|UNITED STATES
      SECURITIES AND EXCHANGE COMMISSION
      WASHINGTON, D.C. 20549
      
      FORM. 10-QSB
      
      
      [ X ]	QUARTERLY REPORTS UNDER SECTION 13 OR 15(D) OF
        THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March
        31, 2001.
      OR
      
      [ ]	QUARTERLY REPORTS UNDER SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
        TO ______________.
      
      Commission File No. 0-19844
      -----------
      
      PARACELSIAN, INC.
      ------------------------------------------------------
      (Exact name of small business issuer as specified in its
        charter)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







|Delaware                                                                                                            |  | 16-1399565                          
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|-----------                                                                                                         |  | -----------------                   
|(State or other
      jurisdiction of incorporation or organization)                                                |  | (I.R.S. Employer Identification No.)
|222 Langmuir
      Laboratories, Cornell Technology Park, Ithaca, New York                                          |  | 14850                               
|------------------------------------------------------------------                                                  |  | -------------------                 
|(Address
        of principal executive offices)                                                                    |  | Zip Code                            
|                                                                                                                    |  |                                     
|Issuer's
          telephone number: (607) 257-4224
          -----------------------------------------------------



|Check whether
        the issuer (1) filed all reports required to be filed by section 13 or
        15(d) of the Securities 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 [ ]
      There
        were 23,526,849 shares of Common Stock outstanding at May 1, 2001
      
      (PAGE
        1)
      Paracelsian,
        Inc. and Subsidiary
      
      Index
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|PART I.  FINANCIAL
        INFORMATION
      Item 1.	Financial
        Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Consolidated Balance
        Sheet as of March 31, 2001 (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Consolidated Statements
        of Operations for the three months and six months ended March 31, 2001
        and 2000 and the cumulative period from inception to March 31, 2001 (Unaudited)                                                                                                                                                                                                                                                                                                                                                                               
|Consolidated Statements
        of Cash Flows for the six months ended March 31, 2001 and 2000 and the
        cumulative period from inception to March 31, 2001 (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                
|Notes to Consolidated
        Financial Statements (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Item. 2  Managements
        Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|PART II  OTHER
        INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Item 1  Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 6  Exhibits
        and Reports of Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Signatures
      
      (PAGE
        2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Paracelsian,
        Inc. and Subsidiary(A Development Stage Company) 
        Consolidated Balance Sheet 
        March 31, 2001 (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                

|                                       |                                                                     | March
        31, 2001
|-------------------------------------- | ------------------------------------------------------------------- | ----------------------
|                                       | Assets                                                              |                       
|Current Assets:                        |                                                                    
|                                       | Cash and cash equivalents                                           | $4,746                
|                                       | Inventory                                                           | -                     
|                                       | Prepaid expenses                                                    | 59,382                
|                                       | Other current assets                                                | 30,445                
|                                       | Total
        current assets                                        | 94,573                
|                                       |                                                                     |                       
|Equipment, net                         | 108,484                                                            
|Interest
      Receivable              | 45,988                                                             
|Note
      Receivable                  | 148,750                                                            
|Other Assets:                          |                                                                    
|                                       | TCM extracts on-hand                                                | -                     
|                                       | Patents and trademarks,
        net                                 | 204,845               
|                                       |                                                                     | 508,067               
|                                       |                                                                     | $602,640              
|                                       | Liabilities
        and Stockholders Equity (Deficit)              |                       
|Current Liabilities:                   |                                                                    
|                                       | Accounts payable                                                    | $466,032              
|                                       | Accrued expenses                                                    | 566,312               
|                                       | Current portion of
        capital lease obligation                 | 1,975                 
|                                       | Current portion of
        notes payable                            | 139,206               
|                                       | Advances
      from related party                                   | 191,877               
|                                       |                                                                     |                       
|                                       | Total
        current liabilities                                   | 1,365,402             
|Long-term Liabilities:                 |                                                                    
|                                       | Long-term portion
        of capital lease obligation               | 6,084                 
|                                       | Long-term portion
        of notes payable                          | 12,150                
|                                       | Total
        current and long-term liabilities                     | 1,383,636             
|                                       |                                                                     |                       
|Stockholders Equity
        (Deficit) |                                                                    
|                                       | Common Stock, $.01
        par value; 35,000,000 shares authorized; |                       
|                                       | 23,520,849
        shares outstanding                               | 234,904               
|                                       |                                                                     |                       
|                                       | Additional
      paid-in-capital                                    | 25,404,381            
|                                       | Deficit
      accumulated during the development stage              | (25,077,766)          
|                                       | Treasury
      stock, at cost; 265,478                              | (1,342,515)           
|                                       | Total
        stockholders equity (deficit)                        | (780,996)             
|                                       |                                                                     | $602,640              



