10QSB 1 e10qsb.txt ADVANCED PLANT PHARMACEUTICALS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-30256 ADVANCED PLANT PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 59-2762023 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 43 West 33rd Street New York, New York 10001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 695-3334 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. Yes X No The number of shares outstanding of the Registrant's common stock is 110,671,469 (as of 8/09/00). 2 ADVANCED PLANT PHARMACEUTICALS, INC. INDEX TO QUARTERLY REPORT ON FORM 10-QSB FILED WITH THE SECURITIES AND EXCHANGE COMMISSION QUARTER ENDED JUNE 30, 2000 ITEMS IN FORM 10-QSB

PAGE PART I FINANCIAL INFORMATION Item 1. Financial Statements 1 Item 2. Management's Plan of Operation 11 PART II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds 11 Item 3. Defaults Upon 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 12 SIGNATURES 13

3 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TABLE OF CONTENTS

Balance Sheet as of June 30 2000 (unaudited) ............................................. 2 Statements of Operations for the Three and Six Months Ended June 30 2000 (unaudited) and 1999 ............................. 3 Statements of Cash Flows for Six Months Ended June 30 2000 (unaudited) and 1999 .............................. 4 Notes to the Financial Statements ...................................... 5-10 Schedule 27 ............................................................ 11

1 4 ADVANCED PLANT PHARMACEUTICALS, INC. BALANCE SHEET JUNE 30, 2000 (UNAUDITED)

ASSETS Current assets: Cash and cash equivalents ............................. $ -- ----------- Total current assets .................................. -- ----------- Other assets ............................................... 9,785 ----------- $ 9,785 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable ...................................... $ 133,868 Accrued expenses payable .............................. 951,361 Loans payable ......................................... 676,047 Due to distributor .................................... 103,500 ----------- Total current liabilities ............................. 1,864,776 ----------- Shareholders' Equity: Common stock, $.0007 par value, 120,000,000 shares authorized and 110,424,506 shares issued ....... 77,297 Capital in excess of par value ........................ 4,734,291 Accumulated deficit ................................... (6,621,399) Treasury shares at cost ............................... (180) Stock subscriptions receivable ........................ (45,000) ----------- Total shareholders' equity ....................... (1,854,991) ----------- $ 9,785 ===========

See accompanying notes to financial statements. 2 5 ADVANCED PLANT PHARMACEUTICALS, INC. STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 Net Sales $ 6,583 $ 3,016 $ 9,061 $ 5,601 Cost of goods sold 13,297 1,557 45,694 7,331 -------------- -------------- -------------- ------------- Gross profit (6,714) 1,459 (36,633) (1,730) -------------- -------------- -------------- ------------- Operating expenses: Research and development 48,500 - 49,250 1,000 General and administrative 343,829 239,863 1,352,073 340,708 -------------- -------------- -------------- ------------- Total operating expenses 392,329 239,863 1,401,323 341,708 -------------- -------------- -------------- ------------- Operating loss (399,043) (238,404) (1,437,956) (343,438) Other expense (income) - - - - -------------- -------------- -------------- ------------- Loss before provision for income taxes (399,043) (238,404) (1,437,956) (343,438) Provision for income taxes - - - - -------------- -------------- -------------- ------------- Net loss $ (399,043) $ (238,404) $ (1,437,956) $ (343,438) ============== ============== ============== ============= Loss per common share $ (0.00) $ (0.00) $ (0.01) $ (0.00) ============== ============== ============== =============

See accompanying notes to financial statements. 3 6 ADVANCED PLANT PHARMACEUTICALS, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)

