Pursuant to Rule 424 (b) (3)
REGISTRATION NO. 333-8333
PROSPECTUS
825,001 Shares
PARACELSIAN, INC.
Common Stock, $.01 Par Value
________________
This Prospectus relates to the public offering of shares of common
stock (the "Shares") of Paracelsian, Inc. (the "Company") which may be offered
by certain shareholders (the "Selling Shareholders"). The Shares were issued
by the Company to the Selling Shareholders in June and July of 1996 pursuant to
a private placement. The Shares may be offered from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices relating to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker/dealers, and such
broker/dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker/dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker/dealer might
be in excess of customary commissions). To the extent required, information
regarding the specific Shares to be offered and sold, the names of the Selling
Shareholders,the public offering price, the names of any such broker/dealer or
agent and any applicable commissions or discount with respect to any particular
offer is set forth herein or will be set forth in an accompanying Prospectus
supplement. See "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company.
_________________________________
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
See "Risk Factors" at page 5.
_________________________________
The Shares are traded over-the-counter and are quoted through the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
on the Small Cap Market System under the symbol "PRLN." On July 25, 1996
the last sales price of the Shares on the NASDAQ Small Cap System was $3.468.
______________________________________
The Selling Shareholders and any broker/dealers or agents that
participate with the Selling Shareholders in the distribution of the shares may
be deemed to be "underwriters" within the meaning of Section 2(ii) of the
Securities Act of 1933 as amended (the "Securities Act") and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 26, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SHARES TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of these materials can also be obtained at prescribed rates from the
Public Reference Section of the Commission at its principal offices in
Washington, D.C., set forth above. Additional information with respect to this
offering may be provided in the future by means of supplements or "stickers" to
the Prospectus.
The Company has filed a Registration Statement on Form S-3 (including all
amendments and supplements thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the Shares offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
Exhibits filed therewith, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning the provisions of such documents are not necessarily complete and,
in each instance, reference is made to the Registration Statement or to the copy
of such document filed as an Exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference. Copies of the Registration Statement and the Exhibits thereto
can be obtained upon payment of a fee prescribed by the Commission or may be
inspected free of charge at the public reference facilities and regional offices
referred to above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference: (1) the Company's Annual Report
on Form 10-KSB, as amended (the "Form 10-KSB") for the fiscal year ended
September 31, 1995 filed pursuant to the Exchange Act, (2) the Company's
Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 1995
filed pursuant to the Exchange Act, (3) the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended March 31, 1996 (the "March 10-QSB") filed
pursuant to the Exchange Act, (4) the Company's Proxy Statement filed with
respect to its Annual Meeting held on April 12, 1996 filed pursuant to the
Exchange Act, and (5) the description of the Company's Common Stock contained
in its Registration Statement on Form S-1 (the "Form S-1") filed with the
Commission on December 27, 1991.
Each document filed subsequent to the date of this Prospect pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document incorporated
by reference in this Prospectus (other than exhibits unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
directed to Paracelsian, Inc., 222 Langmuir Laboratories, Cornell Technology
Park, Ithaca, New York 14850, (607) 257-4224, Attention:
Arthur A. Koch, Jr., Chief Financial Officer.
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider, among other
things, the following factors before a decision is made to purchase any shares
of Common Stock.
Limited Operating History. Although the Company commenced operations in
April 1991, its first year having sales revenue was fiscal 1994. Revenues in
the first six months of fiscal 1996 were approximately $24,000 compared to
approximately $285,000 for the first six months of fiscal 1995. Revenues for
fiscal 1995 and 1994 were approximately $305,690 and $74,000, respectively.
Fiscal 1995 revenues were primarily attributable to licensing fees from one
contract. Future revenues will be derived from sales of the Company's products
that are currently under development and royalties in connection with licensing
of its technology. 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 market acceptance of the Company's products, the ability of the
Company to develop and manage the introduction of new products, competition and
the ability to control costs.
Additional Financing Requirements and Access to Capital Funding. The
Company believes that the net proceeds of approximately $2.25 million from its
private placement to the Selling Shareholders and its current cash on hand will
satisfy its cash needs through March 1997 even if the Company's operations do
not generate any significant revenues. While the Company hopes to begin
generating revenues from the commercialization and sale of certain products in
December 1996, there can be no assurance that such will be the case, and even
if such is the case, such revenue is not expected to result in positive cash
flow for the Company in fiscal 1996 or fiscal 1997. The Company has expended
and will continue to expend in the future substantial funds for the research and
development of its products, and to market such products. The Company may
require additional funds for these purposes. No assurance can be given that
funds will be available for the Company to finance its development on acceptable
terms, if at all. If adequate funds are not available from operations or
sources of financing, the Company's business will be materially adversely
affected.