See accompanying
  notes to consolidated financial statements







|Paracelsian, Inc. and Subsidiary
      (A Development
        Stage Company)
        Consolidated Statements of Operations
        For the three months and six months ended March 31, 2001 and 2000,
        And the cumulative period from inception to March 31, 2000
        (Unaudited)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|Revenues:                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|Operating expenses:                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|Interest income (expenses),
        net                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                            
|Gain on sale of assets                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                            
|See accompanying
        notes to consolidated financial statements.                                                                                                                                                                                                                        








Paracelsian,
  Inc. and Subsidiary

(A Development
  Stage Company)
  Consolidated Statements of Cash Flows
  For the six months ended March 31, 2001 and 2000,
  And the cumulative period from inception to December 31, 2001
  (Unaudited)



|                                                                                      |                          |                      | Cumulative         
|------------------------------------------------------------------------------------- | ------------------------ | -------------------- | -------------------
|                                                                                      |                          |                      | Period
        from
|                                                                                      | Six Months
        Ended | Inception
        to
|                                                                                      | March
        31,        | March
        31,   
|Cash flows
      from operating activities:                                           | 2001                     | 2000                 | 2001               
|                                                                                      |                          |                      |                    
|Net loss                                                                              | $(573,160)               | (696,423)            | (22,949,766)       
|Adjustments
        to reconcile net loss to net cash used in                         |                          |                      |                    
|operating
        activities:                                                         |                          |                      |                    
|Gain
        on the sale of assets                                                    | -                        | -                    | (6,968)            
|Non-cash
        compensation expense                                                 | -                        | -                    | 1,475,301          
|Other
        non-cash expenses                                                       | -                        | -                    | 2,071,985          
|Depreciation
        and amortization                                                 | 41,446                   | 114,460              | 2,388,791          
|Changes
        in assets and liabilities:                                            |                          |                      |                    
|Interest receivable                                                                   | (19,135)                 | -                    | (45,988)           
|Inventories                                                                           | 926                      | -                    | -                  
|Prepaid
        expenses and other current assets                                     | (46,528)                 | 17,349               | (89,827)           
|Accounts
        payable                                                              | 103,782                  | 143,420              | 466,032            
|Deferred
        revenue                                                              | -                        | (57,000)             | -                  
|Accrued
        expenses                                                              | 168,569                  | (89,257)             | 566,312            
|                                                                                      |                          |                      |                    
|Net
        cash used in operating activities:                                        | (324,100)                | (567,451)            | (16,124,128)       
|                                                                                      |                          |                      |                    
|Cash flows
      from investing activities:                                           |                          |                      |                    
|Purchase
        of equipment                                                         | (3,805)                  | -                    | (741,671)          
|Proceeds
        from sale of equipment                                               | -                        | -                    | 26,968             
|Acquisition
        of licensed technology                                            | -                        | -                    | (53,656)           
|Acquisition
        of patents and trademarks                                         | (3,547)                  | -                    | (496,719)          
|Acquisition
        of New Century Nutrition newsletter                               | -                        | -                    | (350,000)          
|Acquisition
        of option for East West Herbs, Ltd. and related acquisition costs | -                        | -                    | (92,866)           
|Loan
        to East West Herbs, Ltd.                                                 | -                        | -                    | (340,000)          
|Proceeds
        from loan to East West Herbs, Ltd.                                   | -                        | -                    | 42,500             
|                                                                                      |                          |                      |                    
|Net
        cash used in investing activities                                         | (7,352)                  | -                    | (2,005,444)        
|                                                                                      |                          |                      |                    
|Cash flows
      from financing activities:                                           |                          |                      |                    
|Sale
        of common stock, initial public offering, net of costs                   | -                        | -                    | 5,124,014          
|Sale
        of common and preferred stock, net of costs                              | -                        | -                    | 11,776,088         
|Proceeds
      from the sale of common stock                                          | -                        | -                    | 500,000            
|Proceeds
      from the exercise of warrants                                          | -                        | -                    | 1,219,640          
|Proceeds
        from the exercise of options                                         | -                        | -                    | 68,900             
|Termination
      of warrants                                                         | -                        | -                    | -                  
|Purchase
        of treasury stock                                                    | -                        | -                    | (1,342,515)        
|Cost
        of warrant dividend                                                      | -                        | -                    | (63,102)           
|Increase
        in capital lease obligations and notes payable                       | -                        | -                    | 115,868            
|Payment
        on capital lease obligations                                          |                          | (5,782)              | (22,663)           
|Proceeds
        from advances from related party                                     | -                        | -                    | 797,350            
|Payments
      on advances from related party                                         | -                        | -                    | (105,473)          
|(Decrease)
      increase in notes payable                                            | 109,075                  | 541,491              | 66,211             
|                                                                                      |                          |                      |                    
|Net
      cash provided by financing activities                                       | 109,075                  | 535,709              | 18,134,318         
|                                                                                      |                          |                      |                    
|Net increase
      (decrease) in cash and cash equivalents                            | (222,377)                | (31,742)             | 4,746              
|Cash and cash
      equivalents, beginning of period                                  | 227,123                  | 72,754               | -                  
|                                                                                      |                          |                      |                    
|Cash and cash
      equivalents, end of period                                        | $4,746                   | 41,012               | 4,746              
|                                                                                      |                          |                      |                    
|Supplemental
      disclosures:                                                       |                          |                      |                    
|Cash
      paid during the period for interest                                        | $16,086                  | 3,421                | 97,400             
|                                                                                      |                          |                      |                    
|Supplemental
      disclosure of non-cash investing & financing activities:           |                          |                      |                    
|Fair
      value of assets acquired, net of cash acquired                             | $-                       | -                    | 1,733,212          
|Less
      - liabilities assumed                                                      | -                        | -                    | 83,212             
|Less
      - issuance of common stock                                                 | -                        | -                    | 1,644,000          
|                                                                                      |                          |                      |                    
|Net
      cash paid                                                                   |                          |                      | 6,000              
|                                                                                      |                          |                      |                    
|Warrant
      dividend                                                                | -                        | -                    | 500,000            
|Issuance
      of common stock/warrants for services and to reduce liabilities        | -                        | -                    | 1,455,432          
|Purchase
      of equipment                                                           | -                        | -                    | 90,950             
|Purchase
      of officer stock subscription receivable                               | -                        | -                    | 89,850             
|Issuance
      of common stock for licensing and technology rights                    | $-                       | -                    | 3,338              
|                                                                                      |                          |                      |                    