2000 1999 Cash Flows from Operating Activities: Net Loss from operations ......................... $(1,437,956) $ (343,438) Adjustments to reconcile net loss from operations to net cash used by operating activities: Depreciation and amortization expense ......... 443 316 Services paid with common stock ............... 759,750 275,833 Decrease in prepaid expenses .................. -- 12,153 Increase (decrease) in accounts payable ....... 43,783 (5,000) Increase (decrease) in accrued expenses ....... 105,263 (158,077) ----------- ----------- Net cash used by operations ................... (528,717) (218,213) ----------- ----------- Cash Flows from Investing Activities: Purchase of computer equipment ................... (1,000) -- ----------- ----------- Net cash used by investing activities ......... (1,000) -- ----------- ----------- Cash Flows from Financing Activities: Proceeds from short-term loans payable ........... 542,000 37,479 Payments on short-term loans payable ............. (25,009) -- Net proceeds from issuance of common stock ....... -- 266,000 ----------- ----------- Net cash provided by financing activities ..... 516,991 303,479 ----------- ----------- Net (decrease) increase in Cash and cash equivalents (12,726) 85,266 Cash and cash equivalents at beginning of period ... 12,726 4,198 ----------- ----------- Cash and cash equivalents at end of period ......... $ -- $ 89,464 =========== =========== Supplemental Cash Flow Information: Cash Paid During the Period for: Interest ...................................... -- -- =========== =========== Income Taxes .................................. -- -- =========== =========== Information about Noncash Activities: Common stock issued to satisfy loans .......... $ -- $ 51,600 =========== =========== Common stock issued for services .............. $ 759,750 $ 275,833 =========== ===========

