequate insurance coverage against all potential claims at a
reasonable cost.  Some of our
development and manufacturing agreements contain insurance and indemnification
provisions pursuant to which we could be held accountable for certain
occurrences.  If we are subject to
product liability claims for which we have inadequate insurance, we could be
required to use a large amount of cash, which would then not be available for
funding operations or development and commercialization of our products.

If we fail to protect our intellectual property rights, we
could lose our ability to stop competitors from using our trademarks or selling
our products

Our
success will be substantially dependent on our proprietary technology.  We rely primarily on a combination of
patent, copyright and trademark laws, trade secrets, confidentiality procedures
and contractual provisions to protect our intellectual property.  These means of protecting our proprietary
rights may not be adequate.  Our trademarks
are valuable assets that are very important to the marketing of our products.  Our policy is to pursue registrations for
all of the trademarks associated with our key products.  We currently have 21 U.S. patents issued and
10 U.S. patent applications pending. 
The pending patents may never be approved or issued.  Any issued patents may not provide
sufficiently broad protection or may not prove valid or enforceable in actions
against alleged infringers.  Others may
independently develop similar products, duplicate any of our products or design
around any of our patents.  In addition,
many foreign countries may not protect our products and intellectual property
rights to the same extent as the laws of the United States and there is
considerable variation between countries as to the level of protection afforded
under patents and other proprietary rights. 
Such differences may expose us to increased risks of commercialization
in each foreign country in which we may sell products.  We also depend on unpatented trade
secrets.  All of our employees have
entered into confidentiality agreements. 
However, others may independently develop substantially equivalent
information and techniques or otherwise gain access to our trade secrets.  Our trade secrets may be disclosed or we may
be unable to effectively protect our rights to unpatented trade secrets.  To the extent that we or our consultants or
research collaborators use intellectual property owned by others in their work
for us, disputes also may arise as to the rights in related or resulting know-how
and inventions.  Litigation may be necessary
in the future to enforce our intellectual property rights, protect our trade
secrets or to determine the validity and scope of the intellectual property
rights of others. In the event of litigation to determine the validity of any
third partys claims, we could be required to expend significant resources and
divert the efforts of our technical and management personnel, whether or not
such litigation is determined in our favor.

Our success in outlicensing our pharmaceutical assets
depends in large part on our ability to obtain and maintain patents, protect
trade secrets and operate without infringing upon the proprietary rights of
others. The patent position of companies in the pharmaceutical industry
generally is highly uncertain, involves complex legal and factual questions and
has recently been the subject of much litigation.  No consistent policy has emerged from the U.S. Patent and
Trademark Office or PTO or the courts regarding the breadth of claims allowed
or the degree of protection afforded under pharmaceutical patents.

We
are currently in a dispute in Europe regarding a patent for our
proanthocyanidin polymer composition, which covers the active ingredient in
SP-303/Provir.  The European Patent
Office, the French Patent Office, the German Patent Office and the Australian
Patent Office have each granted a patent containing broad claims to
proanthocyanidin polymer compositions and methods of use of such compositions,
which are similar to our specific composition, to Leon Cariel and the Institut
des Substances Vegetales.  The effective
filing date of these patents is prior to the effective filing date of our
foreign pending patent application in Europe. 
Certain of the foreign patents have been granted in jurisdictions where
examination is not rigorous.  We have
instituted an Opposition in the European Patent Office against granted European
Patent No. 472531 owned by Leon Cariel and Institut des Substances
Vegetales.  We believe that the granted
claims are invalid and intend to vigorously prosecute the Opposition.  In the United States, the Patent and
Trademark Office awarded judgment to us in an Interference regarding this
patent dispute.