Supply of Herbs. The Company obtains its herbs, including those herbs
which the Company uses in its products, from suppliers in China and India with
which it does not have long term contracts. While the Company believes its
relationship with these suppliers is good, no assurance can be given that the
Company will be able to continue to obtain herbs from such suppliers in the
future. While the Company believes new suppliers could be found, a termination
of these relationships could disrupt the Company's marketing and sales of its
products.
Manufacture of Products. The Company currently intends to subcontract the
manufacture of its products with a manufacturer who has produced trial runs of
certain products of the Company. However, the Company does not have any long
term agreement with such manufacturer. While there are numerous sources to
which the Company can turn to manufacture these products, since the Company
initially expects to manufacture small quantities, if the Company's relationship
with this manufacturer were to terminate, locating a substitute manufacturer
could be time consuming and expensive which could disrupt the Company's
marketing and sale of such products.
Supply of Additional Herbal Extracts Under License Agreement. The Company
has received 2,800 out of a total of approximately 10,000 herbal extracts it
expects to receive under its license agreement with the Chinese Academy of
Preventive Medicine. While the Company expects to obtain the remaining
extracts, the inability of the Company to obtain these extracts could have a
material adverse affect on the Company's future business. However, the
Company's current inventory of herbal extracts will adequately supply the
Company's activities for the next several years.
Uncertainty of Product Market. The Company's success will be dependent
upon market acceptance of its products. Market acceptance of new products and
methodologies requires substantial time and effort and is subject to various
risks. To date, the Company has not achieved large sales of its products and
there can be no assurance that the Company will achieve market acceptance of
its products or that significant sales levels will be achieved and/or
maintained.
Technological Change, Obsolescence, Competition. The biotechnology
industry is subject to rapid and significant technological change. Competitors
of the Company engaged in all areas of biotechnological development in the
United States and abroad are numerous and include, among others, major
industrial companies, specialized firms, universities and other research
institutions. There can be no assurance that the Company's competitors will
not succeed in developing technologies and products that are more effective than
any which have been or are being developed by the Company or which would render
the Company's technology and products obsolete or non-competitive. Many of
these competitors have substantially greater financial and technical resources
and production and marketing capabilities than the Company. In addition, many
of the Company's competitors have significantly greater experience than the
Company in commercially producing and marketing their products. Accordingly,
the Company's competitors may succeed in commercially producing and marketing
their products more rapidly than the Company.
Government Regulation. The sale by the Company of Chinese herbs or
natural products derived solely from such herbs are not currently required to
be approved by the Food and Drug Administration (the "FDA") or other Federal
regulatory agencies. However, the labeling of such products is regulated by the
FDA. In addition, extracts of the Chinese herbs and pure compounds with
biological activity identified from these herbs may be subject to FDA or other
regulatory authorities and would require extensive testing and validation
procedures before they could be sold.
The Company's diagnostic test developed from the IN VITRO-CPA ELISA kit
will be subject to FDA or other regulatory approval if it is used in clinical
diagnostics. This test may be classified by the FDA as a Class III medical
device, automatically requiring an FDA-approved pre-market approval application
("PMA") prior to commercial marketing and distribution in the clinical
diagnostic market. The Company will not be able to commercialize a medical
diagnostic test classified by the FDA as a Class III medical device until the
FDA approves a PMA for the product.
In addition, due to the nature of the Company's products it is likely that
the Company could become subject to further governmental regulation in the
future.
Dependence on Key Personnel. The Company's success is dependent on
certain key management and scientific personnel. Competition for qualified
employees among biotechnology companies is intense, and the loss of key
personnel, or the inability to attract and retain the additional high skilled
employees required for the expansion of the Company's activities, could
adversely affect its business. The Company has obtained insurance on the life
of John G. Babish, Ph.D., a founder of the Company, Vice President-Science,
Chairperson-Scientific Advisory Board, Secretary and a director, of which the
Company is the sole beneficiary, in the amount of $1,000,000. In addition,
there is currently no employment agreement between the Company and Dr. Babish
and, although the relationship between the parties is good, there can be no
assurance that Dr. Babish will continue to work in his current capacity with
the Company. See "Executive Compensation--Employment Agreement" in Form 10-KSB.
