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 DECEMBER 31, 1998.

                                       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                    (I.R.S. Employer
   incorporation or organization)                    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 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 18,715,033 shares of Common Stock outstanding at February 12, 1999.

<PAGE>

                        PARACELSIAN, INC. AND SUBSIDIARY

                                      Index

                                                                   PAGE
PART I. - FINANCIAL INFORMATION

Item 1 - Financial Statements

Consolidated Balance Sheet as of December 31, 1998 (Unaudited)      3

Consolidated Statements of Operations for the three months ended
December 31, 1998 and 1997 and the cumulative period from
inception to December 31, 1998 (Unaudited)                          4

Consolidated Statements of Cash Flows for the three months ended
December 31, 1998 and 1997 and the cumulative period from
inception to December 31, 1998 (Unaudited)                          5

Notes to Consolidated Financial Statements (Unaudited)              7

Item 2 - Management's Discussion and Analysis of Financial
         Condition and Results of Operations                        9


PART II  - OTHER INFORMATION

Item 1 - Legal Proceedings                                         11

Item 6 - Exhibits and Reports on Form 8-K                          11

Signatures                                                         11



                                       2
<PAGE>

                        PARACELSIAN, INC. AND SUBSIDIARY
                          (A Development Stage Company)
                           Consolidated Balance Sheet
                                December 31, 1998
                                   (Unaudited)


                                     ASSETS
                                     ------
Current Assets:
     Cash and cash equivalents                                     $    189,024
     Inventory                                                          171,689
     Prepaid expenses and other current assets                           56,223
                                                                   ------------
          Total current assets                                          416,936
                                                                   ------------

Equipment, net                                                          248,794
                                                                   ------------

Other Assets:
     TCM extracts on-hand                                               272,364
     Licensing agreement, net                                           127,257
     Patents and trademarks, net                                        185,344
     Note receivable                                                    148,750
                                                                   ------------
                                                                        733,715
                                                                   ------------
                                                                   $  1,399,445
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
Current Liabilities:
     Accounts payable                                              $    105,703
     Accrued expenses                                                   136,063
     Current portion of capital lease obligation                         10,123
     Current portion of notes payable                                    33,867
                                                                   ------------
          Total current liabilities                                     285,756

LONG-TERM LIABILITIES
     Long-term portion of capital lease obligation                       14,389
     Long-term portion of notes payable                                  18,497
                                                                   ------------
          Total current and long-term liabilities                       318,642
                                                                   ------------

Commitments and Contingency

Stockholders' Equity:
     Common stock, $.01 par value; 35,000,000 shares authorized;
          18,715,033 shares outstanding at December 31, 1998            187,150
     Additional paid-in capital                                      23,368,474
     Deficit accumulated during the development stage               (21,132,306)
     Treasury stock, at cost; 265,478 shares                         (1,342,515)
                                                                   ------------
          Total stockholders' equity                                  1,080,803
                                                                   ------------
                                                                   $  1,399,445
                                                                   ============

          See accompanying notes to consolidated financial statements.
                                       3

<PAGE>
<TABLE>
<CAPTION>

                              PARACELSIAN, INC. AND SUBSIDIARY
                                (A Development Stage Company)
                                 Consolidated Statements of
                            Operations For the three months ended
                                 December 31, 1998 and 1997,
                And the cumulative period from inception to December 31, 1998
                                         (Unaudited)

                                                                               Cumulative
                                                     Three Months Ended        Period from
                                                        December 31,           Inception to
                                               ----------------------------    December 31,
                                                   1998            1997           1998
                                               ------------    ------------    ------------
<S>                                                  <C>             <C>             <C>   
Revenues:
   Marketing rights                            $       --      $       --      $    254,995
   Products                                           1,705            --           178,730
   Product testing                                   10,260          21,920          51,678
   Product royalties                                   --              --             1,246
   Subscription revenue                                --              --            31,625
                                               ------------    ------------    ------------
                                                     11,965          21,920         518,274

Operating expenses:
   Research and product engineering                 173,577         182,482       7,849,792
   General and administrative                       341,483         258,240      11,813,172
   Product launch costs                                --              --           300,544
   Cost of products sold                               --              --            95,023
                                               ------------    ------------    ------------
                                                    515,060         440,722      20,058,531
                                               ------------    ------------    ------------
       Loss from operations during
       the development stage                       (503,095)       (418,802)    (19,540,257)

Interest income, net                                   --            13,813         497,463
Gain on sale of assets                                 --             5,268          38,488

                                               ------------    ------------    ------------
       Net loss during the development stage   $   (503,095)   $   (399,721)   $(19,004,306)
                                               ============    ============    ============

       Basic and diluted net loss per share
       of common stock                                (0.03)          (0.03)
                                               ============    ============

