|SECURITIES
        AND EXCHANGE COMMISSION
        WASHINGTON, D.C. 20549
        FORM. 10-KSB
      [ X ]	ANNUAL
        REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
        FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000.
      [ ]TRANSITION
        REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        FOR THE TRANSITION PERIOD FROM ____________ TO ______________.
      Commission
        File No. 0-19844
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      PARACELSIAN,
        INC.
        ------------------------------------------------------
      (Name
        of small business issuer in its charter)
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|Delaware                                                                                       | 16-1399565                          
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|(State
          or other jurisdiction of incorporation or organization)                       | (I.R.S. Employer Identification No.)
|222
          Langmuir Laboratories 
          Cornell Technology Park, Ithaca, New York 14850 | 14850                               
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|(Address
          of principal executive offices)                                             | Zip
          Code                  
|Issuer's
          telephone number: (607) 257- 4224                                           |                                     
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|Securities
          registered under Section 12(b) of the Act: None                           |                                     
|Securities
          registered under Section 12(g) of the Act:                                |                                     
|Common
          Stock, $.01 par value                                                         |                                     
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|(Title
          of class)                                                                     |                                     
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|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 [ ]
      Check if there is
        no disclosure of delinquent filers in response to Item 405 of Regulation
        S-B is not contained in this form, and no disclosure will be contained,
        to the best of registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or
        any amendment to this Form 10-KSB. [ ]
      Issuer's revenues
        for its most recent fiscal year were $429,616.
      The aggregate market
        value of the voting stock (based on the closing price of such stock on
        NASD OTC Electronic Bulletin Board) held by non- affiliates of the Registrant
        at November 14, 2000 was approximately $8,809,068.
      There were 23,490,849
        shares of Common Stock outstanding at November 14, 2000.
      
      PART
        I
      Item 1. DESCRIPTION
        OF BUSINESS
      Company History
      Paracelsian, Inc.
        ("Paracelsian" or the "Company") is a Delaware corporation that was incorporated
        in 1990. The Companys initial strategy was to refine and commercialize
        the Ah-IMMUNOASSAY® for environmental applications. Management of
        the Company at that time believed that the refined Ah-IMMUNOASSAY®
        would be effective as an inexpensive and easy to use test for the screening
        and monitoring of polluted soil and water samples. The Company received
        a patent for this application in October 1993, and began to develop a
        program to commercialize the technology. The result of this work is the
        Toxicological Screening Assay system.
      In 1994, the Company
        purchased Pacific Liaisons. Pacific Liaison brought to Paracelsian a close
        working relationship with health and research authorities. Pacific Liaison
        also contributed to Paracelsian a library of 2,764 Traditional Chinese
        Medicine (TCM) herbal extracts, and access to Chinese medical and herbal
        databases which contained clinical and research data on the known functions,
        active compounds, and mechanisms of action for each of the 2,764 herbal
        extracts.
      In 1995, other patented
        assays developed as a result of the Companys ongoing research with
        Ah-IMMUNOASSAY® were used to screen Paracelsians library of
        TCM herbal extracts for natural compounds which would be effective in
        treating different types of cancer.
      In January 1998,
        BioSignia, Inc. (formerly Biomar International, Inc.), a Delaware corporation
        with its principal office in Chapel Hill, North Carolina ("BioSignia"),
        purchased a significant interest in the Company and a new board and management
        team was installed.
      In December 2000
        the Company entered into a Strategic Partnership Agreement with Triangle
        Laboratories, Inc., based in North Carolina. This partnership establishes
        an opportunity for Paracelsian to join its dioxin screening Ah-IMMUNOASSAY®
        Kit with the high resolution gas chromatography/high resolution mass spectrometry
        testing capability of Triangle to offer the marketplace a multi-tiered
        system for the comprehensive and accurate measurement of dioxin and related
        environmental chemicals.
      Company
        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.
      To date, the Company
      has developed specific need-driven bioassay systems for three markets: (1)
      environmental testing, (2) herbal supplements and (3) drug discovery and
      development.
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PARACELSIAN PRODUCTS


|PRODUCT                                   | MARKET                                                 | NEED                                                                                  
|----------------------------------------- | ------------------------------------------------------ | --------------------------------------------------------------------------------------
|Ah-IMMUNOASSAY®
        Kit               | Environmental
        Testing                          | Quick,
        low cost user friendly test for dioxin and dioxin-like chemicals       
|BioFIT
        Quality Assurance Program | HerbalSupplements                                      | Establish
        a quality assurance program that confirms product bioactivity       
|Drug
        Screening Assay System       | Natural
        Product Drug Discovery and Development | More
        effective method for screening natural compounds for therapeutic benefits



