UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] 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
PARACELSIAN, INC.
------------------
(Exact name of small business issuer as specified in its charter)
Delaware 16-1399565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Langmuir Laboratories,
Cornell Technology Park, Ithaca, New York 14850
(Address of principal executive offices) Zip Code
Issuer's telephone number: (607) 257-4224
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X _ No ____
There were 11,676,889 shares of Common Stock and 2,111,870 Redeemable
Common Stock Purchase Warrants outstanding at May 9, 1997.
<PAGE>
Paracelsian, Inc. and Subsidiary
Index
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 (Unaudited) and
September 30, 1996 (Audited).
Consolidated Statements of Operations for the three months and six
months ended March 31, 1997 and 1996 and the period from inception
(April 15, 1991) to March 31,1997 (Unaudited).
Consolidated Statements of Stockholders' Equity for the period from
inception (April 15, 1991) to March 31, 1997 (Unaudited).
Consolidated Statements of Cash Flows for the six months ended March
31, 1997 and 1996 and the period from inception (April 15, 1991)
to March 31, 1997 (Unaudited).
Notes to Consolidated Financial Statements (Unaudited).
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 6 - Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Paracelsian, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets
March 31, September 30,
1997 1996
Assets (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $2,076,849 $4,171,402
Prepaid expenses and other
current assets 533,150 278,367
----------- -----------
Total current assets 2,609,999 4,449,769
Equipment, net 359,167 384,790
Other Assets:
Traditional Chinese Medicine extracts,net 544,629 622,419
Licensing agreements, net 459,601 555,602
Patents and trademarks, net 292,158 258,206
Option to acquire EastWest Herbs, Ltd.
and related acquition costs - 92,866
Loan to EastWest Herbs, Ltd. 340,000 340,000
----------- -----------
1,636,338 1,869,093
----------- -----------
$4,605,554 $6,703,652
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 146,800 $ 312,817
Accrued expenses 49,301 192,790
Deferred revenues 48,758 46,858
Due to related party 42,931 77,597
----------- -----------
Total current liabilities 287,790 630,062
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value;
20,000,000 shares authorized;
11,942,367 issued at March 31, 1997
and 11,935,082 at September 30, 1996 119,420 119,348
Additional paid-in capital 20,335,840 20,348,005
Deficit accumulated during the
development stage (14,794,981) (13,051,248)
Treasury stock,at cost; 265,478 shares (1,342,515) (1,342,515)
---------- -----------
Total stockholders' equity 4,317,764 6,073,590
----------- -----------
$4,605,554 $6,703,652
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Paracelsian, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
For the three months and six months ended March 31, 1997 and 1996,
And the period from inception to March 31, 1997
(Unaudited)
Cumulative
Period from
Three Months Ended Six Months Ended Inception to
December 31, March 31, March 31,
1997 1996 1997 1996 1997
<S> <C> <C> <C> <C>
Sales:
Marketing rights $ - $ - $ - $ - $ 254,995
Product royalties 140 - 1,070 - 1,070
Products 3,525 12,963 3,525 20,306 161,338
Subscription revenues - 3,487 - 3,636 31,625
---------- -------- ----------- ---------- --------
Total sales 3,665 16,450 4,595 23,942 449,028
Operating expenses:
Research and product engineering 448,297 323,022 836,032 566,864 6,053,297
Research concerning Indian herbs - - - - 375,000
Newsletter expenses and costs - 180,087 - 197,726 955,586
Cost of products sold - 6,717 - 10,538 95,023
General and administrative 595,508 570,668 973,723 904,578 6,405,355
Officer stock compensation - - - - 1,228,275
---------- -------- ----------- --------- ------------
Total Operating Expenses 1,043,805 1,080,494 1,809,755 1,679,706 15,112,536
---------- -------- ----------- ----------- -------------
Loss from operations during
the development stage (1,040,140) (1,064,044) (1,805,160) (1,655,764) (14,663,508)
Interest income, net 18,161 1,785 61,427 39,283 368,527
---------- -------- ------------ ------------ ------------
Net loss during the
development stage $(1,021,979) $(1,062,259) $(1,743,733) $(1,616,481) $(14,294,981)
========== ========== ============= ============ =============
Net loss per weighted average
shares of common share $(0.10) $(0.13) $(0.16) $(0.20)
Weighted average number of
common stock outstanding 10,599,041 8,188,655 10,595,768 8,188,655
=========== ========= ========== =========
See accompanying notes to consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Paracelsian, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
For the period from Inception to March 31, 1997
Deficit
Accumulated
Additional During the
Preferred Stock Common Stock Paid-In Development Treasury
Shares Amount Shares Amount Capital Stage Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock April-July 1991 - $- 806,250 $ 8,063 $ - $ - $ - $ 8,063
Issuance of Common Stock for licensing,
technology and consulting services-July 1991 333,850 3,338 3,338
Private placement of Common Stock-
August-September 1991, net of costs 267,288 2,673 369,017 371,690
Net loss(April 15, 1991 to
September 30, 1991) (133,469) (133,469