See accompanying notes to financial statements. 4 7 ADVANCED PLANT PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) NOTE 1 BASIS OF PRESENTATION The accompanying unaudited financial statements of Advanced Plant Pharmaceuticals, Inc. ("APPI" or the "Company") as of June 30, 2000 have been prepared in accordance with generally accepted accounting principles for interim information. Accordingly, certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments of a recurring nature considered necessary for a fair presentation of the results for the interim periods presented have been included. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the entire year or any other period. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1999. NOTE 2 NATURE OF OPERATIONS APPI focuses on the research and development of plant based dietary supplements. During July 1999, the Company acquired exclusive rights and interests to a thirteen step process which utilizes virtually the whole of the nutrients found in plants to manufacture all natural herbal dietary supplements. The Company intends to use this process to manufacture products that it hopes to distribute worldwide through various sales distribution contracts. NOTE 3 GOING CONCERN Management believes that it can continue to obtain additional capital. However, if additional financing is not obtained, the Company might be forced to cease operations. Since its inception, the Company has had significant operating losses and working capital deficits. The Company's continued existence has been dependant on cash proceeds received from the sale of its common stock and the willingness of vendors to accept stock in lieu of cash payments for their services. Employees have also accepted deferrals of wage payments. The Company hopes to reverse this trend by generating cash inflows through the sale of new products that they have developed. To accomplish this objective, the Company will require working capital to satisfy current operating expenses, and to produce inventory, during the interim period preceding such time as the revenue cycle begins generating cash. However, to date, sales have not materialized and the Company has run out of capital. NOTE 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash Equivalents: For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 5 8 ADVANCED PLANT PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) NOTE 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Other Assets: Other assets consist of patents ($4,766), security deposits ($4,144) and computer equipment ($875). Patents are amortized on a straight-line method over their economic lives and are reviewed for impairment whenever the facts and circumstances indicate that the carrying amount may not be recoverable. Computer equipment is depreciated on a straight-line method using an estimated useful life of three years. Research & Development Costs: Research and development costs are expensed as incurred. Income Taxes: APPI has incurred significant losses from operations. The Company has elected not to record any tax benefits relating to potential net operating loss carryforwards due to the uncertainty of realizing those benefits. The Company intends to follow Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes" when either operations achieve profitability or the realization of net operating loss benefits can more readily be measured, whichever comes first. Earnings per Share: Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" discusses the computation and presentation of earnings per share ("EPS"). Basic EPS, as defined by SFAS No. 128, is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the reporting period, ignoring any potential effects of dilution. Diluted EPS reflects the potential dilution that would occur if securities, or other contracts to issue common stock, were exercised or converted into common stock that then shared in the earnings of the entity. There were 5,500,000 common stock options outstanding as of June 30, 2000. As a result of the losses reported in the periods presented these options, if exercised, would be antidilutive. Accordingly, only Basic EPS is presented in these financial statements. The weighted-average number of shares used in the computation of per share data was 109,811,099 and 100,810,073 for the three months ended June 30, 2000 and 1999, respectively. For the six-month periods then ended, the weighted-average number of shares was 109,155,303 in 2000 and 88,610,295 in 1999. 6 9 ADVANCED PLANT PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) NOTE 4 (Continued) Stock-Based Compensation: APPI has satisfied various loans, trade payables, employee back-wages and other liabilities through the issue of its common stock. The Company accounts for such stock-based compensation using the fair-value method as prescribed by SFAS No. 123, "Accounting for-Stock-Based Compensation." The Company has also issued stock options to key employees. As permissible under SFAS No. 123, the Company accounts for stock options using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. NOTE 5 CAPITAL STOCK As of June 30, 2000, the Company was authorized to issue 120 million shares of it common stock, par value $.0007 per share. The holders of common stock are entitled to one vote for each share held on all matters to be voted on by stockholders. At the annual shareholders' meeting on July 18, 2000 the shareholders' approved increasing the authorized shares to 250 million. The Company is also authorized to issue 5 million shares of preferred stock, par value $.0007 per share. There is currently no preferred stock outstanding and the company has no current plans to issue preferred stock. NOTE 6 LOANS PAYABLE Loans Payable consists of unsecured, non-interest bearing short-term loans typically of less than three months duration. The loan agreements provide the Company with the option of repaying the loans with either cash or restricted shares of the Company's common stock. Loans payable at June 30, 2000 includes a loan of $622,800 payable to one individual lender. This loan is payable on or before December 30, 2000 and includes an option that permits the Company to pay off the loan with shares of its common stock. 