|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. A public service group in Japan, for example, has compared
        the relative contributions to human exposure of the original group of
        dioxins and furans in 4 countries, and showed that food contributes about
        98% of the total exposure. Among the food residues, 80-88% of the total
        is consumed from seafood, milk, dairy products, meat and eggs; in Japan,
        the proportion of dioxin consumption from fish is much higher than for
        other countries.
      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 uses of the AH-1
        Method are twofold: screening and monitoring. On screening, a sufficient
        number of samples taken from the site under investigation will need to
        be assayed in order to identify hot spot areas with the highest
        contamination. This type of screening allows not only the setting aside
        of incorrectly suspected contamination areas, but also permits identification
        of areas of contamination needing more attention. Subsequent efforts and
        resources can then be focused on areas and samples most in need of attention
        and possible remediation.
      Monitoring refers
        to the assay of positive samples before and after treatment or remediation.
        In the case of fly ash, attempts are presently being made to destroy dioxin-like
        substances during the production process, thus the AH-I Method can be
        used to monitor the success of the intervention program. In the case of
        soil contaminated areas, there are new methods that are said to have the
        potential of degrading the dioxin-like substances already present.
      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 BioFIT 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 BioFIT
        Program.
      The Company is continuing
        to work with its Chinese colleagues, during the appropriate market conditions,
        to expand the scope of the BioFIT 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 websitewww.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 BioFIT 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.
      The Company is selling
        its inventory of Andrographis Paniculata through the website. Andrographis
        is an annual plant that grows in much of Asia and has been used for centuries
        in India, China, Sri Lanka, and Indonesia. The herb is traditionally used
        to fight some viral infections and the associated symptoms, including
        fever, diarrhea, cough, and gastrointestinal problems. Modern research
        has been conducted over the past three decades, and much of this research
        has returned very promising results, supporting the traditional use of
        Andrographis over the past several hundred years.
      The Company owns
        an extract library of approximately 2,800 Traditional Chinese Medicines
        and other plant materials which it has screened using its proprietary
        screening technology. Through the screening process, the Company has identified
        the (10) extracts with potent in vitro activity against cancer cells as
        potential drug discovery and development candidates. The long term goal
        of the Company is to continue to pursue discussions and to partner with
        a major pharmaceutical partner to develop any potential drug candidates
        in the shortest possible time period.
      Future revenues are
        anticipated to be derived from the sale of the dioxin testing product
        the Ah-IMMUNOASSAY® Kits and dioxin and dioxin-like chemical testing
        services, and ecommerce sales through the Internet. There can be no assurance
        that the Company will be able to attain such revenues in sufficient amounts
        to achieve profitable operations. Results of operations in the future
        will be influenced by numerous factors, including the ability of the Company
        to develop and manage the introduction of its products and services, market
        acceptance, competition and the ability to control costs.
      In 2001, the Company
        will continue to pursue the following strategies: (i) Identify and develop
        new markets in industries which will benefit from the adoption of the
        bioassay testing technologies and services; (ii) Form co-development,
        strategic partnerships and licensing partnerships in these new markets
        with the industry leaders; (iii) Structure development agreements that
        will provide up front licensing payments and on-going royalties from partnership
        revenues; (iv) Promote the bioassay technologies and services as the "Industry
        Benchmark"; and (v) Position the Company, via its internet websites, as
        a leading partner with China in the area of health and the trade of health
        related products and technologies. These strategies will be executed by
        focusing the Companys primary activities on the Companys patented
        AH-1 Method that detects potentially dioxins in the environment and provides
        quick, accurate and inexpensive results compared to traditional analytical
        techniques.
      Market
      Worldwide, there is
      increasing awareness of the enormous health hazards of dioxins and dioxin-like
      chemicals. This awareness is derived from a combination of regulatory, economic
      and political pressures. Many governments, including those in North America,
      Western Europe and Japan, have set levels of dioxin pollution that will
      be allowed in the environment. In addition, international agencies, especially
      those associated with the United Nations and the World Trade Organization,
      have begun formal discussions that are leading to the establishment of similar
      international regulations in the future.
      The global pollution
        monitoring market is more than $10 billion annually. Andrew Jolin, owner
        of Government & Export Sales (GESS), developed the $10 billion estimate.
        GESS is a consulting firm that brings environmental technology to market
        around the world.
      There are at least
        100,000 incinerators (small, medium and large size) operating in Asia.
        In the rest of the world there are probably another 150,000 incinerators,
        which brings the total to 250,000 (some estimate the number to be as high
        as 500,000). If each of the 250,000 incinerators had 10 dioxin tests/year
        @ $2,000 per test, that would create a $5 billion market for incinerators
        alone. This estimate is based on the number of incinerators currently
        in existence and it does not include any new additions. For example, there
        are 14 municipal waste incinerators in Britain and contracts have been
        awarded to build 60 new incinerators. It is also estimated that incineration
        capacity (28 to 138 extra incinerators) will be required by 2016.
      Another major market
        is industrial plant screening for dioxins. Paper mills, petroleum refineries,
        chemical manufacturers and others will create a $2.5 billion market for
        dioxin testing. With global annual growth forecast at 2.5%, these industries
        will increase dramatically within the next five to ten years and so will
        the market for the screening of dioxins.
      The food chain is an
      additional major market. From animal feed to mothers milk, this market
      will develop into a $2.5 billion market, and will also increase due to global
      growth.
      Because the demand
        for pollution abatement is driven almost entirely by government regulation,
        Paracelsian is focusing its marketing efforts on those countries that
        already have set standards for dioxin pollution. In addition, we are introducing
        our technology to key government regulators and encouraging them to consider
        the kit for use as their governments testing standard.
      The Company began
        to focus on the Japanese market for the following reasons: (1) Japan has
        a widely recognized dioxin pollution problem largely due to the greater
        use of waste incinerators for which the government has begun to enforce
        emission requirements, (2) Incinerators that do not meet government emission
        requirements are being shut down, causing disruption in many industries
        and, (3) The Japanese government has not yet imposed standards and types
        of tests to be used in monitoring pollution discharge and, as a result,
        companies are more open to new technologies which save money.
      On January 21, 2000,
        Paracelsian, Inc. and Kubota Corporation signed a License Agreement whereby
        Kubota will commercialize Paracelsians AH-1 Method in Japan. This
        agreement will provide both license fees ($150,000) and royalties. Kubota,
        a company with approximately $9 billion of revenue, is a leader in the
        control and resolution of environmental contamination problems in Japan.
        They have subsidiaries and affiliates that manufacture and/or market Kubota
        products in more than 130 countries. On June 1, 2000, as part of the License
        Agreement, Paracelsian delivered an Assessment Plan to Kubota Corp., detailing
        the Kits functionality. Kubota reviewed and evaluated the Assessment Plan,
        and accepted the AH-1 Method. Kubotas acceptance of the Assessment
        Plan, the Kit and our methodology is a milestone for Paracelsian. Kubota
        and Paracelsian are now focusing their efforts to market, sell and distribute
        the Kit throughout Japan. The present market for dioxin testing in Japan
        is $400 to $600 million yearly and the Japanese estimate that Paracelsian
        has the potential to capture 25% of that market over the next five years
      In May 2000, major
        newspapers across the USA reported that a draft Dioxin Reassessment Report
        by the Environmental Protection Agency(EPA) concluded for the first time
        that a large number dioxin-like compounds are "human carcinogens."
        This assessment, along with the numerous reports of many other serious
        ailments resulting from exposure to these chemicals, make this class of
        chemicals perhaps the most significant toxicity problem known in the world
        today.
      On November 2, 2000
        the EPA held an open meeting for public comments 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 December 7, 2000
        the Company entered into a Strategic Partnership Agreement with Triangle
        Laboratories, Inc., based in the Research Triangle Park in North Carolina.
        Triangle Laboratories is a recognized world leader in High Resolution
        Mass Spectrometry and dioxin testing. They were formed in 1984, and are
        still led by the founding scientists. Triangle provides a wide range of
        testing services to a broad customer base, specializing in the most demanding
        testing, such as dioxins and related compounds. The Agreement contemplates
        a unified system wherein the Companys AH-1 Method can be used by
        customers to screen large numbers of samples in a user friendly manner
        and on a cost effective basis. Samples that are positive can then be assessed
        with the Triangle high resolution gas chromatography/high resolution mass
        spectrometry assay system at the highest possible level of accuracy. The
        Partnership provides the basis for a more comprehensive agreement between
        the parties for the development and worldwide co-marketing of the multi-tiered
        testing system. The Companies specifically anticipate collaboration to
        make their combined capabilities available in the emerging Asian environmental
        markets, including China and Vietnam.
      The Company also
        has received inquiries on, or has provided demonstration of the AH-1 Method
        to several other countries around the world, including China, Thailand,
        Vietnam, South Korea, The Czech Republic, The Netherlands, Belgium, Israel,
        Canada and Germany; similar initiatives have also developed in the USA.
        A proposal also has been made to the U.S. State Department that they make
        use of the AH-1 Method in their proposed joint study with Vietnam on dioxin
        contamination caused by Agent Orange.
      The China partnership
        includes an agreement, which specifies development of a manufacturing
        and laboratory facility in China, arises from a long 20 year collaboration
        between Paracelsians CEO and President , Dr. T. Colin Campbell who
        has long held an endowed professorship at Cornell University. Moreover,
        Chinese and Paracelsian scientists are collaborating on the development
        of further improvements of the AH-1 Method.
      Paracelsian is implementing
        its marketing program through Government & Export Sales Specialists
        (GESS). GESS is a consulting/marketing company active in technology research,
        development, commercialization and marketing. Mr. NoriYoshi Inoue, formerly
        an International Marketing Manager with Kubota Corporation, will be collaborating
        with GESS to develop business opportunities for the Ah-IMMUNOASSAY®
        Kit.
      Orders have been
        placed, training has been requested, and/or inquiries have been made for
        possible licensing for the Ah-IMMUNOASSAY® Kit from the Kubota Corporation
        (Japan), Lockheed-Martin Corporation (U.S.), Scientific Supply Co. (for
        Thailand), ECOSOL (Israel), Cypress Diagnostics (Belgium), MCS Diagnostice
        BV (The Netherlands), Campo Scientific (The Netherlands), and Dynex Technologies,
        Inc. (The Czech Republic), among a few other individual customers
      Competition
      There are companies
        who have been developing bioassay type methods, similar to that of the
        AH-1 Method of Paracelsian. Several approaches have been tried, with two
        being the more prominent. Unfortunately, one requires the use of radioactivity
        while the other requires the use of live cell cultures; both therefore
        require considerable technical expertise. Neither appears to be as cost
        effective as the Paracelsian AH-1 Method, as timely, and/or, according
        to our information, as patented protected.
      The Paracelsian product
        is the first receptor based system that works in a simple-to-use and cost
        effective form. Compared to the products of the closest competitors, the
        AH-1 Method is more user friendly, provides much faster turnaround time,
        is more cost-effective, requires less technical skills and sophisticated
        laboratory facilities, and is more meaningful of toxicological risk assessment
        because of its theoretical basis. The beauty of our system is its taking
        advantage of the observation that these chemicals travel through a common
        pathway in the cell according to their concentration and their relative
        toxicity. The AH-1 Method measures the central event in this pathway,
        one which shows the extent of activation of the receptor involved in the
        initiation of the myriad toxic events. That is, measurement of the central
        event is more meaningful than, say, measurement of a downstream outcome
        event which represents only one of many such events possibly involved
        in toxicological outcomes.
      Patents
      Where possible, the
        Company has applied for product and process patents. In the course of
        its research, the Company obtained 3 patents (#s 5,496,703, 5,529,899
        and 5,833,994) prior to 2000 for the Dioxin Assay Systems which cover
        a wide range of commercial applications for the AH-1 Method and other
        assay technologies. During 2000, the Company was granted two additional
        patents. The US Patent & Trademark Office in October 2000 issued to
        the Company Patent # 6,127,136 for the detection of dioxin-like compounds.
        This patent relates to new, improved and user friendly methods of detecting
        dioxin-like compounds by detecting the transformed Ah receptor. This patent
        gives the Company the protection it needs to continue to strengthen its
        presence in the worldwide dioxin detection marketplace. In November 2000
        the US Patent & Trademark Office issued to the Company Patent # 6,140,063,
        in vitro screening assay for the identification of compounds that inhibit
        destruction of cells due to viral infection. This patent represents a
        potential new screening pathway for anti-viral compounds. The Company
        is actively seeking partners to fully develop the market potential of
        these patents. Patents have a statutory duration of twenty years.
      The Company believes
        that patent protection of materials or processes it develops and any products
        that may result from the Company's research and development efforts are
        important to the possible commercialization of these products. However,
        there can be no assurance that the Company's patents will afford adequate
        protection to the Company or its licensees. Further, there can be no assurance
        that any patents that have been or may be issued will provide the Company
        with significant protection from competitors. Other private and public
        entities may file applications for patents and other proprietary rights
        to technology which could be harmful to the commercialization of the services
        and products developed by the Company. The ultimate scope and validity
        of patents which are now owned by or which may be granted to third parties
        in the future, the extent to which the Company may wish or be required
        to acquire rights under such patents, and the cost or availability of
        such rights cannot be determined by the Company at this time.
      The Company also
        relies on unpatented proprietary technology and no assurance can be given
        that others will not independently develop substantially equivalent proprietary
        information or otherwise gain access to the Companys proprietary
        technology or that the Company can meaningfully protect its rights in
        such unpatented proprietary technology.
      In addition, although
        all of the Company's employees are parties to confidentiality agreements
        which are intended to protect the Company's proprietary technology, there
        can be no assurance that any of such employees will not compromise any
        of the Company's proprietary rights.
      Dependence on
        a Key Distributor and Certain Industries
      The Company has entered
        into an Agreement with the Kubota Corporation for the sale of the Companys
        AH-1 Method in the Japanese market. The Licensing Agreement provides the
        Company with licensing fees and a royalty on sales in the Japanese market.
        In return, the Company provides Kubota with an exclusive license to manufacture
        and distribute the AH-1 Method in Japan. Future revenues from these licensing
        fees and royalties are dependent on market receptivity of the AH-1 Method.
        As with any new product, acceptance is not guaranteed, and future earnings
        could be negatively impacted.
      Government Regulation
      The dioxin and dioxin-like
        compound and the health care industries are the subject of significant
        proposed legislation. The Company cannot predict what new legislation
        might be enacted or what regulations might be adopted or amended, or if
        enacted, adopted or amended, the effect thereof on the Companys
        operations. Any change in applicable law or regulation may have a material
        effect on the business of the Company.
      Funding of Research
        and Development
      The Company expended
        $744,143 in 1999 and $761,673 in 2000 on research and development.
      Costs of Environmental
        Compliance
      The Company believes
        it is in compliance with all applicable environmental laws and the cost
        of such compliance to the Company has been minimal.
      Employees and
        Board
      The Company employs
        9 full time people and 1 part-time person. None of the Companys
        employees are covered by a collective bargaining agreement. The Company
        considers its relationship with its employees to be excellent. All employees
        of the Company are signatories to confidentiality agreements that restrict
        proprietary right in, and commercial development of, all technology developed
        by the employees.
      On January 31, 2000
        the Company announced that Dr. T. Colin Campbell was named Chairman, CEO
        & President. Dr. Campbell replaces Bernard M. Landes, who served as
        Chairman, CEO and President the previous two years. Dr. Campbell served
        on the Board of Directors of the Company for several years prior to taking
        this new position. On February 8, 2000 the Company announced that Dr.
        Mac Shaibe has accepted an invitation to serve on the Companys Board.
        His appointment to the Board lasts until the annual meeting of shareholders
        in 2003. Dr. Shaibes background includes significant positions in
        academia, government and the private sector. Perhaps most noteworthy,
        Dr. Shaibe is a co-inventor of the Internet. On May 2, 2000 the Company
        announced that NoriYoshi Inoue has accepted an invitation to also become
        a Director on the Company. Mr. Inoue is a Senior Executive with over 25
        years of Japanese and international management, marketing and sales experience.
        He has had significant success in creating and implementing profitable
        worldwide marketing programs and strategies. Mr. Inoues appointment
        to the Board lasts until the annual meeting of shareholders in 2001.
        In addition, Gary G. Chabot has joined the Company as the Chief Financial
        Officer.
      Item 2. 	DESCRIPTION
        OF PROPERTIES
      The Companys
        executive offices and research facilities are located at Langmuir Laboratories
        in Ithaca, New York, and occupy 6,210 square feet at that location. The
        Company occupies this space under a one-year lease from Cornell University,
        which expires in April 2001, and provides for automatic renewals. At this
        time, the Company believes that this space is sufficient for its administrative
        offices as well as the Internet operation, and the current manufacturing
        and research and development activities.
      Item 3.	LEGAL
        PROCEEDINGS
      In addition to routine
        litigation that is incidental to its business, the Company is a party
        to the following litigation:
      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 has 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. The case is in the pretrial
        motion phase as discovery is now closed and there are pending motions
        for summary judgment, including a motion for summary judgment by the Company.
        That motion, if successful, will fully resolve the case in favor of the
        company. A three-week trial has been scheduled to begin on March 26, 2001.
        If the case is not resolved by the pending motion, an appeal of the denial
        of the motion is contemplated, followed by the trial if necessary. The
        Company believes that the suit against it is without merit and intends
        to defend the case vigorously.
      Item 4.	SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS
      None.
      