Unpredictability of Patent Protection; Proprietary Technology. Certain of
the technologies utilized in the Company's products are proprietary. 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 the Company's
products. The Company currently has three US patent applications and three
foreign applications that are pending. In the 1995 fiscal year, the Company
filed for US patent protection regarding the use of compounds identified from
two of its traditional Chinese medicine extracts and for another patent
describing an improved Ah-IMMUNOASSAY technology. In addition, the Company
filed for patent protection in Europe and Canada on its findings of increased
presences of cyclin-dependent kinases protein in cells that are exposed to
carcinogenic chemicals. However, there can be no assurance that the Company's
pending applications will be issued as patents or that any of its issued 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
Company's products. 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. In addition, the Company also relies on unpatented proprietary
technology in the development and commercialization of its products. There is
no assurance that others may not independently develop the same or similar
technology or obtain access to the Company's proprietary technology or disclose
such technology or that the Company can meaningfully protect its rights in such
unpatented proprietary technology. See "Business--Patent Applications and
Proprietary Technology" in Form 10-KSB.
The patent positions of biopharmaceutical and biotechnology firms, as well
as of academic and other research institutions, are uncertain and involve
complex factual and legal questions. Accordingly, no firm predictions can be
made regarding the allowance, breadth or enforceability of claims in these
applications or others that may be filed by the Company. Cornell Research
Foundation, Inc. and the Company believe that they have the sole and exclusive
rights in the technologies underlying the Company's products. The Company would
vigorously defend any attempt by any individuals to assert any rights in such
technologies. Although Cornell Research Foundation, Inc. has substantial
resources to legally enforce its patent rights, there can be no assurance that
it will do so. If Cornell Research Foundation, Inc. elects not to enforce its
patent rights in the technologies underlying the Company's products, the Company
has the right under the License Agreement to seek to enforce those rights. See
"Business--Exclusive License Agreement with Cornell Research Foundation, Inc."
in Form 10-KSB. However, in such event, there can be no assurance that the
Company will have the financial resources to do so. 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.
Certain of the research activities relating to the development of the
technologies underlying the Company's products were funded by grants from the
United States government. When the United States government participates in the
funding of research activities, it retains certain rights, which include the
retention of a royalty free license to use the technologies for governmental
purposes.
Uncertainty of Results of Clinical Trials of PN355 for AIDS and PN27,1 for
Cancer. There can be no assurance that the clinical trials for toxicity of the
Company's compounds PN355 for AIDS and PN27,1 for Cancer will be successful.
The outcome of the trials cannot be predicted. The lack of success of the
trials, as well as that of future trials, can have an adverse affect on the
Company's business and prospects.
Legal Proceedings. In June 1993, a suit was commenced by certain
individuals against the Company and a current and former officer of the Company
whereby the plaintiffs allege, among other things, prior to the Company's
incorporation, a partnership had been formed by such individuals to utilize
certain technology in order to commercialize certain products which the Company
was developing at that time. The Company never commercialized any such products
and the Company is no longer utilizing and has no interest in such technology
to commercialize future products. 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 seeking damages for unfair competition, an accounting and
injunctive relief to proceed. The Company has appealed the court's failure
to dismiss the remaining claims and such appeal is pending. While the Company
believes that the suit against it is without merit and continues to vigorously
contest the allegations, there can be no assurance that the Company will be
successful in its defense of the allegations. If the plaintiffs are successful
in the action against the Company, the Company's financial position could be
materially adversely affected. See "Legal Proceedings" in Form 10-KSB.
Product Liability. The testing, marketing and sale of biotechnology
products assumes an inherent risk of product liability. There can be no
assurance that product liability claims will not be asserted against the
Company. The Company has product liability insurance coverage in the aggregate
amount of $1,000,000; however, there can be no assurance that such coverage will
be sufficient for the Company's needs.