7 10 ADVANCED PLANT PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) NOTE 6 LOANS PAYABLE (Continued) If the Company elects to repay the balance of the loan in common stock, the number of shares issued shall be calculated based on the following per share prices: The first $175,000 of principal balance will be paid using a discounted per share price of $.015. Principal loan balances between $175,000 up to and including $350,000 will be paid using a share price of $.12. Any remaining loan principal balances will be converted at a rate yet to be determined. NOTE 7 RELATED-PARTIES TRANSACTIONS On February 28, 2000 the Company entered into an Asset Purchase Agreement with Dr. Leonard Bielory whereby the company acquired the exclusive rights and interest to allergy and sinus formulations ("Assets"). As consideration for such formulations, Dr. Bielory shall receive options to purchase 18,000,000 shares of the company's common stock at an aggregate exercise price of $180. Additionally, the Company agrees to pay Dr. Bielory a royalty payment of $.01 per bottle with respect to each product manufactured with these Assets, 1% (one percent) of the suggested retail price of each product sold that was manufactured with the Assets and 10% (ten percent) of the company's net profits before taxes from such sales (net profits to be determined by the Company's regularly retained independent public accountants using generally accepted accounting principles). In the event that the Company enters into an agreement with a third party for the sale of products manufactured with these Assets, which agreement unconditionally provides for payments to the Company of not less than $20,000,000, whether in lump sum or over a period of four years, from such third party, the Company shall issue to Dr. Bielory 5 million shares for each $20,000,000 required to be paid to the Company, not to exceed twenty five million shares. As of August 10, 2000, the Company has not issued the options due to Dr. Bielory as required by the agreement. On March 15, 2000 the company entered into a two-year employment agreement with Dr. Leonard Bielory whereby Dr. Bielory will serve as the Company's Scientific Director and its Chairman of the Board of Directors. Under the terms of the agreement, the Company is required to pay Dr. Bielory wages of $500 per month for the first twelve months and up to $2,500 per month thereafter, contingent on the Company achieving specified net profit levels. Upon commencement of this agreement, and each January 1 thereafter, the Company is to issue Dr. Bielory options to purchase 750,000 shares of the Company's common stock as additional compensation under this agreement. 8 11 ADVANCED PLANT PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) NOTE 7 RELATED-PARTIES TRANSACTIONS (Continued) As of August 10, 2000, the Company has not yet issued these options to Dr. Bielory. Also, in accordance with the agreement, the Company issued Dr. Bielory 225,000 restricted shares of its common stock on April 10, 2000 as a signing bonus. The Company recorded these shares at an aggregate value of $96,750 (The fair market value on the date of the agreement). NOTE 8 FINANCIAL RESULTS AND LIQUIDITY To market and generate sales of its new products, the Company entered into several distribution agreements during 1999. Following is a discussion of the potential minimum sales that may result from these agreements as well as their status as of August 10, 2000: In June 1999, the Company entered into an exclusive two-year distribution agreement with Ambar Pharmacies and Health, Inc. ("Ambar") for the sale of the Company's products in Israel. Such distribution agreement requires Ambar to purchase a minimum of $88,290 during the two year period. Under the agreement, the Company is committed to reimburse Ambar for advertising expenditures in an amount not to exceed 5% of Ambar's gross purchases. As of August 10, 2000, no sales have been realized from this agreement and Amber has not complied with the initial minimum order schedule outlined in the agreement due to compliance issues relating to Israeli labeling laws. The Company is attempting to resolve this issue. In July 1999, the Company entered into exclusive distribution agreements with Manayer Najd Trading & Medical Supplies Co. ("MNM") and with Manayer Egypt Trading & Medical Supplies Co. ("MEM") for distribution of the Company's products in Saudi Arabia and Egypt respectively. Both agreements are contingent on the distributors receiving product registration certificates from their respective countries and are for periods of five years. The potential aggregate minimum purchases required under these agreements is $4,681,140 over the five-year period commencing with receipt of the registration certificates. As of August 10, 2000, the registration certificates have not been received from the respective countries. The success of these distribution agreements, and their effect on the Company's cash flow is uncertain. The Company is uncertain as to when sales relating to these agreements can be expected to begin or that the generated cash receipts, if any, will be sufficient to fund operating costs which can be expected to increase as the Company "ramps up" for manufacturing and distribution activities. There also is no assurance that the Company will continue to be able to finance operations through the sale of its common stock, the exchange of stock for services or from the proceeds of unsecured loans with private lenders. 