      PART
        II
      Item
        5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
      The Companys
        Common Stock, par value $0.01 per share (the "Common Stock"), commenced
        trading on February 11, 1992 on the over- the-counter market and was quoted
        on the National Association of Securities Dealers Automated Quotation
        System ("NASDAQ") until October 7, 1998 when it moved to the over-the-counter
        Bulletin Board, under the symbol PRLN.OB. The Companys Redeemable
        Common Stock Purchase Warrants (the "Warrants") commenced trading on September
        24, 1993 on the over-the-counter market and are no longer quoted under
        the symbol PRLNW, since the warrants expired on September 7, 2000.
      The following table
        sets forth the high and low bid prices for the Common Stock and Warrants
        during the periods indicated as reported by NASDAQ. The prices reported
        reflect inter-dealer quotations, may not represent actual transactions
        and do not include retail mark-ups, markdowns or commissions.
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|               | Common Stock | Warrants
|-------------- | ------------ | --------
|               | High Bid     | Low Bid 
|               |              |         
|Fiscal 1999    |              |         
|First Quarter  | 1-1/8        | 5/32    
|Second Quarter | 2            | 21/32   
|Third Quarter  | 1-1/32       | 7/16    
|Fourth Quarter | 35/64        | 17/64   
|               |              |         
|Fiscal 2000    |              |         
|First Quarter  | 1/2          | 1/4     
|Second Quarter | 1-5/32       | 9/32    
|Third Quarter  | 19/32        | 3/8     
|Fourth Quarter | 19/32        | 21/64   





|As of November 14,
        2000, the Company had 23,490,849 shares of Common Stock outstanding held
        by 323 record holders.
      The Company did not
        pay cash dividends on the Common Stock during the two fiscal years ended
        September 30, 2000. It is the present policy of the Company to retain
        earnings, if any, to finance the development and growth of its business.
        Accordingly, the Company does not anticipate that cash dividends will
        be paid until earnings of the Company warrant such dividends, and there
        can be no assurance that the Company can achieve such earnings or any
        earnings.
      
      Item 6. MANAGEMENTS
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS
      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.
      On July 20,1999 the
        Company signed a Development Agreement with Kubota Corporation to further
        develop The Companys patented AH-1 Method for use in the monitoring
        of municipal waste incinerators in Japan. The Company signed a final Licensing
        Agreement with the Kubota Corporation on January 18, 2000 for the sale
        of the Companys AH-1 Method in the Japanese market. On June 1, 2000,
        as part of the License Agreement, Paracelsian delivered an Assessment
        Plan to Kubota, detailing the Kits functionality. Kubota reviewed and
        evaluated the Assessment Plan, and paid the License Fee of $150,000. The
        payment signifies Kubotas acceptance of the AH-1 Method. In return,
        the Company provides Kubota with an exclusive license to manufacture and
        distribute the AH-1 Method in Japan. Through September 30, 2000, Kubota
        has purchased 180 kits (for 3,600 tests) for distribution in Japan. Kubota
        has also agreed to pay for additional research and development work that
        will increase the worth of the AH-1 Method by refining sample preparation
        procedures along with a component of the manufacturing process.
      The Company is also
        actively involved in discussions with private businesses in Europe, Korea
        and with the Ministry of Health and other government agencies in the Peoples
        Republic of China regarding development and implementation of the AH-1
        Method to monitor food, water and soil, in addition to municipal waste
        incinerators. One on the largest labs in Belgium, the University of Liege,
        is now using the AH-1 Method to screen several different types of samples,
        including fly ash. German and Czech labs are also using the AH-1 Method
        to screen milk and animal feed for dioxin. The Company expects these discussions
        to be fruitful and result in further applications for its technology with
        associated revenues some time in the year 2001.
      In April 2000 the
        Company signed a Letter of Intent with Beijing Health-Way Management Company
        in China to construct a manufacturing plant for the production of low-cost,
        user friendly assay kits for the analysis of dioxins and dioxin-like chemicals
        to strengthen our ability to penetrate markets in Asia and Europe. The
        Letter of Intent is a significant step in Paracelsians strategy
        to establish low cost manufacturing capability in China that is sufficient
        for meeting potential worldwide demand.
      BioSignia, Inc.,
        a corporation in Chapel Hill, North Carolina, is the Companys largest
        shareholder, owning 29% of the outstanding common stock of the Company.
        Since the last quarter of 1999, BioSignia has advanced interim funds to
        the Company for working capital purposes. The Companys Board of
        Directors on June 19, 2000 approved of BioSignias proposal to convert
        $500,000 of this debt into common stock of the Company at $.40 per share
        which represented the negotiated estimated fair value of the common stock
        on June 19, 2000. The newly issued shares will be restricted for one year.
        The additional equity commitment by BioSignia is a strong indication of
        BioSignias confidence in the future of Paracelsian.
      The Company received
        an equity investment of $500,000 (1,250,000 shares of common stock) in
        a private placement transaction on August 10, 2000. In addition to the
        sale of common stock, the Company issued warrants that could result in
        additional investment of $1.5 million by December 31, 2000. The warrants
        expired on December 31, 2000, and no warrants were exercised.
      The US Patent &
        Trademark Office issued to the Company Patent # 6,127,136 for the detection
        of dioxin and dioxin-like compounds by the Companys AH-1 Method.
        This patent relates to new, improved and user-friendly methods of detecting
        dioxin-like compounds by detecting the transformed Ah receptor, and is
        by far the most important of the five patents the Company holds relative
        to the AH-1 Method. It gives the Company the protection it needs so that
        it can strengthen its position in the worldwide marketplace.
      On December 7, 2000
        the Company entered in a Strategic Partnership Agreement with Triangle
        Laboratories, Inc., based in Research Triangle Park in North Carolina.
        Triangle Laboratories, based in Research Triangle Park, NC, is a recognized
        world leader in High Resolution Mass Spectrometry and dioxin testing.
        They were formed in 1984, and are still led by the founding scientists.
        Triangle provides a wide range of testing services to a broad customer
        base, specializing in the most demanding testing, such as dioxins and
        related compounds. The Agreement establishes an opportunity for the Company
        to join its dioxin screening AH-1 Method with the high resolution gas
        chromatography/high resolution mass spectrometry (HRGC/HRMS) testing capability
        of Triangle to offer the marketplace a unified system wherein the Companys
        AH-1 Method can be used by customers to screen large numbers of samples
        in a user-friendly manner and also on a cost effective basis. Samples
        that are positive using the AH-1 Method can then be assessed with a full
        HRGC/HRMS assay system at the highest possible level of accuracy. The
        Agreement provides the basis for a more comprehensive agreement between
        the parties for the development and worldwide CO-marketing of the multi-tiered
        testing system. The Company and Triangle will collaborate to make their
        combined capabilities available in the emerging Asian environmental markets,
        including China and Vietnam.
      Results of Operations
      The Companys
        fiscal 2000 net loss of $1,847,000 is approximately $181,000 less than
        the fiscal 99 loss of $2,028,000. Revenues increased by $67,000
        primarily as a result of revenues received from the Kubota Corporation
        for development work on the Ah-IMMUNOASSAY® and the purchase of kits.
        Operating expenses decreased by $125,000 as a result of decreases in a
        variety of expense categories, as part of the companys program to
        control costs. During 2000, the Company wrote off approximately $172,000
        of its Andrographis paniculata inventory.
      Liquidity and
        Capital Resources
      As of September 30,
        2000, the Company had cash of $227,000 and a net working capital deficit
        of approximately $720,000. Management believes that revenues from the
        sale of Ah-IMMUNOASSAY® Kits will accelerate throughout the coming
        year and that 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. BioSignia, the Companys largest shareholder, has advanced
        funds of $797,350 during the current year. On June 19, 2000 BioSignia
        agreed to convert $500,000 of current debt into additional equity of Paracelsian.
        The Board of Directors of Paracelsian, by unanimous vote, approved of
        the conversion of BioSignias debt to equity at $.40 per share. On
        September 30, 2000 the principal portion of advances from BioSignia aggregated
        $191,877.
      On August 10, 2000
        the Company received an equity investment of $500,000 in a private placement
        transaction. In addition to the sale of common stock, the Company issued
        1,833,333 warrants that could result in additional investment of $1.5
        million by December 31, 2000, if the warrants are exercised in full. The
        warrants expired on December 31, 2000. Prior to the expiration date, no
        warrants were exercised.
      On June 19, 2000
        the Board of Directors of the Company lowered the exercise price on the
        1,736,870 of Redeemable Common Stock Purchase Warrants outstanding from
        $3.25 per share to $.50 per share. The unexercised warrants expired on
        September 7, 2000. Prior to the expiration date, 66,688 warrants were
        exercised in the amount of $33,344. As of September 30, 2000 all remaining
        warrants expired.
      Management is currently
        seeking a capital infusion of at least $1 million to strengthen its working
        capital position and bridge its needs until the revenue stream is sustained.
        Current monthly cash requirements in order to sustain meaningful operations
        are approximately $100,000. Management will continue to evaluate the most
        cost effective means of raising any additional needed capital. Although
        management is confident of its ability to raise needed capital, there
        can be no assurance that additional financing will be available on acceptable
        terms or at all.
      
      Item 7. FINANCIAL
        STATEMENTS
      Independent Auditors
        Report.
      Consolidated Balance
        Sheet as of September 30, 2000.
      Consolidated Statements
        of Operations for the years ended September 30, 2000 and 1999, and the
        cumulative period from April 15, 1991 (inception) to September 30, 2000.
      Consolidated Statements
        of Stockholders Equity for the years ended September 30, 2000 and
        1999 and the cumulative period from April 15, 1991 (inception) to September
        30, 2000.
      Consolidated Statements
        of Cash Flows for the years ended September 30, 2000 and 1999 and the
        cumulative period from April 15, 1991 (inception) to September 30, 2000.
      Notes to Consolidated
        Financial Statements.
      
