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 JUNE 30, 1999
                                                    -------------

                                       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 20,653,227 shares of Common Stock outstanding at August 13, 1999.

<PAGE>


                        PARACELSIAN, INC. AND SUBSIDIARY

                                      Index





                                                                          Page
                                                                          ----
PART I. - FINANCIAL INFORMATION

Item 1.    Financial Statements

Consolidated Balance Sheet as of June 30, 1999 (Unaudited)
                                                                            3


Consolidated Statements of Operations for the three and
nine months ended June 30, 1999 and 1998 and the cumulative
period from inception to June 30, 1999 (Unaudited)                          4


Consolidated Statements of Cash Flows for the nine months
ended June 30, 1999 and 1998 and the cumulative period from
inception to June 30, 1999 (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>


<TABLE>
<CAPTION>
                              Paracelsian, Inc. and Subsidiary
                                (A Development Stage Company)
                                 Consolidated Balance Sheet
                                        June 30, 1999
                                         (Unaudited)


                                  ASSETS
Current Assets:
<S>                                                                             <C>
           Cash and cash equivalents                                            $  109,319
           Inventory                                                               171,689
           Prepaid expenses and other current assets                                 7,798
                                                                                ----------
                   Total current assets                                            288,806
                                                                                ----------

Equipment, net                                                                     224,488
                                                                                ----------
Other Assets:
           TCM extracts on-hand                                                    194,574
           Licensing agreement, net                                                 31,258
           Patents and trademarks, net                                             208,132
           Note receivable                                                         148,750
                                                                                ----------
                                                                                   582,714
                                                                                ----------
                                                                                $1,096,008
                                                                                ----------



                                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
           Accounts payable                                                     $  204,816
           Accrued expenses                                                         17,206
           Current portion of capital lease obligations                             11,525
           Current portion of notes payable                                          7,760
                                                                                ----------
                   Total current liabilities                                       241,307
                                                                                ----------

Long-term Liabilities
           Long-term portion of capital lease obligation                            11,668
           Long-term portion of notes payable                                       16,037
                                                                                ----------
                   Total current and long-term liabilities                         269,012
                                                                                ----------

Commitments and Contingency

Stockholders' Equity:
           Common stock, $.01 par value; 35,000,000 shares authorized;
                    20,147,227 shares outstanding June 1999                        201,472
           Additional paid-in capital                                           24,128,300
           Deficit accumulated during the development stage                    (22,160,261)
           Treasury stock, at cost; 265,478 shares                              (1,342,515)
                                                                                ----------
                   Total stockholders' equity                                      826,996
                                                                                ----------
                                                                                $1,096,008
                                                                                ==========


                      See accompanying notes to consolidated financial statements.
                                                   3
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                            Paracelsian, Inc. and Subsidiary
                                              (A Development Stage Company)
                                          Consolidated Statements of Operations
                               For the three and nine months ended June 30, 1999 and 1998,
                                And the cumulative period from inception to June 30, 1999
                                                       (Unaudited)


                                                                                                              Cumulative
                                                       Three Months Ended            Nine Months Ended        Period from
                                                            June 30,                      June 30,            Inception to
                                                   --------------------------    --------------------------     June 30,
                                                     1999            1998           1999           1998           1999
                                                   -----------    -----------    -----------    -----------   ------------
<S>                                                        <C>          <C>            <C>            <C>          <C>
Revenues:
        Marketing rights                           $        --    $        --    $        --    $        --   $    254,995
        Products                                           640          1,425          8,293          3,100        185,318
        Product testing                                  1,790         15,240         17,279         49,210         58,697
        Development fees                                50,000             --        148,000             --        148,000
        Product royalties                                   --             --             --             --          1,246
        Subscription revenue                                --             --             --             --         31,625
                                                   -----------    -----------    -----------    -----------   ------------
                                                        52,430         16,665        173,572         52,310        679,881

Operating expenses:
        Research and product engineering               203,099        165,107        579,614        542,264      8,255,829
        General and administrative                     408,547        371,205      1,132,508        926,606     12,604,197
        Product launch costs                                --             --             --             --        300,544
        Cost of products sold                               --             --             --             --         95,023
                                                   -----------    -----------    -----------    -----------   ------------
                                                       611,646        536,312      1,712,122      1,468,870     21,255,593
                                                   -----------    -----------    -----------    -----------   ------------
           Loss from operations during
             the development stage                    (559,216)      (519,647)    (1,538,550)    (1,416,560)   (20,575,712)