9 12 ADVANCED PLANT PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) NOTE 9 FINANCIAL ADVISOR AND INVESTMENT BANKING AGREEMENT On February 17, 2000 the Company entered into an agreement with First Madison Securities, Inc. ("FMS") whereby FMS will act as consultant and non-exclusive financial advisor and investment banker to the Company in connection with strategic planning, securities transactions, valuations, mergers & acquisitions, alternative financing structures and capital formation. FMS will also act as placement agent for the Company. As compensation for these services, the Company is required to issue FMS 6,000,000 restricted shares of its common stock as follows; 1,700,000 shares upon execution of the agreement, 1,700,000 shares within three months of signing the agreement and 2,600,000 shares within six months of signing the agreement. The restricted shares shall be registered with the Securities and Exchange Commission to become free trading shares as soon as possible with FMS bearing all registration costs. On May 2, 2000, the Company issued the initial 1,700,000 shares to FMS. The shares were recorded at an aggregate value of $663,000 representing the fair market value of such shares at February 17, 2000 (The date of the agreement). As of August 10, 2000, no further shares have been issued under this agreement. The Company will also pay FMS a placement fee for any transactions consummated, directly or indirectly, through FMS during the term of the agreement or within two years thereafter. The placement fee will consist of a payment equal to 10% of the gross proceeds raised from the sale of applicable securities, reimbursement of non-accountable expenses equal to 3% of the gross proceeds from the sale of any applicable securities plus warrants to purchase common stock equal to 10% of the applicable shares sold. Additionally, the Company will reimburse FMS for all reasonable out-of-pocket expenses incurred in the performance of this agreement, up to a maximum of $25,000. Service under this agreement shall continue until terminated by either party by giving thirty days written notice. The provisions regarding compensation and placement fees shall survive the term of the agreement. NOTE 10 MARKETING CONSULTANT'S AGREEMENT On March 15, 2000 the Company entered into a twelve-month agreement with a consultant whereby the consultant will act as the Company's marketing and distribution advisor and as such, will assist in the development of relationships with industry related third parties for the purpose of product marketing and distribution. As compensation for these services, the company is required to issue 600,000 restricted shares of its common stock. The Company issued 200,000 of the 600,000 shares on July 21, 2000. The aggregate Fair market value of the stock on its day of issue was $24,000. This amount is included in accrued expenses payable at June 30, 2000. 10 13 ITEM 2. MANAGEMENT'S PLAN OF OPERATION. (i) As of the beginning of August 2000 we did not have any cash on hand or accounts receivable. The Company's two employees have deferred payment of their salaries for the past eight weeks. While we are negotiating with potential investors to secure cash infusions into the Company, if we do not find any cash investors we will be unable to operate our business for any significant length of time. (ii) If we secure funds we intend to use our Process to expand our product line to include herbal dietary supplements such as St. John's Wort, Kava Kava, Ginko Biloba and Echinacea. We estimate that the initial production and preliminary marketing of these four herbal products to potential domestic and international distributors and wholesalers will cost approximately $60,000. (iii) We do not expect to purchase or sell any manufacturing facilities or significant equipment over the next twelve months. (iv) We do not foresee any significant changes in the number of employees we will employ over the next twelve months. PART II ITEM 2. CHANGES IN SECURITIES (c) Recent Sales of Unregistered Securities During the second quarter of 2000 we issued (i) 225,000 shares of our common stock to Dr. Leonard Bielory, the chairman of our board of directors, pursuant to the terms of the employment agreement entered into by us with Dr. Bielory as of March 15, 2000, and as part of the consideration paid by us to Dr. Bielory for his services to us, and (ii) 1,700,000 shares of our common stock to two designees of First Madison Securities, Inc. ("FMS") for consulting services rendered by FMS to us described in our quarterly report on Form 10-QSB for the quarter ended March 31, 2000. The issuance of such 1,925,000 shares of our common stock was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act"), pursuant to the provisions of Section 4(2) of the Act, as transactions by an issuer not involving any public offering. 11 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. EXHIBIT NUMBER 3.1.1 Articles of Incorporation of the Company, as amended (1) 3.1.2 Amendment to the Articles of Incorporation of the Company (1) 3.2 By-Laws of the Company (1) 27.1* Financial Data Schedule -------------- * Filed herewith. (1) Filed as an Exhibit to the Company's Form 10-SB, dated July 23, 1999, and incorporated herein by reference. (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter ending June 30, 2000. FORWARD LOOKING INFORMATION This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements included in this Quarterly Report regarding Management's plans and objectives for the future and assumptions and predictions about products and sales are all forward-looking statements. When used herein, words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," as they relate to the Company, are intended to identify forward-looking statements. The Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to it on the date of this Quarterly Report, but no assurances can be given that these assumptions and expectations will prove to have been correct or that the Company will take any action that it may presently be planning. The Company is not undertaking to publicly update or revise any forward-looking statement if it obtains new information or upon the occurrence of future events or otherwise. 12 15 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. ADVANCED PLANT PHARMACEUTICALS, INC. By:/s/ David Lieberman David Lieberman President Exhibit Index EXHIBIT NUMBER 3.1.1 Articles of Incorporation of the Company, as amended (1) 3.1.2 Amendment to the Articles of Incorporation of the Company (1) 3.2 By-Laws of the Company (1) 27.1* Financial Data Schedule -------------- * Filed herewith. (1) Filed as an Exhibit to the Company's Form 10-SB, dated July 23, 1999, and incorporated herein by reference. Date: August 14, 2000 13