      The Board of Directors
        and Stockholders 
        Paracelsian, Inc.:
      We have audited the
        accompanying consolidated balance sheet of Paracelsian, Inc. and subsidiary
        (a development stage enterprise) as of September 30, 2000, and the related
        consolidated statements of operations, stockholders' equity (deficit),
        and cash flows for the years ended September 30, 2000 and 1999 and for
        the period from April 15, 1991 (inception) to September 30, 2000. These
        consolidated financial statements are the responsibility of the Company's
        management. Our responsibility is to express an opinion on these consolidated
        financial statements based on our audits. The cumulative statements of
        operations, stockholders' equity (deficit), and cash flows for the period
        April 15, 1991 (inception) to September 30, 2000 include amounts for the
        period from April 15, 1991 (inception) to September 30, 1991 and for each
        of the years in the four-year period ending September 30, 1995, which
        were audited by other auditors whose report has been furnished to us,
        and our opinion, insofar as it relates to the amounts included for the
        period April 15, 1991 (inception) through September 30, 1995 is based
        solely on the report of the other auditors.
      We conducted our
        audits in accordance with auditing standards generally accepted in the
        United States of America. Those standards require that we plan and perform
        the audit to obtain reasonable assurance about whether the financial statements
        are free of material misstatement. An audit includes examining, on a test
        basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles
        used and significant estimates made by management, as well as evaluating
        the overall financial statement presentation. We believe that our audits
        provide a reasonable basis for our opinion.
      In our opinion, based
        on our audits and the report of the other auditors, the consolidated financial
        statements referred to above present fairly, in all material respects,
        the financial position of Paracelsian, Inc. and subsidiary (a development
        stage enterprise) as of September 30, 2000 and the results of their operations
        and their cash flows for the years ended September 30, 2000 and 1999 and
        for the period April 15, 1991 (inception) to September 30, 2000, in conformity
        with accounting principles generally accepted in the United States of
        America.
      The accompanying
        financial statements have been prepared assuming that the Company will
        continue as a going concern. As discussed in Note (1) (b) to the financial
        statements, the Company has suffered recurring losses from operations
        and has a net capital deficiency that raise substantial doubt about its
        ability to continue as a going concern. Management's plans in regard to
        these matters are also discussed in Note (1) (b). Additionally, the Company
        is subject to litigation as described in Note (7) (e). The financial statements
        do not include any adjustments that might result from the outcome of these
        uncertainties.
      /s/KPMG LLP
        Raleigh, NC
        January 4, 2001
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PARACELSIAN,
  INC. AND SUBSIDIARY(A Development Stage Company)
  Consolidated Balance Sheet
  September 30, 2000

|Assets                                                            |                                                                                                          | 2000                                         
|----------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---------------------------------------------
|                                                                  |                                                                                                          |                                              
|Current
      Assets:                                             |                                                                                                          |                                              
|                                                                  | Cash
      and cash equivalents                                                                          | $                                            
|                                                                  | Inventory                                                                                                |                                              
|                                                                  | Prepaid
      expenses                                                                                   |                                              
|                                                                  | Other
      current assets                                                                               |                                              
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          | Total
      current assets                   
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          |                                              
|Equipment,
      net                                              |                                                                                                          | 137,027                                      
|Interest
      Receivable                                         |                                                                                                          | 26,853                                       
|Note
      Receivable                                             |                                                                                                          | 148,750                                      
|Other
      Assets:                                               |                                                                                                          |                                              
|                                                                  | TCM extracts
      on-hand                                                                               |                                              
|                                                                  | Patents
      and trademarks, net                                                                        |                                              
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          | 523,026                                      
|                                                                  |                                                                                                          |                                              
|                                                                  | $                                                                                                        | 794,374                                      
|                                                                  |                                                                                                          |                                              
|Liabilities
        and Stockholders' Equity (Deficit)            |                                                                                                          |                                              
|Current
      Liabilities:                                        |                                                                                                          |                                              
|                                                                  | Accounts
      payable                                                                                   | $                                            
|                                                                  | Accrued
      expenses                                                                                   |                                              
|                                                                  | Current
      portion of capital lease obligation                                                        |                                              
|                                                                  | Current
      portion on notes payable                                                                   |                                              
|                                                                  | Advances
      from related party                                                                        |                                              
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          | Total
      current liabilities              
|                                                                  |                                                                                                          |                                              
|long
      term portion of capital lease obligation               |                                                                                                          | 1,518                                        
|Long
      term portion of notes payable                          |                                                                                                          | 9,422                                        
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          | Total
      current and long term liabilities
|                                                                  |                                                                                                          |                                              
|Commitments
      and Contingency (Note 7)                        |                                                                                                          |                                              
|                                                                  |                                                                                                          |                                              
|Stockholders'
      Equity (Deficit):                             |                                                                                                          |                                              
|                                                                  | Common
      stock, $.01 par value: 35,000,000 shares authorized and 23,490,849 shares
      outstanding |                                              
|                                                                  | Additional
      paid-in capital                                                                         |                                              
|                                                                  | Deficit
      accumulated during the development stage                                                   |                                              
|                                                                  | Treasury
      stock, at cost; 265,748 shares                                                            |                                              
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          | Total
      stockholders' equity (deficit)   
|                                                                  |                                                                                                          |                                              
|                                                                  |                                                                                                          | 794,374                                      
|                                                                  |                                                                                                          |                                              
|See accompanying
      notes to consolidated financial statements









PARACELSIAN,
    INC. AND SUBSIDIARY(A Development Stage Company)
    Consolidated Statements of Operations
    For the years ended September 30, 2000 and 1999
    and cumulative period from April 15, 1991 (inception) to September 30, 2000 Year
          ended September 30,
      Cumulative
          Period from Inception to September 30,$
      2000
      1999
      2000Revenues:Marketing
        rights
      
      283,677
      313,000
      851,672Products
      
      62,318
      12,675
      252,018Product
        testing
      
      83,621
      37,338
      162,377Product
        royalties
      
      -
      -
      1,246Subscription
        revenue
      
      -
      -
      31,625429,616
      363,013
      1,298,938Operating
        expenses:Research
        and product engineering
      
      761,673
      744,143
      9,182,031General
        and administrative
      
      1,340,831
      1,654,647
      14,467,167Product
        launch costs
      
      -
      -
      300,544Cost
        of product sold
      
      171,689
      -
      266,7122,274,193
      2,398,790
      24,216,454Loss
        from operations during the development stage
      
      (1,844,577)
      (2,035,777)
      (22,917,516)Interest
        income (expenses), net
      
      (2,541)
      7,500
      502,422Gain
        on sale of assets
      
      -
      -
      38,488Net
        loss during the development stage
      
      (1,847,118)
      (2,028,277)
      (22,376,606)Net
        loss per weighted share of common stock - basic and diluted
      $
      (0.09)
      (0.11)Weighted
        average number of shares outstandingBasic
        and Diluted
      
      21,346,964
      18,862,212See
        accompanying notes to consolidated financial statements PARACELSIAN,
    INC. AND SUBSIDIARY(A Development Stage Company)
    Consolidated Statements of Stockholders' Equity (Deficit)
    For the years ended September 30, 2000 and 1999
    and the cumulative period from April 15, 1991 (inception) to September 30,
    2000 Preferred
          Stock
      Common
          Stock
      
      Additional
          Paid-in Capital
      
      Deficit
          Accumulated During the Development Stage
      
      Treasury
          Stock
      
      TotalShares
      
      Amount
      Shares
      
      AmountIssuance
        of Common Stock
      -
      $
      -
      9,190,778
      $
      91,908
      $
      9,334,341
      $
      -
      $
      -
      $
      9,426,249Redemption
        of Common Stock
      -
      
      -
      (245,000)
      
      (2,450)
      
      -
      
      -
      
      -
      
      (2,450)Initial
        Public Offering, Net of Costs
      -
      
      -
      1,150,000
      
      11,500
      
      5,103,451
      
      -
      
      -
      
      5,114,951Issuance
        of Warrants & Options
      -
      
      -
      -
      
      -
      
      168,500
      
      -
      
      -
      
      168,500Warrant
        Dividend
      -
      
      -
      -
      
      -
      
      436,898
      
      (500,000)
      
      -
      
      (63,102)Termination
        of Warrants
      -
      
      -
      -
      
      -
      
      (35,000)
      
      -
      
      -
      
      (35,000)Issuance
        of Preferred Stock
      102,351
      
      1,024
      -
      
      -
      
      4,978,573
      
      -
      
      -
      
      4,979,597Issuance
        of Treasury Stock
      -
      
      -
      -
      
      -
      
      -
      
      -
      
      (1,342,515)
      
      (1,342,515)Conversion
        of Preferred Stock
      (102,351)
      
      (1,024)
      5,371,000
      
      53,710
      
      (52,686)
      
      -
      
      -
      
      -Preferred
        Dividends and Beneficial Conversion Feature
      -
      
      -
      -
      
      -
      
      1,628,000
      
      (1,628,000)
      
      -
      
      -Repayment
        of Officer Stock Subscription Receivable
      -
      
      -
      -
      
      -
      
      89,850
      
      -
      
      -
      
      89,850Exercise
        of Warrants and Options
      -
      
      -
      3,180,947
      
      31,809
      
      1,399,956
      
      -
      
      -
      
      1,431,765Surrender
        of shares
      -
      
      -
      (705,000)
      
      (7,050)
      
      7,050
      
      -
      
      -
      
      -Net
        loss
      -
      
      -
      -
      
      -
      
      -
      
      (18,501,211)
      
      -
      
      (18,501,211)Balance,
        September 30,1998
      -
      
      -
      17,942,725
      
      179,427
      
      23,058,933
      
      (20,629,211)
      
      (1,342,515)
      
      1,266,634Issuance
        of Common Stock
      -
      
      -
      2,262,036
      
      22,620
      
      954,759
      
      -
      
      -
      
      977,379Issuance
        of Common Stock for services rendered
      -
      
      -
      223,717
      
      2,237
      
      154,045
      
      -
      
      -
      
      156,282Issuance
        of Common Stock for debt conversion
      -
      
      -
      234,305
      
      2,343
      
      161,345
      
      -
      
      -
      
      163,688Net
        loss
      -
      
      -
      -
      
      -
      
      -
      
      (2,028,277)
      
      -
      
      (2,028,277)Balance,
        September 30, 1999
      -
      
      -
      20,662,783
      
      206,627
      
      24,329,082
      
      (22,657,488)
      
      (1,342,515)
      
      535,706Issuance
        of Common Stock for services rendered
      -
      
      -
      148,600
      
      1,482
      
      68,749
      
      -
      
      -
      
      70,231Issuance
        of Common Stock for debt conversion
      -
      
      -
      1,250,000
      
      12,500
      
      487,500
      
      -
      
      -
      
      500,000Issuance
        of Common Stock
      -
      
      -
      1,362,778
      
      13,628
      
      486,372
      
      -
      
      -
      
      500,000Exercise
        of Warrants
      -
      
      -
      66,688
      
      667
      
      32,678
      
      -
      
      -
      
      33,345Net
        loss
      -
      
      -
      -
      
      -
      
      -
      
      (1,847,118)
      
      -
      
      (1,847,118)Balance,
        September 30, 2000
      -
      $
      -
      23,490,849
      $
      234,904
      $
      25,404,381
      $
      (24,504,606)
      $
      (1,342,515)
      $
      (207,836)See
        accompany notes to consolidated financial statements