See accompanying
  notes to consolidated financial statements.





(PAGE 5)

|Paracelsian,
        Inc. and Subsidiary
      
      (A Development
        Stage Company)
      NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS 
        March 31, 2001
      (Unaudited)
      
      1.	BASIS OF PRESENTATION:
      The consolidated
        financial statements included herein have been prepared in accordance
        with generally accepted accounting principles without audit, pursuant
        to the rules and regulations of the Securities and Exchange Commission
        applicable to quarterly reporting on Form 10-QSB and reflect, in the opinion
        of the Company, all adjustments necessary to present fairly the financial
        position and results of operations for Paracelsian, Inc. and its consolidated
        subsidiary. All such adjustments are of a normal and recurring nature.
        Certain information and footnote disclosures normally included in financial
        statements, prepared in accordance with generally accepted accounting
        principles, have been condensed or omitted as permitted by such regulations.
        These consolidated financial statements and related notes should be read
        in conjunction with the consolidated financial statements and related
        notes included in the Companys Annual Report on Form 10-KSB for
        the fiscal year ended September 30, 2000.
      
      The SAS
        # 71 review has not been completed prior to the filing of the Form 10-QSB
        for the quarterly period ended March 31, 2001.
      2. 	ORGANIZATION, BUSINESS,
        AND RISK FACTORS:
      