Control by Directors, Officers and Employees. The directors, officers and
employees of the Company beneficially own or have voting control over 1,859,416
shares of Common Stock (including 408,300 shares subject to currently
exercisable stock options and redeemable common stock purchase warrants (the
"Redeemable Warrants"), issued pursuant to a warrant dividend by the Company
declared on June 28, 1993 to the holders of record of the Common Stock on
September 8, 1993), or approximately 17% of the Company's then outstanding
shares of Common Stock. Such directors, officers and employees are therefore
in a position to significantly influence the election of the Company's directors
and thereby select management and direct policies of the Company. Cornell
Research Foundation, Inc., the owner of approximately 3.5% of the Company's
outstanding shares of Common Stock, has expressed in the license agreement
between the Company and Cornell Research Foundation, Inc., an intention to
maintain a passive non-voting position with respect to its stockholdings and has
acted accordingly up to this time. If this intention continues, directors,
officers and employees of the Company will effectively control a greater
percentage of the vote than reflected by their equity position in the Company.
See "Security Ownership of Certain Beneficial Owner and Management" in Form
10-KSB.
Volatility of Share Price. The market price of the Company's Common Stock
since the initial public offering has been volatile. As recently as September
1995, the market price of the Company's Common Stock was $8.00 per share while
in January 1996 the market price of the Company's Common Stock was $1.00 per
share. Factors such as announcements of technological innovations or new
commercial products by the Company or its competitors, the results of clinical
testing, patent or proprietary rights, developments or other matters may have
a significant impact on the market price of the Common Stock. See "Market for
Common Equity and Related Stockholder Matters" in Form 10-KSB.
Non-payment of Cash Dividends. The Company has not paid any cash
dividends and it is unlikely that the Company will pay any cash dividends in the
foreseeable future. Earnings, if any, will be retained by the Company for
further development and expansion of its business. There can be no assurance
that the Company will ever pay cash dividends.
Effects of Issuance of Preferred Stock. The Company's Articles of
Incorporation authorized the issuance of up to 1,000,000 shares of preferred
stock on terms which may be fixed by the Company's Board of Directors without
further shareholder action. While the Company has previously issued shares of
preferred stock, as of the date of this Prospectus the Company has no shares of
preferred stock outstanding. The terms of any future series of preferred stock,
which may include priority claims to assets and dividends and special voting
rights, could adversely affect the rights of holders of the Common Stock. The
issuance of such preferred stock could make the possible takeover of the Company
or the removal of management of the Company more difficult, discourage hostile
bids for control of the Company in which shareholders may receive premiums for
their shares of Common Stock, or otherwise dilute the rights of holders of
Common Stock and the market price of the Common Stock. See "Description of
Securities" in the Form S-1.
<PAGE>
RECENT DEVELOPMENTS
Private Placement Financing.
In June and July 1996, the Company completed a private placement to the
Selling Shareholders for approximately $2.25 million in which it issued:
1) 825,001 shares of Common Stock;
2) Warrants, immediately exercisable, to purchase 825,001 shares of Common
Stock at an exercise price of $3.25 per share, at any time prior to June 26,
2001; and
3) Warrants to purchase 375,001 shares of Common Stock at an exercise price of
$4.50 per share, of which the right to purchase 250,000 shares is not
immediately exercisable and is void after the 5th anniversary of the date on
which they first become exercisable and of which the right to purchase
125,001 shares is immediately exercisable and void after June 26, 2001.
The Selling Shareholders have certain rights to require the Company to register
the shares of Common Stock underlying the warrants.
The Company intends to use the proceeds of the private placement for
working capital and research and development.
Appointment of New Directors.
On June 21, 1996 the Company expanded the Board of Directors to nine
members and elected, effective as of July 15, 1996, the following directors:
William Warwick was elected to the Board for a term that expires
at the next Annual Meeting. Mr. Warwick is President and Chief Executive Officer
of AT&T China, where he has worked for over the past five years. From January
1995 to date Mr. Warwick has served as a consultant to the Board of Directors on
management and operational issues for which he was granted an option to purchase
5,000 shares of Common Stock at $2.50 per share. Mr. Warwick is 62 years of
age.
Jack O'Reilly was elected to the Board for a term that expires at
the 1998 Annual Meeting. From August 1993 to date he has been a director and
President of Vectorpharma International Corporation, a
pharmaceutical-bio-technology related concern. From November 1992 to date,
Mr. O'Reilly has been a self-employed consultant on pharmaceutical and
healthcare issues. From 1987 to November 1992 Mr. O'Reilly was Senior Director,
Corporate and Business Development for Syntex Corporation, a pharmaceutical
company. Mr. O'Reilly is 53 years of age.