PARACELSIAN,
    INC. AND SUBSIDIARY(A Development Stage Company)
    Consolidated Statements of Cash Flows
    For the years ended September 30, 2000 and 1999
    and the cumulative period from April 15, 1991 (inception) to September 30,
    2000


|                                                                                 |                                                                                     | 2000                                               |                                                           | 1999                                            |             | Cumulative
        Period from 
        Inception to
        September 30, 2000
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------------------------- | ----------------------------------------------- | ----------- | -------------------------------------------------------------------------------
|Cash
      flows from operating activities:                                      |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 | Net loss                                                                            | $                                                  | (1,847,118)                                               | $                                               | (2,028,277) | $                                                                              
|                                                                                 | Adjustments
      to reconcile net loss to net cash used in operating activities:   |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     | Gain
      on sale of assets                       | $                                                         | -                                               |             | -                                                                              
|                                                                                 |                                                                                     | Non-cash
      compensation expense                |                                                           | 70,231                                          |             | 162,795                                                                        
|                                                                                 |                                                                                     | Other
      non-cash expenses                      |                                                           | -                                               |             | -                                                                              
|                                                                                 |                                                                                     | Depreciation
      and amortization                |                                                           | 241,029                                         |             | 419,471                                                                        
|                                                                                 |                                                                                     | Changes
      in operating assets and liabilities: |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    | Interest
      receivable                                 |                                                 | (26,853)    |                                                                                
|                                                                                 |                                                                                     |                                                    | Inventories                                               |                                                 | 170,763     |                                                                                
|                                                                                 |                                                                                     |                                                    | Prepaid
      expenses and other current assets           |                                                 | 7,739       |                                                                                
|                                                                                 |                                                                                     |                                                    | Accounts
      payable                                    |                                                 | 213,346     |                                                                                
|                                                                                 |                                                                                     |                                                    | Deferred
      revenue                                    |                                                 | (57,000)    |                                                                                
|                                                                                 |                                                                                     |                                                    | Accrued
      expenses                                    |                                                 | 188,711     |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           | Net cash
      used in operating activities     |             | (1,039,152)                                                                    
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Cash
      flows from investing activities:                                      |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 | Purchase
      of equipment                                                         |                                                    | (698)                                                     |                                                 | (3,767)     |                                                                                
|                                                                                 | Proceeds
      from sale of equipment                                               |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Acquisition
      of licensed technology                                            |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Acquisition
      of patents and trademarks                                         |                                                    | (7,550)                                                   |                                                 | (55,043)    |                                                                                
|                                                                                 | Acquisition
      of New Century Nutrition newsletter                               |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Acquisition
      of option for East West Herbs, Ltd. and related acquisition costs |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Loan
      to East West Herbs, Ltd.                                                 |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Payment
      from East West Herbs, Ltd.                                            |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           | Net cash
      used in investing activities     |             | (8,248)                                                                        
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Cash
      flows from financing activities:                                      |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 | Sale
      of common stock, initial public offering, net of costs                   |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Sale
      of common and preferred stock, net of costs                              |                                                    | -                                                         |                                                 | 945,979     |                                                                                
|                                                                                 | Proceeds
      from the sale of common stock                                        |                                                    | 500,000                                                   |                                                 | -           |                                                                                
|                                                                                 | Proceeds
      from the exercise of warrants                                        |                                                    | 33,345                                                    |                                                 | -           |                                                                                
|                                                                                 | Proceeds
      from the exercise of options                                         |                                                    | -                                                         |                                                 | 31,400      |                                                                                
|                                                                                 | Termination
      of warrants                                                       |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Purchase
      of treasury stock                                                    |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Cost
      of warrant dividend                                                      |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Increase
      in capital lease obligation and notes payable                        |                                                    | -                                                         |                                                 | -           |                                                                                
|                                                                                 | Payment
      on capital lease obligations                                          |                                                    | (11,900)                                                  |                                                 | (5,608)     |                                                                                
|                                                                                 | Proceeds
      from advances from related party                                     |                                                    | 797,350                                                   |                                                 | -           |                                                                                
|                                                                                 | Payments
      on advances from related party                                       |                                                    | (105,473)                                                 |                                                 | -           |                                                                                
|                                                                                 | Payments
      on notes payable                                                     |                                                    | (11,553)                                                  |                                                 | (12,947)    |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           | Net
      cash provided by financing activities |             | 1,201,769                                                                      
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Net
      increase (decrease) in cash and cash equivalents                       |                                                                                     | 154,369                                            |                                                           | (177,788)                                       |             | 227,123                                                                        
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Cash
      and cash equivalents, beginning of period                             |                                                                                     | 72,754                                             |                                                           | 250,542                                         |             | -                                                                              
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Cash
      and cash equivalents, end of period                                   | $                                                                                   | 227,123                                            | $                                                         | 72,754                                          | $           | 227,123                                                                        
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Supplemental
      disclosures:                                                  |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Cash paid during
        the period for interest                                 | $                                                                                   | 47,893                                             | $                                                         | 6,359                                           | $           | 81,314                                                                         
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Supplemental
      disclosure of non-cash investing and financing activities:    |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    | Fair
      value of assets acquired, net of cash acquired |                                                 | -           |                                                                                
|                                                                                 |                                                                                     |                                                    | Less
      - liabilities assumed                          |                                                 | -           |                                                                                
|                                                                                 |                                                                                     |                                                    | Less
      - issuance of common stock                     |                                                 | -           |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|                                                                                 |                                                                                     |                                                    |                                                           | Net
      cash paid                             |             | -                                                                              
|                                                                                 |                                                                                     |                                                    |                                                           |                                                 |             |                                                                                
|Warrant dividend                                                                 | $                                                                                   | -                                                  | $                                                         | -                                               | $           | 500,000                                                                        
|Issuance of common
        stock/warrants for services and to reduce liabilities |                                                                                     | 570,231                                            |                                                           | 319,970                                         |             | 1,455,432                                                                      
|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               









|Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      (1) Organization,
        Business, And Risk Factors
      (a)	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 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.
      (b)	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.
      (Continued)
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      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 $1,847,000 and $2,028,000 for the years ended September
          30, 2000 and 1999, respectively, and has a working capital deficit of
          approximately $720,000 as of September 30, 2000. The Company is projecting
          revenues from the sale of Ah-IMMUNOASSAY® Kits and testing services
          to be in excess of $1,000,000 (unaudited), for the year 2001. On January
          18, 2001 the Company announced that Ernest A. Knesel agreed to join
          the Companys Sales and Marketing team. Mr. Knesel brings with
          him a long history of entrepreneurial involvement. He is best known
          as a founder of Biomedical Reference Laboratories, Inc. and Roche Biomedical
          Laboratories, Inc. Mr. Knesel joins NoriYoshi Inoue, Andrew Jolin and
          Dr. Thomas Knudsen, Paracelsians Director  Science Program
          on the team. Mr. Inoue and Mr. Jolin have been largely responsible for
          the Companys expanding relationship with Kubota Corporation of
          Japan, for generating additional sales and key contacts. Mr. Knesel
          will lead the efforts of this team to implement an aggressive strategy
          for generating additional revenue from the sale of Ah-IMMUNOASSAY®
          Kits and testing services. Also participating on the team is Dr. J.
          Ronald Hass, President and CEO of Triangle Laboratories. Led by Dr.
          Hass, Triangle Laboratories has agreed to collaborate with the Company
          in the development of a presentation that joins the Companys Ah-IMMUNOASSAY®
          Kit with the high resolution gas chromatography/high resolution mass
          spectrometry testing capability of Triangle Laboratories. Now that the
          Company has developed the Ah-IMMUNOASSAY® Kit into a very competitive
          and marketable product, this team has begun an aggressive and focused
          international rollout of this product, working towards developing a
          sustainable stream of revenues.
        The
          Ah-IMMUNOASSAY® Kits are continuing to be sold to the Kubota Corporation
          for the sale and distribution of the Kits 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. In February 2001, the Company will be meeting with
          the Vietnamese Ministry of Science, Technology and Environment (MOSTE)
          to discuss utilizing the Companys kits to screen the large number
          of soil, food and other samples that have shown high residual dioxin
          levels in Vietnam because of Agent Orange. Just recently Company representatives
          initiated discussions for sales of the Ah-IMMUNOASSAY® Kit with
          two large corporations  Kodak and General Electric.
        Additionally, the
          Company has a note receivable outstanding, including accrued interest,
          with a face amount of $386,853 ($175,603 net of allowance). 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 the Ah-IMMUNOASSAY® Kit 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 $200,000 (unaudited).
          In addition, Kubota Corporation has indicated a willingness to contribute
          $150,000 (unaudited) to the Company for further enhancements to the
          Ah-IMMUNOASSAY® Kit.
        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 $100,000,
          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.(Continued)
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      (2) Significant
      Accounting Policies
      (a)	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. This subsidiary has had no activity for the years
        ended September 30, 2000 and 1999.
      (b)	Cash
        and Cash Equivalents
      Cash equivalents
        consist of highly liquid investments with an original maturity of three
        months or less. As of September 30, 2000 and 1999, the Companys
        cash equivalents aggregated $177,204 and 0, respectively.
      (c)
        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.
      (d)
        Inventory
      Inventory
        consists of booklets held for sale, related to a study performed by the
        Company between diet and disease. Inventory is stated at the lower of
        cost or market (net realizable value).
      (e)
        Net Loss Per Share
      Basic loss
        per common share is based on the weighted average number of common shares
        outstanding. Diluted net loss per common share is based on the weighted
        average number of common shares outstanding and the potentially dilutive
        common shares, which comprise shares issuable upon exercise of stock options,
        stock warrants, stock subscriptions, and conversion of preferred stock.
        The computation of net loss per share is as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                                          |   | Year
        Ended September 30,
|----------------------------------------- | - | --------------------------------
|                                          |   | 2000                            
|                                          |   |                                 
|Net loss to common
        stockholders   | $ | (1,847,118)                     
|                                          |   |                                 
|Weighted
      average shares outstanding |   |                                 
|Basic and Diluted                         |   | 21,346,964                      
|                                          |   |                                 
|Net
      loss per share of common stock  |   |                                 
|Basic and  Diluted                        | $ | (0.09)                          
|                                          |   |                                 



|Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      (f)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 lives of the assets which range from 15 to 17 years. Accumulated
          amortization of the patents and trademarks totaled $295,026 and $277,026
          at September 30, 2000 and 1999, respectively.
        (g)Equipment
          and Depreciation
        Equipment is stated
          at cost and is depreciated over the estimated useful lives of the assets
          using the straight-line method. Equipment consists of the following
          at September 30, 2000:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                                | Useful Lives |   | 2000   
|------------------------------- | ------------ | - | -------
|                                |              |   |        
|Laboratory equipment            | 10 Years     | $ | 536,203
|Office furniture and equipment  | 10 Years     |   | 87,588 
|Computer equipment              | 5 Years      |   | 143,940
|                                |              |   |        
|                                |              |   | 767,731
|Less - accumulated depreciation |              |   | 630,704
|                                |              |   |        
|                                |              | $ | 137,027
|                                |              |   |        