      Organization and Business
      Paracelsian is a development stage company, which develops
        and applies bioassays to monitor environmental toxins, to determine the
        quality of herbal products, and to identify therapeutic compounds from
        herbal sources (www.paracelsian.com).
      The Company has developed a highly sensitive, user friendly,
        cost effective testing system for the detection and quantification of
        highly toxic environmental chemicals generally known as dioxin and dioxin-like
        compounds. It is called the Ah-IMMUNOASSAY® Kit (AH-1 Method).
      Since the discovery of the dioxin compounds, during the
        late 1950s, extensive research has been undertaken into their chemical
        and biological properties. And as more information becomes available,
        it is now clear that the original and narrowly defined group of dioxins
        is becoming more expansive to include many other highly toxic, chemically
        similar compounds.
      Dioxin, although singular in name, is actually comprised
        of at least 17 chemical variants or congeners of a larger dioxin family.
        These chemicals are highly toxic, with the most active congener (TCDD)
        being the most toxic chemical ever discovered. The number of chemicals
        with dioxin-like activity is even much larger still than the 17 original
        polychlorodibenzo-p-dioxin (PCDD) families, such as the polychlorodibenzofurans
        (PCDF), the polychlorinated biphenyls (PCBs), the polybrominated biphenyls
        (PBBs), the polycyclic aromatic hydrocarbons (PAHs), the heterocyclic
        amines (HAs), among others.
      Probably no other group of chemicals has invoked more
        public health concern and received more media attention than these dioxin
        and dioxin-like substances, both because of their widespread distribution
        and their capability for serious toxicity (e.g., cancer, birth defects,
        diabetes, hormone disruption, immunologic dysfunction, etc.). The Environmental
        Protection Agency (EPA) of the United States has concluded, for example,
        that more than 100 of these dioxins and dioxin-like chemicals are likely
        human carcinogens.
      Waste incineration is a major source of these chemicals.
        Paper mill bleaching and varied industrial syntheses also add significant
        amounts to the environment. Following release into the air, perhaps also
        into waste water or sludge, these chemicals then settle on plant material,
        soil, and water where they are likely to persist for very long periods
        of time. As a consequence, they tend to accumulate either onto particulate
        matter (such as found at the bottom of bodies of water), or into body
        fat reservoirs of animals and fishes which feed on the plants. And because
        of their stability and persistence, these chemicals accumulate to relatively
        high levels in animal based foods.
      Investigating the distribution and toxicities of these
        chemicals has been challenging, both because of the ever-growing number
        of chemicals with dioxin-like activity and the difficulty of predicting
        toxicities. Because of these complexities, analysis of these chemicals
        has been very expensive, with the results being difficult to interpret.
      More recently, simpler analytical methods have been developed,
        such as the AH-1 Method, based on the use of biologically based concepts.
        Dioxins and dioxin-like chemicals (also called ligands), enter the cell
        and bind to a protein in the cytoplasm called Ah receptor (AhR), thus
        giving a ligand-AhR complex. This complex, by dropping and adding some
        smaller proteins (e.g., AhR translocator or ARNT, hsp-90 protein) is said
        to be transformed, thus enabling it to enter the nucleus to
        bind to a specific dioxin receptor element (or enhancer) (DRE)
        of DNA. This interaction with DNA occurs upstream of genes
        which then are activated to produce certain enzymes, some of which are
        highly correlated with the subsequent toxicity.
      The AH-I Method takes advantage of these facts. It is
        generally acknowledged, for example, that AhR binding appears to be essential
        for the development of toxicity by these chemicals. It is as if ligand
        binding of AhR is the main traffic intersection through which these chemicals
        pass on their way to produce their respective toxicities.
      In the AH-I Method, where an excess of AhR protein is
        provided, the amount of AhR-ligand complex that transforms is dependent
        on the amount of dioxin ligand present in the sample being assayed. The
        amount of the transformed complex is detected by using an antibody specific
        for the Ah-I protein component of the complex, thus giving the Immunoassay
        name to the method. (For the scientifically minded reader, there really
        are two antibodies: the first interacts with the ARNT protein in the complex
        while the second, containing an enzyme that catalyzes the formation of
        the color reaction, binds to the first antibody. The color being produced
        in the reaction shows how much of the complex is present.).
      Dioxin is a toxic chemical group of widespread public
        health concern, and more information is needed, especially on the distribution
        of this material in the environment. More survey data are needed not only
        to identify potential hot spots but also to allay unwarranted
        concerns. Until now, such survey work has been prohibitively expensive,
        but with the introduction of simpler and much more cost effective bioassay
        methods, such as the AH-1 Method, it is now possible to gather far more
        information in order to make wiser decisions.
      The herbal supplement market presents the opportunity
        to commercialize a quality assurance program that identifies the bioactivity
        present in herbal products, which are complex mixtures of substances.
        This product is a significant advance versus current practices for verifying
        the quality and the bioactivity of herbal products. This is the Companys
        BioFITTM Quality Assurance Certification Program.
      Typically, the Company will investigate the effect of
        a compound or mixture of compounds on a disease (such as cancer) or a
        symptom (such as depression). The Company scientists conduct in depth
        research of the scientific literature and review the results of successful
        clinical trials to establish the best scientific explanation for the positive
        results seen in such trials. Based on their review, they identify the
        biological mechanism which, if activated, would best explain the positive
        clinical results. By defining such mechanisms of action associated with
        a wide variety of biological effects the Company scientists can then test
        a wide variety of natural materials in "in vitro" models which
        demonstrate these effects for the purpose of either discovering or confirming
        these biological activities. Such discovery or confirmation provides the
        Company with the basis for its BioFITTM Program.
      The Company is continuing to work with its Chinese colleagues,
        during the appropriate market conditions, to expand the scope of the BioFITTM
        program to the rest of the world.
      The Company is engaged in an internet-based health exchange
        between the US and China and currently maintains the website www.newcenturynutrition.com.
        The Company has excellent relations with recognized health authorities
        and organizations within the Peoples Republic of China. This website
        serves to provide a forum for the exchange of nutrition, health and related
        information. At its core is the New Century Nutrition website where renowned
        researchers, teachers and physicians from both countries can discuss their
        philosophies, research findings and health advice. Other components of
        the site include an herbal resource center featuring herbal databases
        from China, a nutrition resource center featuring healthy recipes and
        a technology center featuring the Ah-IMMUNOASSAY® Kit and the BioFITTM
        Program. Our goal is to combine the best of Chinese medical practice with
        the best of Western practice creating new opportunities for information
        on health and disease prevention.
      