Weighted average number of
  shares outstanding                             18,093,430      12,004,867
                                               ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        4


<PAGE>
                        PARACELSIAN, INC. AND SUBSIDIARY
                          (A Development Stage Company)
                                  Consolidated
                               Statements of Cash
                               Flows For the three
                              months ended December
                               31, 1998 and 1997 ,
          And the cumulative period from inception to December 31, 1998
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                         Cumulative
                                                                                Three Months Ended       Period from
                                                                                   December 31,          Inception to
                                                                              ----------------------     December 31,
                                                                                 1998         1997           1998
                                                                              ---------    ---------    ------------
<S>                                                                           <C>          <C>          <C>          
    Cash flows from operating activities:
         Net loss                                                             $(503,095)   $(399,721)   $(19,004,306)
         Adjustments to reconcile net loss to net cash used in
         operating activities:
              Gain on the sale of assets                                             --       (5,268)         (6,968)
              Non-cash compensation expense                                      29,763           --       1,272,038
              Other non-cash expenses                                                --           --       1,742,754
              Depreciation and amortization                                     107,325      107,325       1,794,170
              Changes in assets and liabilities:
                   (Increase) decrease in inventory                                  --      (15,366)       (171,689)
                   (Increase) decrease in prepaid expenses
                        and other current assets                                 27,954        6,000         (26,803)
                   (Decrease) increase in accounts payable                       36,068     (153,243)        460,225
                   (Decrease) increase in due to related party                       --      (11,555)             --
                   (Decrease) increase in accrued expenses                       11,226      (21,164)        173,564
                                                                              ---------    ---------    ------------
              Net cash used in operating activities                            (290,759)    (492,992)    (13,767,015)
                                                                              ---------    ---------    ------------

    Cash flows from investing activities:
         Purchase of equipment                                                       --           --        (733,401)
         Proceeds from sale of equipment                                             --        5,268          26,968
         Acquisition of licensed technology                                          --           --         (53,656)
         Acquisition of patents and trademarks                                   (6,141)          --        (436,720)
         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          42,500
                                                                              ---------    ---------    ------------
              Net cash used in investing activities                              (6,141)      47,768      (1,937,175)
                                                                              ---------    ---------    ------------

    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                       250,000           --      11,080,109
         Proceeds from the exercise of warrants                                      --           --       1,186,295
         Proceeds from the exercise of options                                       --           --          37,500
         Purchase of treasury stock                                                  --           --      (1,342,515)
         Cost of warrant dividend                                                    --           --         (63,102)
         Payment on equipment contract                                               --           --         (90,950)
         Payment on capital lease obligations                                    (1,545)          --          (6,700)
         Payment on notes payable                                               (13,073)          --         (31,437)
                                                                              ---------    ---------    ------------
              Net cash (used in) provided by financing activities               235,382           --      15,893,214
                                                                              ---------    ---------    ------------

    Net increase (decrease) in cash and cash equivalents                        (61,518)    (445,224)        189,024

    Cash and cash equivalents, beginning of period                              250,542      886,249              --
                                                                              ---------    ---------    ------------

    Cash and cash equivalents, end of period                                  $ 189,024    $ 441,025    $    189,024
                                                                              =========    =========    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        5

<PAGE>
<TABLE>
<CAPTION>

                                           PARACELSIAN, INC. AND SUBSIDIARY
                                             (A Development Stage Company)
                                                     Consolidated
                                                  Statements of Cash
                                                  Flows For the three
                                                 months ended December
                                                  31, 1998 and 1997 ,
                             And the cumulative period from inception to December 31, 1998
                                                      (Unaudited)
                                            (Continued from Previous Page)

                                                                                                         Cumulative
                                                                                Three Months Ended       Period from
                                                                                   December 31,          Inception to
                                                                              ----------------------     December 31,
                                                                                 1998         1997           1998
                                                                              ---------    ---------    ------------
<S>                                                                           <C>          <C>          <C>          
    Supplemental disclosures:
         Cash paid during the period for interest                             $   1,580    $      --    $     20,864
                                                                              =========    =========    ============

    Supplemental disclosure of non-cash investing and 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 short-term liabilities                            $  67,263    $      --    $    632,494
         Purchase of equipment                                                $      --    $      --    $     90,950
         Repayment of officer stock subscription receivable                   $      --    $      --    $     89,850
         Issuance of common stock for licensing and technology rights         $      --    $      --    $      3,338

</TABLE>

          See accompanying notes to consolidated financial statements.
                                        6

<PAGE>
                        PARACELSIAN, INC. AND SUBSIDIARY
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998
                                   (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, 1998.