|Depreciation
        expense aggregated $67,449 and $70,632 for the years ended September 30,
        2000 and 1999, respectively.
      (h)Income
        Taxes
      Deferred
        tax assets and liabilities are recognized for the future tax consequences
        attributable to differences between financial statement carrying amounts
        of existing assets and liabilities and their respective tax bases and
        operating loss and tax credit carryforwards. Deferred tax assets and liabilities
        are measured using enacted tax rates expected to apply to taxable income
        in the years in which those temporary differences are expected to be recovered
        or settled. The effect on deferred tax assets and liabilities of a change
        in tax rates is recognized in income in the period that includes the enactment
        date.
      (Continued)
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      (i)Use of
        Estimates
      The preparation
        of the consolidated financial statements in conformity with accounting
        principles generally accepted in the United States Of America 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.
      (j) Recent
        Pronouncements
      In December
        1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101), which
        provides guidance in applying revenue recognition in financial statements
        under accounting principals generally accepted in the United States of
        America. SAB 101, as amended, will require implementation by the Company
        in the fourth quarter of fiscal 2001. The Company is presently reviewing
        the SAB to determine the impact the Bulletin will have on the Companys
        financial statements.
      (k) Reclassifications
      Certain
        1999 amounts have been reclassified to conform with the 2000 presentation.
        The reclassification had no effect on net loss or deficit accumulated
        during the development stage as previously reported.
      (3) Acquisitions
      (a)	East
        West Herbs, Ltd.
      On April
        9, 1996, the Company signed an option to acquire East West Herbs, Ltd.
        of Kingham, England. East West Herbs, Ltd. marketed and distributed traditional
        Chinese medicines in the United Kingdom and throughout Europe. Under terms
        of the option, the Company had the right to acquire all of the outstanding
        shares of East West Herbs, Ltd. on or before April 6, 1997 for $780,000
        in cash and shares of the Company with a value of approximately $2,400,000
        for a total proposed acquisition price of $3.2 million. Consideration
        for the option was made in the form of an option fee of $20,000 and a
        working capital loan of $340,000. The loan was to be used by East West
        Herbs, Ltd. for inventory purchases, continuing research and development
        including the clinical trials of two herbal products for cancer patients
        and corporate working capital. In 1997 the Company elected not to exercise
        its option.
      (Continued)
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      The loan
        originally provided for repayment in eight equal quarterly installments
        of $42,500 plus interest at the LIBOR rate. Since making the first installment
        payment and related accrued interest, East West Herbs, Ltd. has not made
        additional payments and is currently in default on the obligation. The
        parties continued to negotiate the terms of a work-out agreement that
        would provide an extension of time (up to two years) for principal repayment,
        change the interest rate to prime plus 2% and further collateralize the
        repayment obligation. In 1998, management determined that this note was
        impaired. Accordingly, the Company classified the entire obligation as
        non-current, deferred the recognition of related interest income until
        collected, and provided a reserve of $148,750 for collectibility. Minor
        payments were made to the trustee in the transaction during 1999. Subsequent
        to September 30, 1999, the Company received information from their attorneys
        that the loan may indeed be collectible through a guarantor, and they
        are aggressively pursuing collection. East West Herbs, Ltd. is in the
        final stages of the sale of an asset, and the proceeds should be sufficient
        to pay off the loan plus accrued interest.
      (b) Pacific
        Liaisons
      During October
        1994, a wholly-owned subsidiary of the Company acquired Pacific Liaisons
        for approximately $1.6 million in common stock. The acquisition has been
        accounted for using the purchase method of accounting for a business combination
        and the accompanying statement of operations includes the results of operations
        of Pacific Liaisons from October 25, 1994. The allocation of the purchase
        price was based on an independent appraisal of certain assets acquired
        which include ACM extracts and a licensing agreement. The approximately
        2,800 TCM extracts could be sold outright or utilized in various research
        and development applications using the Company's screening technology.
        It is the Company's intention to continue to sell/license the extracts
        to established pharmaceutical and biotechnology companies. Effective October
        1, 1995, the Company elected to begin amortizing the cost of the TCM extracts
        on a straight line basis over a five-year period, which represents the
        estimated period over which the extracts will be used in the Company's
        research and development efforts. Amortization expense of the extracts
        aggregated $155,580 for the years ended September 30, 2000 and 1999, and
        is included in research and product engineering expense in the accompanying
        consolidated statements of operations.
      Through
        a licensing agreement with the Institute of Nutrition and Food Hygiene,
        an institute within the Chinese Academy of Preventive Medicine, the Company
        has the exclusive right to acquire up to 10,000 additional extracts. The
        licensing agreement is being amortized over a period of five years commencing
        in October 1994. Amortization of the license agreement aggregated $192,000
        for the year ended September 30, 1999, and is included in research and
        product engineering expense in the accompanying consolidated statements
        of operations. As of September 30, 2000, the licensing agreement was fully
        amortized.
      (Continued)
      
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      (4) Stockholders'
        Equity (Deficit)
      (a) Common
        Stock Offerings
      In January
        1998, the Company sold 3,571,429 shares of common stock for $500,000 to
        BioSignia, Inc. ("BioSignia"). BioSignia also received warrants to purchase
        an additional 2,871,429 shares of common stock at a price of $520,000.
        In August 1998, BioSignia exercised its warrants. BioSignia became the
        major shareholder and has three of its representatives serving on the
        seven member Board of Directors. BioSignia is controlled by T. Colin Campbell,
        a director of the Company and Chairman and CEO effective January, 2000,
        and his son, T. Nelson Campbell, a former Vice President of the Company
        and current director. The Company used the proceeds for working capital
        and research and development.
      During the
        year ended September 30, 1999, the Company issued 234,305 shares for the
        conversion of short-term liabilities. In June 2000, the Company issued
        1,250,000 shares of Common Stock for $500,000 to BioSignia in exchange
        for a release of related debt owed to BioSignia by the Company. The transactions
        have been valued based on the negotiated estimated fair value of the common
        stock on June 19, 2000 ($.40 per share), the date issued. On that date,
        the stock traded at a high of $.4688, a low of $.375 and closed at $.4688.
        In June 2000,
          the Company sold 1,250,000 shares of common stock for $500,000 to Flow
          Master Fund LP (Flow Master) as part of a private placement transaction.
          The Company also authorized the issue of warrants to purchase an additional
          833,333 shares of common stock at a price of $.60 per share as well
          as warrants to purchase 1,000,000 shares of common stock at a price
          of $1.00 per share. As of September 30, 2000, all 1,833,333 warrants
          are outstanding. As of December 31, 2000 all 1,833,333 warrants expired.
      (b)	Other
        Transactions
      During the
        years ended September 30, 2000 and 1999, the Company issued 148,600 and
        223,717 shares of common stock, respectively, in exchange for services
        rendered. The transactions have been valued based on the estimated fair
        value of the common stock on the date issued.
      On September
        8, 1993, the Company granted a warrant dividend. The Company distributed
        to each stockholder, excluding one of the Company's founders, one redeemable
        common stock purchase warrant for each share of the Company's common stock
        owned, entitling the holder to purchase an additional share of common
        stock for $3.25 per share. These warrants were scheduled to expire on
        September 7, 2000. On June 19, 2000, the Board of Directors passed a resolution
        to reduce the strike price of the warrant, entitling the holder to purchase
        an additional share of common stock for $.50 per share. As of September
        30, 2000, a total of 66,688 redeemable warrants have been exercised and
        zero remain outstanding, as the remainder of the warrants all expired.
      On October
        12, 1994, the Company granted 375,000 warrants to one of the Company's
        founders, under similar terms as the Common Stock Purchase warrants noted
        above. The warrants were originally valued at $500,000. These warrants
        were originally scheduled to expire on September 7, 1998. The Company
        extended the expiration of the warrants to September 6, 2000. The warrants
        are callable at a redemption price of $.05 per warrant, if the Company's
        common stock trades at $4.75 or higher for 15 consecutive days. As of
        September 30, 2000, all 375,000 warrants have expired.
      Additionally,
        in connection with certain private placement transactions during fiscal
        1996, the Company issued common stock warrants exercisable for an aggregate
        of 1,883,333 shares of common stock at prices ranging from $3.25 to $4.50
        per share and varying other terms and restrictions. As of September 30,
        2000, none of these warrants had been exercised and all were outstanding.
        The warrants expire on September 30, 2001.
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      During fiscal
        1999, in connection with certain private placement transactions, the Company
        issued common stock Class A warrants exercisable for an aggregate of 350,000
        shares of common stock at $1.00 per share, expiring on June 1, 2000 and
        Class B warrants exercisable for an aggregate of 350,000 shares of common
        stock at $1.20 per share, expiring on June 1, 2001. On June 19, 2000 the
        Board of Directors approved of lowering the exercise price on the Class
        A warrants to $.50 per share and extended the expiration date to September
        7, 2000. As of September 7, 2000 all Class A warrants
        exercisable for an aggregate of 350,000 shares of common stock at $.50
        per share had expired. As of September 30, 2000, those Class B
        warrants exercisable
        for an aggregate of 350,000 shares of common stock at $1.20 per share
        were all outstanding.
      (5) Common Stock
        Options
      In 1991,
        the Company adopted a Stock Option Plan (the Plan). Under the Plan, directors,
        key employees and consultants of the Company are eligible to receive grants
        of options which are intended to qualify as incentive stock options, within
        the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
        (the Code), or which are non-qualified stock options. In addition, non-employee
        directors of the Company may receive grants of options according to a
        formula which upon the adoption of the Plan provided for an initial grant
        of an option to purchase 5,000 shares of common stock and annual grants
        of options to purchase 2,500 shares of common stock for each person who
        is subsequently elected or re-elected and for each year of service thereafter
        as a director. The Plan is administered by a committee (the Committee)
        designated by the Board of Directors of the Company. The exercise price
        per share for the options granted under the plan may not be less than
        the fair value of the Company's common stock on the date of grant. The
        exercise price and the term are fixed by the Committee, subject to the
        terms of the Plan.
      Changes
        in the status of options under the Plan are summarized as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                              |   | Year Ended September 30,
|--------------------------------------------- | - | ------------------------
|                                              |   | 2000                    
|                                              |   |                         
|Options outstanding at beginning of period    |   | 1,090,000               
|Granted                                       |   | 739,204                 
|Forfeited                                     |   | (697,447)               
|Exercised                                     |   | -                       
|                                              |   |                         
|Outstanding at end of period                  |   | 1,131,757               
|                                              |   |                         
|Number
      of options at end of period -    |   |                         
|Exercisable                                   |   | 498,421                 
|Available for grant                           |   | -                       
|                                              |   |                         
|Average exercise price of options outstanding | $ | 1.04                    
|                                              |   |                         
|Average exercise price of options granted     | $ | -                       
|                                              |   |                         
|Average exercise price of options forfeited   | $ | 1.58                    
|                                              |   |                         
|Average exercise price of options exercisable | $ | 1.04                    