We
may be unsuccessful in having the granted European patent revoked or the claims
sufficiently narrowed so that our proanthocyanidin polymer composition and
methods of use are not potentially covered. The holders of the granted European
patent may assert against us claims relating to this patent.  If they are successful, we may not be able
to obtain a license to this patent at all or at reasonable cost or be able to
develop or obtain alternative technology to use in Europe or elsewhere.  If we cannot obtain licenses to the patent,
we may not be able to introduce or sell our SP-303/Provir product in
Europe.  The earlier effective filing
date of this patent could limit the scope of the patents, if any, that we may
be able to obtain or result in the denial of our patent applications in Europe
or elsewhere.

If a third party were to bring an infringement claim against
us, we would need to expend significant resources in our defense; if the claim
were successful, we would need to obtain licenses or develop non-infringing
technology

The
pharmaceutical industry and, to a lesser extent, the dietary supplement
industry, is subject to frequent litigation regarding patent and other
intellectual property rights.  Leading
companies and organizations in these industries have numerous patents that
protect their intellectual property rights in these areas.  Third parties may assert claims against us
with respect to our existing and future products.  In the event of litigation to determine the validity of any third
partys claims, we could be required to expend significant resources and divert
the efforts of our technical and management personnel whether or not such
litigation is determined in our favor. 
In the event of an adverse result of any such litigation, among other
requirements, we could be required to develop non-infringing technology or to
obtain licenses to the technology that is the subject of the litigation.  We may not be successful in developing
non-infringing technology or in obtaining a license to use the technology on
commercially reasonable terms.

Penny Stock regulations may impose restrictions on
marketability of our stock

The
Securities and Exchange Commission has adopted regulations which generally
define penny stock to be any equity security that is not traded on a national
securities exchange or NASDAQ and that has a market price of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exceptions.  Since our securities that
are currently included on the OTC Bulletin Board are trading at less than $5.00
per share at any time, our stock may become subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors.  Accredited investors
generally include investors that have assets in excess of $1,000,000 or an
individual annual income exceeding $200,000, or, together with the investors
spouse, a joint income of $300,000.  For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchasers written consent to the transaction prior to the purchase.  Additionally, for any transaction involving
a penny stock, unless exempt, the rules require, among other things, the delivery,
prior to the transaction, of a risk disclosure document mandated by the SEC
relating to the penny stock market and the risks associated therewith.  The broker-dealer must also disclose the
commission payable to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealers
presumed control over the market. 
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. 
Consequently, the penny stock rules may restrict the ability of
broker-dealers to sell our securities and may affect the ability of
stockholders to sell our securities in the secondary market.

Our
stock price has been and may continue to be highly volatile

The
price of our common stock has been particularly volatile and will likely
continue to fluctuate in the future. Announcements of technological
innovations, regulatory matters or new commercial products by us or our
competitors, developments or disputes concerning patent or proprietary rights,
publicity regarding actual or potential product results relating to products
under development by us or our competitors, regulatory developments in both the
United States and foreign countries, public concern as to the safety of
pharmaceutical or dietary supplement products, and economic and other external
factors, as well as period-to-period fluctuations in financial results, may
have a significant impact on the market price of our common stock.   In addition, from time to time, the stock
market experiences significant price and volume fluctuations that may be
unrelated to the operating performance of particular companies or industries.  The market price of our common stock, like
the stock prices of many publicly traded smaller companies, has been and may
continue to be highly volatile.

Anti-takeover provisions in our charter documents and
Delaware law may inhibit potential acquisition bids for Shaman, which may
adversely affect the market price of our Common Stock and the voting rights of
the holders of the Common Stock

Certain provisions of our charter documents and Delaware
law make it more difficult for a third party to acquire and may discourage a
third party from attempting to acquire us, even if a change in control would be
beneficial to our stockholders. These provisions could also limit the price
that certain investors might be willing to pay in the future for shares of the
common stock.  The provisions include
the division of our board of directors into two separate classes, the ability
of the board to elect directors to fill vacancies created by an expansion of
the board, the power of the board to amend our bylaws and the requirement that
at least 66% of the outstanding shares are required to call a special meeting
of stockholders.  Our board also has the
authority to issue up to 1,800,000 additional shares of preferred stock and to
fix the price, rights, preferences, privileges and restrictions of those shares
without any further vote or action by the stockholders.  The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock with voting rights could make it more difficult for a third
party to acquire a majority of the outstanding voting stock.  Certain provisions of Delaware law applicable
to us could also delay or make more difficult a merger, tender offer or proxy
contest involving Shaman, including Section 203 of the Delaware General
Corporation Law, which prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years unless certain conditions are met.