      Development Stage Company
        and Risk Factors
      
      The Company is considered
        to be a development stage company as defined in Statement of Financial
        Accounting Standards No. 7, "Accounting and Reporting by Development Stage
        Enterprises." Since inception, the Company has been primarily engaged
        in research, product engineering and raising capital.
      
      The Company,
        as a development stage enterprise, has yet to generate significant revenues
        and has no assurance of substantial future revenues. The Company is subject
        to a number of risks that may affect its ability to become an operating
        enterprise or impact its ability to remain in existence, including risks
        related to successful development and marketing of its products, patent
        protection of proprietary technology, government regulation, competition
        from substitute products (including technologies that may not yet have
        been developed), dependence on key employees and the need to obtain additional
        funds that may not be available to it.
      
      As shown in the accompanying
        financial statements, the Company incurred a net loss of approximately
        $573,000 for the six months ended March 31, 2001 and had a working capital
        deficit of approximately $1,270,000 at March 31, 2001. Operating expenses
        decreased by $152,000 (17%) as a result of decreases in a variety of expense
        categories, as part of the company's program to control costs.Management
        believes that revenues from the sale of Ah-IMMUNOASSAY® Kits will
        accelerate throughout the coming year, and coupled with a continual program
        to control costs, the Company will achieve positive cash flow from operations
        during 2001. Until such revenues are realized on a sustained basis, the
        Company will require additional capital to meet its obligations and continue
        operations.
      (PAGE
        7)
      
      ITEM
        2.Managements
        Discussion and Analysis of Financial Condition and Results of Operations
      Six months
        ended March 31, 2001 as compared to the
      Six months
        ended March 31, 2000
      