|Paracelsian,
        Inc. and Subsidiary(A
        Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      During fiscal
        1996, 15,000 options were granted pursuant to the plan and an additional
        200,000 (for a total of 215,000) were granted to consultants providing
        communications services to the Company. The fair value of these options
        of $107,500 was being amortized over the two year period ended September
        30, 1997 during which time the services were performed.
      On January
        23, 1995, the Company approved a stock purchase by the Company's President
        and then Chief Executive Officer to purchase an aggregate of 705,000 shares
        of the Company's common stock at a price of $.05 and $.56 per common share
        for 245,000 and 460,000 shares of common stock, respectively. In connection
        with this transaction, the Company recognized a one-time, non-cash compensation
        expense of approximately $1,228,000 in the year ended September 30, 1995.
        In conjunction with the purchase of these shares, the Company extended
        a note to the officer for $230,000, due December 31, 1995. Subsequently,
        this note was extended until December 31, 1997. In January 1998, the shares
        of stock were returned to the Company and the note was forgiven.
      On January
        15, 1998, the Company granted to the then Chief Executive Officer, 100,000
        shares of stock and options to acquire 800,000 shares at an exercise price
        of $.22 per share, which represented the estimated fair value of common
        stock at the close of business on January 14, 1998. The options included
        various vesting requirements having to do with the Companys stock
        price and time served. At September 30, 1999, 100,000 options had been
        exercised, 50,000 were exercisable and 700,000 were outstanding. Upon
        the expiration and non-renewal of the Officers contract in January
        2000, non-vested options totaling 650,000 shares expired.
      On January
        24, 2000, the Company granted options to acquire 525,000 shares of common
        stock at an exercise price of $.45 per share, which represented the estimated
        fair value of common stock at the close of business on January 24, 2000,
        to the Chief Executive Officer. The options included various vesting requirements
        having to do with the Companys stock price and time served. On the
        date that the closing price of the common stock of the Company is equal
        to or greater than $1.50 per share for ten consecutive trading days 100,000
        Option Shares shall vest. At each date that the stock price equals or
        exceeds $2.00, $2.50 and $3.00 per share for ten consecutive trading days,
        an additional 100,000 shares shall vest. As the vesting requirements are
        contingent upon variable terms, where by the number of shares exercisable
        are dependent upon the future price of the Companys stock, the Company
        will be required to recognize compensation expense in the future for the
        difference between the quoted market price and the exercise price of the
        shares. As of September 30, 2000, no options had been exercised, 41,664
        were exercisable and 525,000 were outstanding.
      On February
        1, 2000, the Company granted options to acquire 150,000 shares of common
        stock at an exercise price of $.45 per share, which represented the estimated
        fair value of common stock at the close of business on February 1, 2000,
        to the Chief Financial Officer. The options included vesting requirements
        having to do with time served. As of September 30, 2000, no options were
        exercisable and 150,000 were outstanding.
      Stock option
        grants are set at the closing price of the Companys common stock
        on the date of grant and the related number of shares granted are fixed
        at that point in time. Therefore, under the principles of APB Opinion
        No. 25, the Company does not recognize compensation expense associated
        with the grant of stock options except as follows: 500,000 of the 800,000
        options granted to the then Chief Executive Officer on January 15, 1998
        had variable terms whereby the number of shares exercisable were dependent
        on the future price of the Companys stock. Consequently, when 100,000
        of the shares were exercised in 1999 according to the terms, compensation
        expense totaling $78,000 was recognized for the difference between the
        quoted market price and the exercise price of the shares.
      SFAS No.
        123, Accounting for Stock-Based Compensation, requires the use
        of option valuation models to provide supplemental information regarding
        options granted after 1995. Pro forma information regarding net loss and
        loss per share shown below was determined as if the Company had accounted
        for its employee stock options and shares sold under its stock purchase
        plan under the fair market value method of that statement.
      In order
        to disclose the pro forma net loss related to the vested options, the
        fair value of the options was estimated at the date of grant using a Black-Scholes
        option pricing model with the following weighted-average assumptions for
        2000 and 1999, respectively: risk-free interest rates of 6.50% and 5.50%;
        dividend yields of 0% and 0%; volatility factors of the expected market
        price of the Companys common stock of 155.1% and 101.5% and expected
        term of the options of 2.4 years and 1 year, respectively.
      (Continued)
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For purposes of pro
      forma disclosures, the estimated fair value of the options is amortized
      over the options vesting periods. The Companys pro forma information
      is as follows :
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                          |   | September
          30,
|------------------------- | - | -----------------------
|                          |   | 2000                   
|                          |   |                        
|Pro forma net loss        | $ | (1,883,409)            
|Pro forma loss per share: |   |                        
|Basic and diluted         |   | (0.09)                 



|(6)
          Income Taxes
        The income
          tax effect of temporary differences that gives rise to the deferred
          tax asset/(liability) as of September 30, 2000 is approximately as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                |   | 2000       
|------------------------------- | - | -----------
|                                |   |            
|Net operating loss carryforward | $ | 6,901,000  
|Patents and trademarks          |   | (72,000)   
|Asset impairments               |   | 51,000     
|Accelerated depreciation        |   | (69,000)   
|                                |   |            
|                                |   | 6,811,000  
|Less - valuation allowance      |   | (6,811,000)
|                                |   |            
|Net deferred tax asset          | $ | -          
|                                |   |            



|(Continued)
      
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      
      A valuation
        allowance of $6,811,000 was recorded at September 30, 2000 to offset
        the related net deferred tax asset due to the uncertainty of realizing
        the related tax benefit.
      At September
        30, 2000, the Company has net operating loss carryforwards for federal
        income tax purposes of approximately $20,296,000 which are available to
        offset future federal taxable income, if any, and expire 2006 through
        2019. For the time period between April 15, 1991 (inception) and September
        30, 2000, an ownership change may have occurred. Management has not determined
        the impact the change of ownership rules will have on the ultimate realizability
        of the tax benefits associated with the net operating loss carryforwards.
      (7) Commitments
        And Contingency
      (a) Lease
        and Rental Commitments
      The Company
        has entered into noncancellable operating leases for executive offices
        and laboratory facilities from an entity owned by Cornell University covering
        approximately 6,000 square feet and expiring in April,, 2001. Such leases
        provide for automatic renewals for a one year term. Amounts charged to
        expense for the years ended September 30, 2000 and 1999 aggregated approximately
        $87,000 and $90,000, respectively.
      (b) Capital
        Leases
      The Company
        is obligated under a capital lease for equipment that expires in 2001.
        At September 30, 2000 the gross amount of equipment recorded under the
        capital lease is as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Equipment                     | $ | 34,998
|----------------------------- | - | ------
|Less accumulated depreciation |   | 26,857
|                              |   |       
|                              | $ | 8,141 
|                              |   |       



|(Continued)
      Paracelsian,
        Inc. and Subsidiary(A Development Stage Company)
        Notes to Consolidated Financial Statements
        September 30, 2000 and 1999
      Amortization of assets
        held under capital leases is included with depreciation expense. Future
        minimum capital lease payments as of September 30, 2000 are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2001                                                                     | $ | 7,470  
|------------------------------------------------------------------------ | - | -------
|2002                                                                     |   | 1,152  
|2003                                                                     |   | 480    
|2004                                                                     |   | -      
|                                                                         |   |        
|                                                                         |   | 9,102  
|Less amount representing interest (at 13.1% and 10% per
          annum) |   | 553    
|                                                                         |   |        
|Present value of net minimum capital lease payments                      |   | 8,549  
|Less current installments of obligations under capital
          leases  |   | (7,031)
|                                                                         |   |        
|Obligations under capital leases, excluding current installments         | $ | 1,518  
|                                                                         |   |        



|(c)
        Notes Payable
      The Company
        has a note payable related to an insurance policy. The note calls for
        monthly installments of $3,888, bearing interest at 9.50% per annum. The
        note is due in June, 2001 and is unsecured. The balance of the note payable
        at September 30, 2000 was $27,023 and is a current liability.
      A suit filed
        by the Company in April, 1997 against a former officer and director of
        the Company and related counter claims were dismissed by the court pursuant
        to a settlement agreement between the parties in early 1998. Under the
        terms of the settlement, the Company canceled a $56,000 loan made to the
        former officer and further agreed to pay him $26,000 over sixty monthly
        installments, with interest at 8.5% per annum. The balance of the note
        payable at September 30, 2000 was $14,768.
      Future minimum
        payments related to notes payable are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|2001                        | $ | 32,369
|--------------------------- | - | ------
|2002                        |   | 5,806 
|2003                        |   | 3,616 
|2004
        and thereafter |   | -     





|(d) Advances From Related Party
        During
          fiscal 2000, the Company received advances from BioSignia aggregating
          $797,350. These advances provide for additional working capital (see
          also footnote 4(a)). The advances bear interest at a rate of 10% and
          are due at the earlier of 30 days from the date the advance was granted
          or upon which date the Company retains capital proceeds of at least
          $200,000 in the aggregate.
        (e)
          Contingency
        During
          1993, an action was brought against the Company, a Company Vice President
          and a shareholder and former employee of the Company. The complaint
          seeks substantial money damages for alleged misappropriation of proprietary
          information and unfair competition. The parties have exchanged documents
          and conducted the depositions of certain key witnesses. Discovery is
          now complete and a trial has been scheduled to begin March 24, 2001.
          Management believes that the action is without merit and is vigorously
          opposing the allegations and that the ultimate resolution of this litigation
          is not estimable at the present time.
        (8) Licensing
          Arrangements
        On January
          21, 2000, the Company entered into an agreement with Kubota Corporation
          (Kubota) of Japan that establishes Kubota as the exclusive marketing
          and distribution agent for Paracelsians Ah-IMMUNOASSAY® Environmental
          Certification program in Japan. The agreement calls for the Company
          to receive $150,000 upon acceptance by Kubota based upon achievement
          of certain milestones related to the acceptance of an evaluation test
          of the Ah-IMMUNOASSAY® product. In addition, under the license agreement
          Kubota is also obligated to pay the Company a royalty of 5% of net sales.
        On June
          15, 2000 the Company delivered an Assessment Plan to Kubota, detailing
          the Ah-IMMUNOASSAY® Kits functionality. Kubota accepted the Ah-IMMUNOASSAY®
          Kits in June 2000, and subsequently paid the Company $150,000 which
          is non-refundable and is recorded as Marketing Rights Revenue in the
          Consolidated Statement of Operations for the year ended September 30,
          2000. Kubota has the right to cancel this agreement with 30 days written
          notice to the Company within the three year period after the effective
          date of the agreement. If Kubota chooses to continue the relationship,
          an additional license fee of $150,000 is due within 30 days of the third
          anniversary of the agreement. Additionally, beginning in the fourth
          year of the agreement a minimum monthly royalty of $30,000 has been
          established.
        The Company
          is presently examining the impact that the implementation of the Securities
          and Exchange Commissions Staff Accounting Bulletin 101 will have
          upon the recognition of revenue associated with the Kubota Agreement.
          The provisions of this Bulletin must be implemented by the fourth quarter
          of fiscal 2001.
        