PART IIOTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item
2.  Changes in Securities and Use of
Proceeds

None.

Item 3.  Defaults in Senior Securities

None.

Item
4.  Submission of Matters to a Vote of
Security Holders

None.

Item 5.  Other information

None.

Item
6.  Exhibits and Reports on Form 8-K

(a)
  Exhibits10.48A*
  Amendment
  No. 2 to License and Sale Agreement dated as of March 16, 2001, by and
  between Registrant and Metabolex, Inc.10.48B*
  Asset
  Purchase Agreement dated as of March 16, 2001, by and between Registrant and
  Metabolex, Inc.10.53(1)
  Security
  Agreement dated as of January 2, 2001 between Registrant and LDI Group, Inc.,
  Feehan Partners, L.P., M. David Titus, Nezam Tooloee, Lisa A. Conte, Bay
  Venture Counsel, L.L.P., and Steven King.10.54(1)
  Absolute
  Assignment of Rents dated as of January 2, 2001 between Registrant and LDI
  Group, Inc., Feehan Partners, L.P., M. David Titus, Nezam Tooloee, Lisa A.
  Conte, Bay Venture Counsel, L.L.P., and Steven King.10.55(1)
  Form
  of Secured Bridge Promissory Note dated January 2, 2001 between Registrant
  and the Investors named therein.10.56(1)
  Intercreditor
  Agreement dated January 2, 2001 by and among Registrant and Alcamin Anstalt,
  Tradewinds Debt Strategies Fund, L.P., Nezam Tooloee and Lisa A. Conte.10.57(1)
  Security
  Agreement dated January 2, 2001 between Registrant and Alcamin Anstalt,
  Tradewinds Debt Strategies Fund, L.P., Nezam Tooloee and Lisa A. Conte.10.58(1)
  Form
  of Security Promissory Note dated January 2, 2001 between Registrant and the
  Investors named therein.10.59*
  Secured
  Bridge Promissory Note dated as of February 28, 2001, by and between
  Registrant and Anthony Conte.10.60*
  Security
  Agreement dated February 28, 2001 between Registrant and Anthony Conte.10.61*
  Sealed-Bid
  Auction Agreement dated as of March 1, 2001, by and between Registrant and
  DoveBid, Inc.10.62*
  Financial
  Advisor Agreement dated as of March 14, 2001, by and between Registrant and
  Sutter Securities Incorporated.10.63A*
  Stipulation
  Regarding Assumption and Assignment of Registrants Lease filed with the
  Bankruptcy Court on March 19, 200110.63B*
  Assignment
  of Lease Agreement dated as of March 22, 2001, by and between Registrant and
  Tularik Inc.* 
Filed herewith.

(1)  
Incorporated by reference to exhibits filed on January 24, 2001 with
Registrants Current Report on Form 8-K.(b)        Current reports on Form 8-K
that were filed during the quarter ended March 31, 2001.

On
January 24, 2001, the Company filed a Form 8-K covering the filing of its
chapter 11 reorganization petition.

SIGNATURES



Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: 
May 15, 2001

SHAMAN
  PHARMACEUTICALS, INC.(Registrant)/s/   Lisa A. ConteLisa
  A. ContePresident,
  Chief Executive Officer and Chief Financial Officer(on
  behalf of the Company and as principal executive officer and principal
  financial officer)