2.        ORGANIZATION, BUSINESS, AND RISK FACTORS:

ORGANIZATION AND BUSINESS
Paracelsian,  Inc., (the "Company") is a bio-science and technology company that
utilizes its  proprietary  screening  technology to identify  novel  therapeutic
compounds from herbal and other  botanical  sources and to define and/or confirm
the biological  mechanisms  through which traditional herbs and other botanicals
provide the therapeutic or functional  benefits  suggested by their  traditional
use. This  technology  has been  developed by the Company to identify  potential
products that inhibit the  biological  signals  generated by targeted cells that
result  in  controlled  or  uncontrolled  growth  and  division.  The  Company's
screening  technology  evaluates  the  effects  of herbal  and  other  botanical
products  on  intracellular   signals   referred  to  as  "Signal   Transduction
Technology."

Cell  division is one of the basic steps in biology  necessary for normal growth
of tissues to support life.  The Company's  technology  enables  researchers  to
observe signal  transduction  and measure the effects of chemicals  contained in
synthetic or natural compounds,  and chemicals occurring in nature such as herbs
and  combinations of herbal extracts,  on cell division.  In the course of these
observations,  the Company can  distinguish  the  effects of such  chemicals  on
targeted  cells,  thereby  screening  compounds to identify those with promising
favorable  therapeutic  effects.  (This  proprietary  technology,  including the
components, methods, procedures and know-how employed in this screening process,
is referred to herein as the "Screening Technology")

In  October  1994,  Pacific  Liaisons   (Pacific),   a  partnership  engaged  in
identifying and acquiring  biologically active drugs, natural products and foods

                                        7
<PAGE>
                        PARACELSIAN, INC. AND SUBSIDIARY
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998
                                   (Unaudited)

from Eastern Asia, merged with a wholly-owned  subsidiary of the Company and the
Company  now  maintains a large  library of natural  medicinal  extracts.  These
extracts are being processed with the Company's screening technology to identify
potential  candidates for drug or dietary  supplement  development.  The Company
also has access to the informational database related to the medicinal extracts,
which contains, among other things, a history of the usage of each extract.

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  $503,000 for the three months ended December 31, 1998 and
has working capital of approximately  $131,000 at December 31, 1998. The Company
continues to expend funds on product  research and  development  and general and
administrative  expenses,  however, under the direction of a new management team
and Board since January,  1998,  expenditures  have been reduced from prior year
levels,  and efforts have been focused on developing a recurring revenue stream.
Management  anticipates  that revenues  from its  BioFIT(TM)  quality  assurance
program will commence in January,  1999, and that revenues  associated  with its
AhIMMUNOASSAY  will also commence  during the second quarter of fiscal 1999. The
Company raised $250,000 of capital in December, 1998 through a private placement
of common stock.  Management  believes that the  combination of that  additional
capital and its  anticipated  revenue stream will enable the Company to continue
its operations and emerge from the development stage in 1999.

                                       8
<PAGE>
                        PARACELSIAN, INC. AND SUBSIDIARY
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998
                                   (Unaudited)

3.          SIGNIFICANT ACCOUNTING POLICIES:

CONSOLIDATION

The  consolidated  financial  statements of the Company  include the accounts of
Paracelsian,  Inc. and its wholly owned subsidiary ParaComm, Inc. formerly known
as Para Acquisition  Corp. All intercompany  balances and transactions have been
eliminated.

CASH AND CASH EQUIVALENTS
Cash equivalents  consist of highly liquid investments with an original maturity
of three months or less. The Company had no cash  equivalents as of December 31,
1998.

RESEARCH AND PRODUCT ENGINEERING
Company-sponsored  research  and  product  engineering  expenditures  have  been
charged to expense as  incurred.  These  costs  consist  primarily  of  employee
salaries and direct  laboratory costs. The cost of extracts used in research and
development activities is expensed as consumed.

NET LOSS PER SHARE
Basic  loss  per  share  is   computed   by   dividing   the  net  loss  by  the
weighted-average  number of common shares outstanding during the period. Diluted
loss per share is not  presented as the  inclusion of  potential  common  shares
(stock options and warrants) would be antidilutive.

PATENTS AND TRADEMARKS
The Company has  acquired or applied for certain  patent and  trademark  rights.
Costs associated with the acquisition and application for these rights have been
capitalized  and are  being  amortized  on the  straight-line  method  over  the
estimated legal life of the assets which range from 15 to 17 years.

EQUIPMENT AND DEPRECIATION
Equipment is stated at cost and is depreciated  over the estimated  useful lives
of the assets using the straight-line method.

USE OF ESTIMATES
The  preparation of the  consolidated  financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements.  Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.


                                       9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

             Three Months Ended December 31, 1998 as compared to the
                      Three Months Ended December 31, 1997

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.