Interest income, net                                     7,500          9,096          7,500         35,798        504,963
Gain on sale of assets                                      --                            --          6,968         38,488
                                                   -----------    -----------    -----------    -----------   ------------
           Net loss during the development stage   $  (551,716)   $  (510,551)   $(1,531,050)   $(1,373,794)  $(20,032,261)
                                                   ===========    ===========    ===========    ===========   ============


           Basic and diluted net loss per share    $     (0.03)   $     (0.03)   $     (0.08)   $     (0.09)
                                                   ===========    ===========    ===========    ===========

Weighted average number of
  shares outstanding                                19,405,588     14,871,296     18,869,948     14,871,296
                                                   ===========    ===========    ===========    ===========


                              See accompanying notes to consolidated financial statements.
                                                            4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                         Paracelsian, Inc. and Subsidiary
                                          (A Development Stage Company)
                                      Consolidated Statements of Cash Flows
                                For the nine months ended June 30, 1999 and 1998,
                            And the cumulative period from inception to June 30, 1999
                                                   (Unaudited)
                                                                                                     Cumulative
                                                                           Nine Months Ended        Period from
                                                                              June 30,              Inception to
                                                                      --------------------------      June 30,
                                                                         1999           1998            1999
                                                                      -----------    -----------    ------------
<S>                                                                   <C>            <C>            <C>
Cash flows from operating activities:
        Net loss                                                      $(1,531,050)   $(1,373,794)   $(20,032,261)
        Adjustments to reconcile net loss to net cash used in
        operating activities:
              Gain on the sale of assets                                       --         (6,968)         (6,968)
              Non-cash compensation expense                               156,828             --       1,399,103
              Other non-cash expenses                                          --             --       1,742,754
              Depreciation and amortization                               321,975        321,975       2,008,820
              Changes in assets and liabilities:
                   (Increase) decrease in inventory                            --        (15,366)       (171,689)
                   (Increase) decrease in prepaid expenses and
                     other current assets                                  76,379        (51,305)         21,622
                   (Decrease) increase in accounts payable                135,181        (95,564)        559,338
                   (Decrease) increase in due to related party                 --        (11,555)             --
                   (Decrease) increase in accrued expenses                 12,071        (15,410)        174,409
                                                                      -----------    -----------    ------------
              Net cash used in operating activities                      (828,616)    (1,247,987)    (14,304,872)
                                                                      -----------    -----------    ------------

Cash flows from investing activities:
        Purchase of equipment                                              (3,767)       (31,212)       (737,168)
        Proceeds from sale of equipment                                        --          6,968          26,968
        Acquisition of licensed technology                                     --             --         (53,656)
        Acquisition of patents and trademarks                             (37,929)       (18,661)       (468,508)
        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 East West Herbs, Ltd.                                    --         42,500          42,500
                                                                      -----------    -----------    ------------
              Net cash used in investing activities                       (41,696)          (405)     (1,972,730)
                                                                      -----------    -----------    ------------

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                  745,980        500,000      11,576,089
        Proceeds from the exercise (redemption) of warrants                    --             --       1,186,295
        Proceeds from the exercise of options                              31,400             --          68,900
        Purchase of treasury stock                                             --             --      (1,342,515)
        Cost of warrant dividend                                               --             --         (63,102)
        Payment on equipment contract                                          --             --         (90,950)
        Payment on capital lease obligations                               (6,651)            --         (11,806)
        Payment on notes payable                                          (41,640)            --         (60,004)
                                                                      -----------    -----------    ------------
              Net cash (used in) provided by financing activities         729,089        500,000      16,386,921
                                                                      -----------    -----------    ------------

Net increase (decrease) in cash and cash equivalents                     (141,223)      (748,392)        109,319

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

Cash and cash equivalents, end of period                              $   109,319    $   137,857    $    109,319
                                                                      ===========    ===========    ============

                           See accompanying notes to consolidated financial statements.
                                                        5
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                         Paracelsian, Inc. and Subsidiary
                                          (A Development Stage Company)
                                      Consolidated Statements of Cash Flows
                                For the nine months ended June 30, 1999 and 1998,
                            And the cumulative period from inception to June 30, 1999
                                                   (Unaudited)