      As a development stage
        enterprise, the Company, since inception, has been primarily engaged in
        research, product engineering, and capital formation. As such, the Company
        has not generated significant revenues to date on a recurring basis.
      The Company signed a final
        Licensing Agreement on January 21, 2000 with Kubota Corporation for the
        sale of Paracelsians Ah-IMMUNOASSAY® in the Japanese market
        and began manufacturing and selling kits to Kubota. This 'bioassay' based
        kit is rugged, user-friendly, portable, analytically sensitive, and low
        cost when compared with existing methodology. The agreement with Kubota
        will provide revenues from the sale of kits and royalties.
      On June 15, 2000 the Company
        announced that in accordance with the License Agreement, Kubota agreed
        to pay the $150,000 License Fee. This payment signifies Kubota's acceptance
        of the Ah-IMMUNOASSAY® Kit. Kubota and Paracelsian will now focus
        their efforts to market, sell and distribute the kit throughout Japan.
        On June 17, 2000 Kubota placed an initial order for 120 Ah-IMMUNOASSAY®
        Kits, and have placed monthly orders since June 2000.
      On November 2, 2000 the
        Environmental Protection Agency (EPA) held an open meeting for public
        comment on the Dioxin Reassessment Report. Approximately 50 people from
        around the US were scheduled to present their comments to the Science
        Advisory Board Dioxin Reassessment Review Committee. Dr. T. Colin Campbell,
        President & CEO of Paracelsian, reported to the committee his concerns
        about including in the report all of the dioxin and dioxin-like chemicals
        because of their capability for serious toxicity. On May 18, 2001 the
        EPA announced that the report will be sent to EPA Administrator Christie
        Whitman. The report concluded that chlorinated dioxin is an air pollutant
        that should be more tightly controlled. The findings could provide the
        basis for federal regulators to impose limits on dioxin that go beyond
        current voluntary controls.
      TheAh-IMMUNOASSAY®Kits are continuing to be sold to the Kubota Corporation
        for the sale and distribution of theAh-IMMUNOASSAY®in Japan. Kits have also been sold to Cypress Diagnostics
        in Belgium for the testing of animal feed. The University of Liege in
        Belgium has purchased kits for animal serum and tissue screening. SGS
        Agrilab in Antwerp, Belgium is the worlds largest inspection organization
        with 340 laboratories worldwide. SGS is waiting for the University of
        Liege screening results, and predicts a large market in Belgium. The Danish
        and Veterinary and Food Administration have purchased kits for the testing
        of fish, milk and fat. MCS Diagnostics is testing our kit for use in the
        German milk program. Dynex Technologies is using the kit for animal feed,
        food and environmental samples in the Czech and Slovak Republics. KNJ
        Engineering is using the kit with one of their customers, LG Chemical
        of Korea. KNJ sells dioxin-sampling equipment to incinerators and other
        applications in Korea. The Company has also begun discussions with Marubeni
        for exclusive distribution in Korea. Solutia has purchased the kit for
        testing organic material, and Scientific Supply Company purchased the
        kit for soil, milk powder and feed samples. Sales have also been made
        to Bristol Myers Squibb and Lockheed Martin.
      
      Additionally, the Company has a note receivable outstanding,
        including accrued interest, with a balance outstanding of $370,000. The
        Company is continuing its efforts to collect the entire amount of this
        receivable. The Company also has an inventory of Andrographis paniculata
        that it is attempting to sell through its Internet sites (www.newcenturynutrition.com
        and www.paracelsian.com/). Andrographis is an annual plant that grows
        in much of Asia. Modern research has examined the effect of Andrographis
        on various viral infections and general immunological functions, and the
        research has indicated very promising results. Because this inventory
        has been slow moving, the Company has written it off completely. However,
        the Company will continue with its efforts to sell this inventory. If
        it is successful in its efforts, the retail value could approximate $400,000.
      The Companys plan is to continue to advance theAh-IMMUNOASSAY®technology so as to be the premier screening and monitoring
        methodology within the worldwide marketplace. To fund certain of its continual
        development expenses the Company, in January 2001, received an initial
        approval for a grant from the New York State Energy Research and Development
        Authority which could result in funding up to $180,000 (unaudited).
      Management is also aggressively seeking an investment
        of at least $1,000,000 to strengthen its working capital position, and
        active discussions with a number of interested parties are continuing.
        Current monthly cash requirements in order to sustain meaningful operations
        are approximately $65,000 and management fully expects to meet its financial
        obligations as described above.
      The actions described above represent the Companys
        plans to generate cash flow, thereby enabling the Company to continue
        to operate as a going concern. There is no assurance that these efforts
        will be successful.
      
      Results of Operations
      
      The Companys net
        loss for the second quarter of fiscal 2001 was approximately $258,000
        compared to $337,000 in the second quarter of fiscal 2000. Revenues for
        the three-month period were $68,000 in 2001 as compared to $91,000 in
        2000. Operating expenses for the three-month period were approximately
        $347,000 compared to $429,000 for the first fiscal quarter of the prior
        year. The decrease of $82,000 (19%) is due to a decrease in a number of
        expense categories. The management team is continuing to operate with
        modest staff levels and has been focusing on continuing to optimize the
        use of its resources, increasing its customer base and generating revenues.
      Liquidity & Capital
        Resources
      
      As of March 31, 2001,
        the Company had cash of $4,700 and a net working capital deficit of $1,270,000.
        Management believes that it can continue to raise additional capital,
        to support its operations until such time as the revenue stream is sufficient
        to realize positive cash flow in 2001. Management believes that the additional
        financing coupled with its expected revenues from the Ah-IMMUNOASSAY®,
        the collection of the outstanding note receivable and the sale of its
        inventory of Andrographolide will enable the Company to further improve
        its operating efficiency and to continue its operations into the future.
      