Since January 1998, a significant  portion of the new management team's strategy
has been focused on the development of its BioFIT(TM) (Bio Functional  Integrity
Tested)  quality  assurance  program.  This  unique  testing  program is able to
certify consistent  bio-functionality  of herbal and other dietary  supplements.
This new  "functional"  approach to quality  assurance will assist  consumers in
selecting  herbs  and  other  botanical  products  based on  their  demonstrated
biological activity,  rather than relying solely on analytical  techniques which
measure only the presence or absence of certain marker compounds.

The Company has entered into an agreement  with R.P.  Scherer North America that
establishes  them as the  exclusive  marketing  and  distribution  agent for the
BioFIT(TM)  certification  program  in the  dietary  supplement  and OTC  market
segments in North America. The agreement also provides for collaboration between
the  two  companies  on the  development  of new  dietary  supplements  and  OTC
products.  The  agreement,  among other  things,  provides  for  payments to the
Company for the  development of each bioassay,  payment for each  certification,
and payment of royalties on all sales of BioFIT(TM) certified products.

Although the BioFIT(TM) program will be introduced in the North American market,
the program will be expanded to a worldwide  basis on terms that are essentially
equivalent to the North American agreement.

The commencement of revenues from the BioFIT(TM)  program began in January 1999,
and  management  anticipates  a gradual  ramp-up  and  expansion  of the program
throughout  the year.  Consequently,  the Company is expected to emerge from the
development stage during the first half of 1999.

RESULTS OF OPERATIONS

The Company's first quarter of fiscal 1999 net loss of $503,000 is approximately
$103,000 more than the first  quarter of fiscal 1998 loss of $400,000.  Although
revenues  decreased  from $21,920 in fiscal '98 to $11,965 in fiscal '99,  those
revenues are incidental and not representative of the Company's future plans and
expectations. By the first quarter of fiscal '98, prior to the Biomar investment
and change in  management,  the  Company  had cut its work force and scaled down
discretionary  expenses  to  conserve  resources  as a result  of its  abandoned
product launch and lack of strategic  focus.  The successor  management team has
continued  to  operate   throughout  1998  with  modest  staff  levels  and  has
particularly  focused on resolving costly litigation that had been a significant
drain on both human and financial  resources.  Management  views fiscal '98 as a
transitional  year, of resolving old problems and  redirecting  the focus of the
Company  toward  generating a recurring and growing  revenue  stream.  The first
quarter of fiscal '99  reflects the gradual  build up of  personnel  and related
costs  associated with the development of the BioFit(TM)  certification  program
under the direction of the new management team and Board of Directors.

LIQUIDITY & CAPITAL RESOURCES

As of December 31, 1998,  the Company  maintained  working  capital of $131,000,
which included cash of $189,000.  In December 1998, the Company raised  $250,000
in cash  through a private  placement  of its common  stock at the then  current
market price, and in January 1999, the Company received the initial payment from
R.P.  Scherer for development fees under its BioFIT(TM)  certification  program.
Management  believes  that  it can  successfully  raise  additional  capital  if
necessary to support its  continued  operations  until such time as revenues are
sufficient to provide internally  generated funds. The Company presently intends
to pursue additional  capital of $1 million to $1.5 million in the near term, if
available on reasonable terms, to provide resources for the hiring of additional
personnel,  expansion and/or relocation of lab facilities,  and the acceleration
of product  development  efforts.  Of  course,  there can be no  assurance  that
additional financing will be available on acceptable terms or at all.

                                       10

<PAGE>

YEAR 2000 COMPLIANCE

The Company continues to monitor its exposure to the year 2000 computer problem.
Management  believes that all of the Company's date sensitive computer equipment
and  software is Y2K  compliant,  and is not aware of any vendor or customer Y2K
problems  that could have a  significant  impact on the  financial  position  or
results of operations of the Company.  To date, the Company has not incurred any
significant  expense  with  respect  to this issue and does not  anticipate  any
significant related expense in the future.

                                       11
<PAGE>


PART II     OTHER INFORMATION

Item 1.     LEGAL PROCEEDINGS

HADYK, ET AL. V. JOHN G. BABISH, ET AL.

This case was  commenced in New York State Supreme  Court  (Onondaga  County) in
June  1993 by  certain  persons,  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 allege,  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  are 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 has been temporarily stayed pending resolution
of  a  motion  for  summary   judgment  brought  by  certain  of  the  Company's
co-defendants.  That motion, if successful, will fully resolve the case in favor
of the Company.  The Company  believes that the suit against it is without merit
and intends to defend the case vigorously.



Item 6(a)   EXHIBITS

            None

Item 6(b)   REPORTS ON FORM 8-K.

            None


SIGNATURES

         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        February 12, 1999

                                    PARACELSIAN, INC.

                            By: /s/ BERNARD M. LANDES
                               --------------------------------------
                                    Bernard M. Landes
                                    President and
                                    Chief Executive Officer