In accordance with the Company's stock option plan, upon election
to the Board of Directors each of Messrs. Warwick and O'Reilly was granted
options to purchase 2,500 shares of Common Stock at a price of $3.125 per share
(the market price on the date of their election).
Option to Purchase East West Herbs Ltd. ("EWH") and Simultaneous Loan to EWH.
On April 3, 1996, the Company made a $340,000 loan to EWH which loan is
evidenced by a Promissory Note and bears interest at a floating LIBOR rate (the
"Loan"). The principal of the Loan is to be repaid in eight equal quarterly
installments beginning October 3, 1997. Interest on the Loan is payable
quarterly in arrears. The Loan is secured by all of the assets of EWH, which
security interest is second in priority to an existing bank security interest.
The Company has a right to appoint one member of the Board of Directors of EWH
for so long as any amount of the Loan is outstanding.
In consideration of the making of the Loan and a non-refundable payment of
$20,000, the shareholders of EWH granted to the Company an option to acquire all
of the outstanding shares of EWH (the "Option")for an amount equal to $780,000
in cash and that number of shares of the common stock of the Company valued at
the higher of (a) $2.75 or (b) the average closing price of such common stock
for the 15 trading days prior to the exercise of the Option, as shall equal
$2,400,000. The Option may be exercised by the Company at any time prior to
April 3, 1997.
EWH is one of the largest marketers and distributors of traditional Chinese
medicines ("TCM") in the United Kingdom, with sales of approximately 1 million
(British pounds) for the fiscal year ended March 31, 1995. EWH acts as
an advisor to both pharmaceutical firms and government agencies in setting the
herbal quality standards for TCM in the United Kingdom. See
"Item 7- Subsequent Events" in the Notes to Consolidated Financial Statements in
the March 10-QSB.
Clinical Trial of the Company's Compounds PN355 and PN27,1.
In January 1996, the Company began a clinical trial for toxicity of
its compound, PN355 for AIDS. The compound is the first of the Company's
extracts that has already been identified through the Company's proprietary
screening technology to have potential, positive therapeutic effects to undergo
such trials. PN355 was patented in December 1994. It has reached human safety
testing in a very short time primarily because of the Company's access to the
documented historical use in traditional Chinese medicine of the herb from which
PN355 has been isolated. Results of this trial are expected in the fourth
quarter of 1996. There is no assurance that the results of this trial will be
successful.
In March 1996, the Company began a clinical trial for toxicity of
its compound, PN27,1 for Cancer. The compound is the second of the Company's
extracts that has already been identified through the Company's proprietary
screening technology to have potential, positive therapeutic effects to undergo
such trials. Because of preliminary promising results of the trial, the trial
has been expanded to include 300 patients. Results of the trial are expected
in the first half of 1997. There is no assurance that the results of the trial
will be successful.
SELLING SHAREHOLDERS
The following table shows the names of the Selling Shareholders, the Shares
owned beneficially by each of them, as of July 15, 1996, the number of Shares
that may be offered by each of them pursuant to this Prospectus and the number
of Shares and percentage of outstanding Shares to be owned by each of them after
the completion of this Offering, assuming all of the Shares being offered are
sold. None of the Selling Shareholders was an officer or director of the
Company or, to the knowledge of the Company, had any material relationship with
the Company within the past three years.
<TABLE>
<S> <C> <C> <C> <C>
Percentage
of Shares
Shares Number of Number of Shares Beneficially
Beneficially Shares that May Beneficially Owned Owned After
Selling Shareholders Owned Be Sold After the Offering the Offering
The Travelers
Insurance Company 1,100,000(1) 550,000 550,000(1) 4.8%
Davin Capital, LP 225,001 (2) 91,667 133,334(2) 1.2%
Craig Drill 225,001(2) 91,667 133,334(2) 1.2%
Capital , LP
Doran Capital 225,001(2) 91,667 133,334(2) 1.2%
Management, LP
</TABLE>
_______________________
(1) Includes warrant exercisable within 60 days of the effective date of this
offering to purchase 550,00 shares of the Company's Common Stock at $3.25 per
share. Does not include warrant not exercisable within 60 days of the effective
date of this offering to purchase 250,000 shares of Common Stock at $4.50 per
share.