                                                                                                     Cumulative
                                                                           Nine Months Ended        Period from
                                                                              June 30,              Inception to
                                                                      --------------------------      June 30,
                                                                         1999           1998            1999
                                                                      -----------    -----------    ------------
<S>                                                                   <C>            <C>            <C>
Supplemental disclosures:
        Cash paid during the period for interest                      $     4,189    $     3,433    $     31,251
                                                                      ===========    ===========    ============

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                    $   270,617    $        --    $    835,848
        Purchase of equipment                                         $        --    $        --    $     90,950
        Repayment 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.
                                                        6
</TABLE>

<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1999
                                   (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>


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 $1,531,000 for the nine months ended June 30, 1999 and had
working capital of approximately $48,000 at June 30, 1999. 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, the business plan has been revised,  and efforts
have been focused on developing a recurring  revenue  stream.  Revenues from the
BioFIT(TM)   quality   assurance   program  and  from   development  of  the  Ah
Immunoassay(TM)  dioxin  screen  commenced  during the second  quarter of fiscal
1999. The Company raised  $217,500 in March 1999,  $300,000 in May and June 1999
and  $200,000  in July 1999  through  private  placements  of its common  stock.
Management believes that it can raise additional capital through similar private
placements,  if  needed,  and  that  the  combination  of such  capital  and the
anticipated  revenue  stream will enable the Company to continue its  operations
and emerge from the development stage in 1999.

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 June 30,
1999.

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.

                                       8
<PAGE>


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.  The
Company's  basic and  diluted  per share  amounts are the same since the assumed
exercise of stock options and warrants are anti-dilutive.

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

               Nine months Ended June 30, 1999 as compared to the
                         Nine months Ended June 30, 1998

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  revenue 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 the Company's core technology as a source
of significant revenues. These technologies,  unique bioassays and assay systems
which can monitor the presence of environmental  toxins or be used to assure the
consistent  functionality  of natural  compounds  sold as  dietary  supplements,
provide the basis,  management  feels,  for the emergence  from the  development
stage by the end of calendar 1999.

The Company has now  completed  development  of its BioFIT (TM) (Bio  Functional
Integrity  Tested)  "functional"  quality assurance program for herbal and other
complex  natural  products.  This unique  quality  assurance  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 and complex  natural  products,  including
nutraceuticals,  based on their demonstrated  biological  activity,  rather than
relying, as in the past, on a chemical analysis of their principal constituents.
Chemicals  analysis  has not been  demonstrated  to be a  consistent  measure of
functionality  for  herbal  products,  and  often  presumed  actives  or  marker
compounds  used for  standardization  do not predict  biological  activity.  The
BioFIT (TM)  certification  ensures that products exhibit a high enough level of
biological activity in mechanisms relevant to the claimed product benefit,  when
compared to products used in  successful  clinical  trials,  to suggest that the
product will deliver on its benefit claims.

The Company  filed a broad patent  application  covering its unique  approach to
quality assurance in July of 1998. The patent application is being prosecuted by
Kenyon & Kenyon  of New  York,  one of the  nation's  most  respected  law firms
specializing in intellectual property.

In July 1998,  the Company  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  provided for payments to the
Company for development of assay systems, for product certifications,  for batch
to batch  testing and for  royalties on the sale of BioFIT (TM)  products.  This
agreement has now been modified to limit R.P. Scherer's  exclusivity only to the
softgel delivery system.  The Company will continue to receive  royalties on the
sale of all BioFIT (TM) certified  products by R.P. Scherer and will continue to
be paid for batch to batch testing.  However,  the Company is now free to pursue
arrangements  with all  manufacturers  selling  other  types of  delivery  forms
including tablets,  two part hard shells,  foods and beverages,  as well as with
raw material manufacturers.  This dramatically increases the Company's potential
revenue and, in the case of finished goods manufacturers,  allows the Company to
receive  royalties  based on a  higher  selling  price  than  that at which  its
royalties from R.P. Scherer would have been based.

The  Company has  initiated  testing for  several  raw  material  suppliers  and
finished goods  manufactures.  Revenues  derived from testing are increasing and
the Company  expects that  requests for testing will continue to increase in the
coming months as the industry  enters its peak selling  period from September to
March.  The  Company  is also in active  discussions  with  several  sellers  of
finished  dietary  supplements  and  sellers  of raw  materials  and  expects to
complete negotiations shortly that will result in BioFIT (TM) certified products
being seen on store shelves later this year.