        Item
          8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE
        None.
        PART
          III
        Item9. 	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
          IN COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
        The Corporation's
          Bylaws provide that the Board shall be divided into three classes, each
          containing as nearly equal a number of directors as possible, each elected
          to staggered three-year terms of office and thereafter directors elected
          to succeed those directors in each class shall be elected for a term
          of office of three years.
        Seven individuals
          serve as directors, with two elected to serve a two year term until
          the Annual Meeting of Shareholders in 2002 ("Class I Directors"), three
          elected to serve a two year term until the Annual Meeting of Shareholders
          in 2003 ("Class II Directors"), and two elected to serve a one year
          term until the Annual Meeting of Shareholders in the year 2001 ("Class
          III Directors"), or until their successors are elected and qualified.
        Listed below
          are the names of the Class I Directors, together with their ages at
          December 31, 2000, and their principal occupations during the past five
          years.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Name and Age       |    | Principal Occupation Over
      Last Five Years                                                                                                                                                                                                                  
|------------------ | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  
|T. Nelson Campbell | 36 | Chairman, BioSignia, Inc. Chapel Hill, North Carolina since
        1996; prior to that, Vice President, Paracelsian, Inc. from 1995 to 1996;
        prior to that, President, Pacific Liaisons, Ithaca, NY (until its merger
        into Paracelsian in 1995).
|                   |    |                                                                                                                                                                                                                                                                  
|Hira Gurtoo        | 62 | President, Professional Financial Advisers, Inc., Amherst,
        New York since 1992; Cancer Research Scientist, Roswell Park Cancer Institute,
        Buffalo, New York until February 1998.                                                                 



|Listed
        below are the names of the Class II Directors, together with their ages
        at December 31, 2000, and their principal occupations during the past
        five years.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Name and Age         |    | Principal Occupation Over Last Five Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    
|Lianping He          | 53 | President, Chinese Service Center for Scholarly Exchange,
          Inc. and President, New York Service Center for Chinese Study Fellows,
          Inc. since 1995; prior to that, Director, Chinese Education Association
          for International Exchange, Inc. and Vice President, Chinese Service
          President, for Scholarly Exchange, both of Beijing, China since 1993;
          prior to that, Director, US-China Exchange and First Secretary, Chinese
          Embassy, Washington, D.C.
|                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Thomas D. Livingston | 48 | President and Co-founder, TLC Management Corp. since 1992;
          Chief Financial Officer, BioSignia, Inc. Chapel Hill, North Carolina
          since 1997.                                                                                                                                                                                                                                                                                                                                                  
|Dr. Mac Shaibe       | 67 | Chairman of the ReGenesis Foundation and President and
          Chief Executive Officer of Technology Transfer International.                                                                                                                                                                                                                                                                                                                                                                                   



|Listed
          below are the names of the Class III Directors, together with their
          ages at December 31, 2000, and their principal occupations during the
          past five years.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Name and Age      |    | Principal Occupation Over Last Five Years                                                                                                                                                                                                                              
|----------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 
|T. Colin Campbell | 66 | Jacob Gould Schurman Professor of Nutritional Sciences,
        Cornell University, Ithaca. NY; Founder and Director, Pacific Health Laboratories
        (NASDAQ Symbol PHLI) since 1995; Founder 	and Director, BioSignia,
        Inc., Chapel Hill, North Carolina.
|                  |    |                                                                                                                                                                                                                                                                        
|NoriYoshi Inoue   | 53 | Consultant; prior to that, Deputy General Manager and International
        Marketing Manager, Kubota Corporation, New York, NY since 1997; prior
        to that, International Business Manager and General Manager of Export
        Department, Tokyo, Japan.      



|Other than Dr. Campbell
        and Mr. Campbell, who are father and son, no proposed director or principal
        officer is related to another director or officer. Other than Dr. Campbell,
        no proposed director is a director of any company with a class of securities
        registered pursuant to Section 12 of the Securities Exchange Act of 1934,
        as amended (the "Exchange Act").
      Reports of Beneficial
        Ownership
      Directors and
        principal officers of the Corporation are required by federal law to file
        reports with the Securities Exchange Commission regarding the amount of
        and changes in their beneficial ownership of the Shares. To the Corporations
        knowledge, all such required reports have been timely filed.
      ITEM 10.	EXECUTIVE
        COMPENSATION
      The cash and cash
        equivalent compensation paid by the Corporation during the fiscal year
        ended September 30, 1999 to its chief executive officer is as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                  | Annual Compensation |        |       | Long Term Compensation   
|------------------------------------------------- | ------------------- | ------ | ----- | -------------------------
|                                                  |                     |        |       |                          
|                                                  |                     |        |       | Other                    
|                                                  |                     | Salary | Bonus | Annual	Stock Compensation
|Name and Position                                 | Year                | ($)    | ($)   | ($)(1)                   
|                                                 
|Dr. T. Colin Campbell
          President and CEO | 2000                | 0      | -0-   | -0-                      



|The
          following table contains information with respect to stock options to
          purchase shares of the Common Stock held by the chief executive office
          during 2000.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Aggregated Options
        Exercises in 2000 and September 30, 2000, Options Values
|-----------------------------------------------------------------------------------
|                                                                                   
|                                                                                   
|Dr.
        T. Colin Campbell                                                      



|((1)
        Value represents the difference between the fair market value and the
        exercise price for the unexercised options at September 30, 2000.
      Employment Agreement
      The Corporation entered into an employment contract
        with Dr. T. Colin Campbell (the "Officer") to be President and Chief Executive
        Officer of the Corporation as of January 24, 2000 (the "Agreement"). The
        initial employment term under the Agreement is for one year. On each anniversary
        of the effective date of the Agreement, the term of the Agreement shall
        automatically be extended for an additional one year period beyond the
        then effective expiration date unless written notice from the Corporation
        or the Officer is received 45 days prior to the anniversary date advising
        the other that the Agreement shall not be further extended. In addition,
        the Officer has the option to terminate the Agreement upon sixty days'
        written notice to the Corporation. Under the Agreement, the Officer receives
        an annual cash salary, with annual adjustments and discretionary bonuses
        as determined by the Board. The Officer's compensation pursuant to the
        Agreement for 2000 is $183,750 and he is eligible for a bonus of up to
        $50,000. On January 24, 2002, if the officer has been in continuous service
        with the Company as its Chief Executive Officer, then a total of 125,000
        Option shares of Common Stock shall vest. As of September 20, 2000 41,664
        had vested. Also, under the Agreement further options were also granted
        to acquire an additional 400,000 shares provided certain performance criteria
        are satisfied. Under the Agreement, the Officer is entitled to all fringe
        benefits, which are generally provided by the Corporation for its employees.
      
      ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
        OWNERS AND MANAGEMENT
      To the Corporation's knowledge, as of November 14,
        2000 listed below are the only shareholders of the Corporation that owned
        more than five percent of the Shares. The following table sets forth certain
        information as to these shareholders:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Name ofShareholder                                                                        | Shares Currently
        Beneficially Owned | Percent of SharesBeneficially Owned(2)
|----------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------------------------
|                                                                                         
|BioSignia, Inc.
        100 Europa Drive, Suite 599
        Chapel Hill, NC 27514         | 6,913,565 (1)                               | 29.43%                                
|                                                                                          |                                             |                                       
|T. Colin Campbell
        100 Europa Drive, Suite 599
        Chapel Hill, NC 27514       | 6,978,126 (1)                               | 29.71%                                
|                                                                                          |                                             |                                       
|T. Nelson Campbell
        100 Europa Drive, Suite 599
        Chapel Hill, NC 27514      | 7,270,432 (1)                               | 30.95%                                
|                                                                                          |                                             |                                       
|The Travelers Insurance Company
        205 Columbus Boulevard
        Hartford, CT 06183 | 1,390,000                                   | 6.72%                                 



|(1)	Dr. Campbell
        and Mr. Campbell are the principal shareholders of BioSignia and their
        total shares beneficially owned include the Shares owned by BioSignia.
      (2)	The calculation
        of the percentage of class beneficially owned is based on the 23,490,849
        Shares which were issued and outstanding at November 14, 2000.
      The following table
        shows, as of November 14, 2000, the number of Shares owned by each director
        and by all directors and principal officers of the Corporation as a group.
        The address of each of the named individuals below is c/o Paracelsian,
        Inc., 222 Langmuir Laboratories, Cornell Technology Park, Ithaca, New
        York 14850.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Name of Beneficial
          Owner                                               | Shares
          Currently 
          Beneficially Owned(1) | Percent
          of SharesBeneficially Owned(2)
|-------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------------------
|                                                                                
|T.
          Colin Campbell                                                      | 6,965,999                                                   | 29.65%                                          
|T.
          Nelson Campbell                                                     | 7,253,610                                                   | 30.88%                                          
|Hira
        Gurtoo                                                              | 49,463                                                      | *                                               
|Lianping
        He                                                              | 18,759                                                      | *                                               
|NoriYoshi
        Inoue                                                          | 7,999                                                       | *                                               
|Thomas
          D. Livingston                                                   | 255,295                                                     | 1.09%                                           
|Mac Shaibe                                                                       | 9,713                                                       | *                                               
|                                                                                 |                                                             |                                                 
|All Directors
        and Principal Officers as a group (7 persons)              | 7,638,273                                                   | 32.52%                                          
|                                                                                 |                                                             |                                                 
|*	Denotes beneficial
          ownership of less than one percent of the Shares.





|((1)	To
          the Corporation's knowledge, each person has sole voting and investment
          power over the Shares shown as beneficially owned by such person, except
          for the following shares which the individual indicates that they share
          voting and/or investment power: Dr. Colin Campbell  6,978,126
          Shares; Mr. Nelson Campbell  7,270,432 Shares; and directors and
          principal officers as a group  7,709,866 shares. Dr. Campbell
          and Mr. Campbell are the principal shareholders of BioSignia, Inc. and
          their total shares beneficially owned include the Shares owned by BioSignia,
          Inc.
        (2)	The calculation of the percentage of class beneficially
          owned is based on the 23,490,849 Shares which were issued and outstanding
          at November 14, 2000 plus the number of Shares capable of being issued
          to that individual (if any) and to directors and principal officers
          as a group within 60 days of the voting record date upon the exercise
          of stock options held by each of them (if any) and by the group, respectively.
        
        ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED
          TRANSACTIONS
        None.
        ITEM 13.	EXHIBITS AND REPORTS ON FORM 8- K
        None.
        SIGNATURES
        
        In accordance with
          Section 13 or 15(d) of the Exchange Act, the Registrant caused this
          amended report to be signed on its behalf by the undersigned, thereunto
          duly authorized.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|PARACELSIAN,
          INC.                                       | Date: | February
          6, 2001
|----------------------------------------------------------------- | ----- | --------------------------
|By:/s/ T. COLIN
          CAMPBELL                                |       |                           
|-------------------------------------                             |       |                           
|T. Colin Campbell
          President and Chief Executive Officer |       |                           



|In accordance
          with the Exchange Act, this amended report has been signed below by
          the following persons on behalf of the Registrant and in the capacities
          and on the dates indicated.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|/s/ T. COLIN CAMPBELL
          -------------------------------------
          T. Colin Campbell        | Chairman of the
          Board,
          Chief Executive Officer and Director
          (Principal Executive Officer) | February 6, 2001        
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ------------------------
|                                                                                                         |                                                                                                                         |                         
|/s/ GARY G. CHABOT
          -------------------------------------
          Gary G. Chabot              | Chief Financial
          Officer
          (Principal Financial and Accounting Officer)                                | February 6, 2001        
|                                                                                                         |                                                                                                                         |                         
|/s/ NELSON CAMPBELL
          ------------------------------------- 
          T. Nelson Campbell        | Director                                                                                                                | February 6, 2001        
|                                                                                                         |                                                                                                                         |                         
|/s/ HIRA GURTOO
          -------------------------------------
          Hira Gurtoo                    | Director                                                                                                                | February 6, 2001        
|                                                                                                         |                                                                                                                         |                         
|/s/ LIANPING HE
          -------------------------------------
          Lianping He                    | Director                                                                                                                | February 6, 2001        
|                                                                                                         |                                                                                                                         |                         
|/s/ NORIYOSHI INOUE
          -------------------------------------
          NoriYoshi Inoue            | Director                                                                                                                | February 6, 2001        
|                                                                                                         |                                                                                                                         |                         
|/s/ THOMAS D. LIVINGSTON
          -------------------------------------
          Thomas D. Livingston. | Director                                                                                                                | February 6, 2001        
|                                                                                                         |                                                                                                                         |                         
|/s/ MAC SHAIBE
          -------------------------------------
          Mac Shaibe                      | Director                                                                                                                | February
        6, 2001