(2) Includes warrants exercisable within 60 days of the effective date of
this offering to purchase 91,667 and 41,667 shares of the Company's Common
Stock at $3.25 and $4.50 per share, respectively.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from this Offering. The Shares
may be offered from time to time in transactions in the over-the-counter market,
in negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices relating to prevailing market prices or at negotiated prices. The
Selling Shareholders may effect such transactions by selling the Shares to or
through broker/dealers, and such broker/dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the Shares for whom such broker/dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker/dealer might be in excess of customary commissions). The
Selling Shareholders and any broker/dealers or agents that may participate in
the distribution of the Shares may be deemed to be "underwriters" under the
Securities Act and any profit on the sale of the Shares by them and any
discounts, commissions or concessions received by any such broker/dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
At the time a particular offer of the Shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
number of Shares being offered, the names of the Selling Shareholders, the
public offering price, the names of any broker/dealers or agents, and any
applicable commissions or discounts with respect to any particular offer.
In order to comply with the applicable securities laws of certain states, if
any, the Shares will be offered or sold through registered or licensed brokers
or dealers in those states. In addition, in certain states the Shares may not
be offered or sold unless they have been registered or qualified for sale in
such states or an exemption from such registration or qualification requirement
is available and such offering or sale is in compliance therewith.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of securities may not simultaneously engage in market
making activities with respect to such securities for a period of two business
days prior to the commencement of such distribution. In addition and without
limiting the foregoing, the Selling Shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, in
connection with transactions in the Shares during the effectiveness of the
Registration Statement of which this Prospectus is a part. All of the foregoing
may affect the marketability of the Shares.
The Company will pay all of the expenses, including, but not limited to,
fees and expenses of compliance with state securities or "blue sky" laws,
incident to the registration of the Shares other than selling commissions. The
expenses payable by the Company are estimated to be $23,500.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") provides that directors and officers of Delaware
corporations are entitled, under certain circumstances, to be indemnified
against all expenses and liabilities (including attorneys' fees) incurred by
them as a result of any suit brought against them in their capacity as a
director or officer, if they acted in good faith and in manner they reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A director or officer may also be
indemnified against expenses incurred in connection with a derivative suit if
such director acted in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was adjudged
liable to the corporation. Article TENTH of the Company's Certificate of
Incorporation entitles officers and directors of the Company to indemnification
to the full extent permitted by Section 145 of the DGCL, as the same may be
supplemented or amended from time to time. In addition, Article NINTH of the
Company's Certificate of Incorporation limits a director's liability to the Comp
any or to any stockholder for monetary damages for breaches of fiduciary duty
as a director to the full extent permitted by Section 102 of the DGCL, and the
same may be supplemented or amended from time to time.
The Certificate of Incorporation and By-Laws of the Company contain certain
provisions that may enhance the likelihood of continuity and stability in the
composition of the Company's Board of Directors and may have the effect of
delaying, deferring or preventing a future takeover or change of control of the
Company. Such provisions also may have the effect of rendering changes in the
Board of Directors and management of the Company more difficult.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
The By-Laws of the Company provide for the classification of the Board into
three classes serving staggered three-year terms. There are currently nine
directors.
The By-Laws of the Company also provide that a vacancy on the Board of
Directors occurring from an increase in the number of directors or otherwise
may be filled by the vote of a majority of directors then in office, though
less than a quorum.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York, New
York 10022. Members of the firm own in the aggregate options to purchase
50,000 shares of Common Stock of the Company, none of which are currently
exercisable.
EXPERTS
The financial statements incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen LLP
independent public accountants, as indicated in their reports with respect
thereto, and are included in reliance upon authority of said firm as experts
in giving said reports.
<PAGE>
No dealer, salesperson or any
other person has been authorized to
give any information or to make any
representation not contained in this
Prospectus with respect to the offering
made hereby. This Prospectus does not 825,001 Shares of Common Stock
constitute an offer to sell or a
solicitation of an offer to buy any of
the securities offered hereby to any
person or by anyone in any jurisdiction
in which such offer or solicitation may
not lawfully be made. Neither the
delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication
that there has been no change in the
information set forth herein or in the
business of the Company since the date
hereof.
______________________
TABLE OF CONTENTS
Paracelsian, Inc.
Available Information..........3
Incorporation of Certain Documents
by Reference..................3
Risk Factors...................5
Recent Developments............9 __________________________
Selling Shareholders..........11
Plan of Distribution..........12 PROSPECTUS
Certain Provisions of the
Certificate of Incorporation --------------------------
and By-laws..................13
Legal Matters.................13 July 26, 1996
Experts.......................14