      Management and The
        Board
      
      The management of the Company will be focusing their efforts
        on bringing the Company products and services to market in a timely manner,
        producing ongoing revenues and controlling expenses.
      Short Term Advances
      
      BioSignia, Inc., the Companys
        largest shareholder, has advanced interim funds to the Company for working
        capital purposes. The Company agreed to repay the funds, together with
        interest at an annual rate of 10%, at the earlier of 30 days from the
        date of the advance or the receipt by the Company of proceeds from the
        sale of stock. On June 19, 2000, the Board of Directors agreed to accept
        BioSignia's offer to convert $500,000 of debt into common stock of Paracelsian
        at $.40 per share. Through March 31, 2001, the principal portion of advances
        from BioSignia aggregated $191,877.
      Patents
      
      The Japanese Patent Office in March 2001 issued to the
        Company Patent # 3144689 for the detection of dioxin-like compounds through
        the use of the Paracelsians Ah-IMMUNOASSAY® Kit. This patent,
        which is equivalent to US patent # 6,127,136 is Paracelsians sixth
        patent related to the Ah-IMMUNOASSAY® Kit
      Forward Looking Statements
      
      Certain statements in this Form 10-Q "Management's Discussion
        and Analysis of Financial Condition and Results of Operations" 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
        the actual results, performance or achievements of the Company to be materially
        different from any future results, performance or achievements expressed
        or implied by such forward looking statements. Such factors include, among
        others, the following: success of operating initiative, advertising and
        promotional efforts, acceptance of new product offerings, availability,
        changes in business strategy or development plan, availability and terms
        of capital, labor and employee benefit costs, and other factors specifically
        referred to in this 10-Q.
      (PAGE
        9)
      PART II		OTHER INFORMATION
      Item 1.		Legal Proceedings
      Hadyk, et al. V. John G. Babish, et al.
      
      On February 14, 2001 the Hadyk, et al. V. John G. Babish,
        et al. case that was commenced in the New York State Supreme Court
        (Onondaga County) in June 1993 by certain persons against the Company
        was dismissed.
      This case was commenced by certain person, individually
        and doing business as In Vitro Bioanalytic Systems, against the Company,
        Dr. John G. Babish, a former officer and director of the Company, and
        Edward Heslop, a founding shareholder of the Company, primarily as an
        action for money damages and injunctive relief against the Company for
        alleged misappropriation of proprietary information and unfair competition.
        The plaintiffs alleged, among other things, that in 1990, prior to the
        Companys incorporation, a partnership had been formed with Messrs.
        Babish and Heslop to commercialize products that the Company was developing.
        Damages, an accounting and an injunction were being sought against the
        Company. By decision dated September 14, 1994, the Court dismissed certain
        of the plaintiffs claims against the Company while permitting a
        claim alleging unfair competition to proceed. Discovery had been temporarily
        stayed pending resolution of a motion for summary judgment brought by
        certain of the Companys co-defendants. That motion was successfully
        and fully resolved, and the Court, on February 14, 2001, ruled in favor
        of the Company. The Court not only exonerated the Company of any wrongdoing,
        but also reflected the plaintiffs fundamental premise that they
        had a property interest in the technology at issue in this case.
      Item 6(a)	Exhibits
      NoneItem 6(b)	Reports on Form 8-K
      
      NoneSIGNATURES
      In accordance with Section 13 or 15
        (d) of the Securities and Exchange Act, the registrant caused this report
        to be signed on its behalf by the undersigned, thereunto duly authorized.
      Date	May 21, 2001
      PARACELSIAN, INC.
      By:/s/
        T. COLIN CAMPBELL
        -------------------------------------
        T. Colin Campbell
        President,
        Chief Executive Officer
      
      By/s/
        GARY G. CHABOT
        ---------------------------------
        Gary G. Chabot
        Principal Accounting Officer
      (PAGE
        12)
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