The  Company is also  continuing  its  efforts to expand the scope of the BioFIT
(TM)  program to the rest of the world and is in ongoing  discussions  with R.P.
Scherer pursuant to a letter agreement signed in March 1999 to take advantage of
this opportunity.

The Company  signed a letter of intent with Kubota  Corporation  on May 25, 1999
calling  for  the  signing  of  a  development   agreement  to  further  develop
Paracelsian's patented Ah Immunoassay(TM) for use in the monitoring of municipal
waste  incinerators in Japan.  The development  agreement was signed on July 20,
1999 and provided  for  payments to the Company in the amount of $257,000,  with
$157,000 due by the end of August 1999.  The letter of intent further called for

                                       10
<PAGE>


the signing of a license  agreement  with Kubota and this agreement is currently
being  negotiated,  and the Company  expects to sign an  agreement by the end of
August 1999.  This  agreement  will  provide  both  license fees and  guaranteed
royalties,  although the royalties may not begin for up to three years while the
Ah Immunoassay(TM) is being validated for its intended use in Japan.

In addition to its agreements and discussions  with Kubota in Japan, the Company
is also actively  involved in  discussions  with private  businesses in Belgium,
Korea and with Ministry of Health and other  government  agencies in the Peoples
Republic  of  China  regarding   development  and   implementation   of  the  Ah
Immunoassay(TM)  to monitor food, water and soil, in addition to municipal waste
incinerators. The Company expects these discussions to be fruitful and result in
further  applications  for its technology with associated  revenues some time in
the year 2000.

The Company is also pursuing the further  development of its E-commerce business
and has  established a site focusing on various  aspects of Traditional  Chinese
Medicine,   including  the  sale  of  Traditional   Chinese  Medicine  remedies.
Discussions  are ongoing with the People's  Republic of China aimed at achieving
proprietary   access  to  various   scientific   information  and  research  and
development services and at establishing sources of TCM products to be sold over
the  Internet.  The Company  expects these efforts to begin bearing fruit in the
year 2000.


RESULTS OF OPERATIONS

The Company's  net loss for the third  quarter of fiscal 1999 was  approximately
$552,000  compared to $511,000 in the third quarter of fiscal 1998. For the nine
months ended June 30, 1999, the net loss was $1,531,000,  compared to $1,374,000
for the comparable period of the preceding year. Revenues for the three and nine
month  periods  were  $52,000  and  $174,000  in 1999 as compared to $16,000 and
$52,000 in 1998. The increase in revenues is primarily  attributable  to initial
development fees under the BioFit (TM) program with R.P. Scherer  ($100,000) and
fees  from the  Kubota  Corporation  ($48,000)  for  development  work on the Ah
Immunoassay(TM).  Operating  expenses  for the fiscal 1999  periods are modestly
higher than the comparable periods in fiscal 1998,  reflecting the gradual build
up of personnel and related costs  associated with the development of the BioFit
(TM) certification  program.  Additionally,  the 1999 periods include $78,000 of
non-cash  compensation  associated with the vesting of stock options  previously
granted to the Chief Executive Officer.


LIQUIDITY & CAPITAL RESOURCES

As of June 30, 1999, the Company had cash of $109,000 and net working capital of
$48,000.  Subsequent  to quarter  end, the Company  executed an  agreement  with
Kubota  Corporation  providing  for  payments  to the  Company  in the amount of
$257,000,  including  $157,000 due by the end of August.  Additionally,  in late
July 1999,  the  Company  completed  the second  half of an  aggregate  $400,000
private placement,  bringing the total private placements completed since fiscal
year end to  $967,500.  Current  monthly cash  requirements  in order to sustain
meaningful operations are approximately $100,000.  Management believes, based on
its recent experience, that it can continue to raise incremental capital through
private placements,  if needed, to support its operations until such time as the
revenue stream is sufficient to provide for continuing operations.  Such private
placements,  if any,  will likely  require  discounts  from then current  market
prices, reflecting the risk associated with trading restrictions, trading volume
and  volatility,  and stock price support  levels.  Management  will continue to
evaluate the most cost effective means of raising any additional needed capital,
including the feasibility of adjusting exercise prices on outstanding options or
warrants as  appropriate.  There can be no assurance that  additional  financing
will be available on acceptable terms or at all.


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.

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<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     August 13, 1999

                                   PARACELSIAN, INC.

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

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