-----------------------------------------------------------------------------------
BALANCE, September 30, 1991 - - 1,407,388 14,074 369,017 (133,469) - 249,622
Redemption of Common Stock-November 1991 (245,000) (2,450) (2,450)
Initial Public Offering of Common Stock
- February 1992, net of costs 1,150,000 11,500 5,103,451 5,114,951
Issuance of Warrants-February 1992 1,000 1,000
Net loss (year ended September 30, 1992) (1,221,943) (1,221,943)
-----------------------------------------------------------------------------------
BALANCE, September 30, 1992 - - 2,312,388 23,124 5,473,468 (1,355,412) - 4,141,180
Warrant dividend-September 1993 436,898 (500,000) (63,102)
Net loss (year ended September 30, 1993) (2,022,614) (2,022,614)
-----------------------------------------------------------------------------------
BALANCE, September 30, 1993 - - 2,312,388 23,124 5,910,366 (3,878,026) - 2,055,464
Net loss (year ended September 30, 1994) (1,940,262) (1,940,262)
-----------------------------------------------------------------------------------
BALANCE, September 30, 1994 - - 2,312,388 23,124 5,910,366 (5,818,288) - 115,202
Issuance of Common Stock for acquisition
of Pacific Liaisons - October 1994 1,116,666 11,167 1,632,833 1,644,000
Exercise of Warrants 221,200 2,212 716,644 718,856
Common Stock purchase by Officer
-January 1995 705,000 7,050 1,311,075 1,318,125
Issuance of Common Stock for services
rendered-January 1995 33,330 333 21,167 21,500
-April 1995 200,000 2,000 373,000 375,000
Issuance of Common Stock for conversion of
short-term liabilities-June 1995 13,000 130 48,849 48,979
Issuance of Common Stock
-August 1995, net of costs 300,000 3,000 749,625 752,625
Issuance of Preferred Stock-September 1995
Series A, net of costs 10,700 107 361,018 361,125
Series B, net of costs 10,000 100 399,900 400,000
Series C, net of costs 5,000 50 218,422 218,472
Net loss(year ended September 30, 1995) (3,031,196) (3,031,196)
-----------------------------------------------------------------------------------
BALANCE, September 30, 1995 25,700 257 4,901,584 49,016 11,742,899 (8,849,484) - 2,942,688
Issuance of Series B Preferred Stock,
net of costs 76,651 767 3,999,233 4,000,000
Exercise of Warrants 73,318 733 154,676 155,409
Issuance of Common Stock for services
rendered-October 1995 33,336 331 42,669 43,000
Purchase of Treasury Stock-November 1995 (1,342,515)(1,342,515)
Conversion of Preferred Stock (102,351) (1,024) 5,371,010 53,710 (52,686) -
Issuance of Common Stock
for conversion of short-term liabilities
-January 1996 2,500 25 9,975 10,000
Issuance of Common Stock
for services rendered-February 1996 25,000 250 27,875 28,125
Issuance of Warrants and Options
for services rendered-February 1996 132,500 132,500
Issuance of Common Stock
-June 1996,net of costs 733,334 7,333 1,965,663 1,972,996
Sale of Warrants-June 1996 35,000 35,000
Issuance of Common Stock
-July 1996,net of costs 91,667 917 250,075 250,992
Issuance of Common Stock
for services rendered-July 1996 5,000 50 4,950 5,000
Exercise of Options-September 1996 15,000 150 37,350 37,500
Issuance of Common Stock
-September 1996, net of costs 683,333 6,833 1,997,826 2,004,659
Net loss(year ended September 30, 1996) (4,201,764) (4,201,764)
-----------------------------------------------------------------------------------
BALANCE, September 30, 1996 - - 11,935,082 119,348 20,348,005 (13,051,248) (1,342,515) 6,073,590
Issuance of Common Stock
for services rendered-January 1997 7,285 72 22,835 22,907
Termination of Warrants February 1997 (35,000) (35,000)
Net loss (six months ended
March 31, 1997) (1,743,733) (1,743,733)
-------------------------------------------------------------------------------------
BALANCE, March 31, 1997
- $- 11,942,367 $ 119,420 $20,335,840 $(14,794,981) $(1,342,515)$4,317,764
=====================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Paracelsian, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the six months ended March 31, 1997 and 1996
And the Period From Inception to March 31, 1997
(Unaudited)
Cumulative
Period from
Six Months Ended Inception to
March 31, March 31,
1997 1996 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,743,733) $(1,616,481) $(14,294,981)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Non-cash compensation expense - - 1,228,275
Other non-cash expenses 170,656 17,130 1,311,314
Depreciation and amortization 147,510 176,524 925,114
Changes in assets and liabilities
(Increase) in prepaid expenses and
other current assets (254,783) (75,015) (503,730)
(Decrease) Increase in accounts payable (143,112) (453,582) 501,320
(Decrease) Increase in due to related party (34,667) - 42,930
Increase in deferred revenues 1,900 - 48,758
(Decrease)Increase in accrued expenses (143,486) 55,358 49,304
--------------------------------------------------
Net cash (used in) operating activities (1,999,715) (1,896,066) (10,691,696)
Cash flows from investing activities:
Purchase of investments - - (6,719,089)
Redemption of investments - - 6,719,089
Purchase of equipment (16,887) (38,775) (732,186)
Proceeds from sale of equipment - - 20,000
Acquisition of licensed technology - - (50,000)
Acquisition of patents and trademarks (42,951) (109,951) (347,754)
Acquisition of New Century Nutrition newsletter - (350,000) (350,000)
Acquisition of option for EastWest
Herbs Ltd. and related costs - - (92,866)
Loan to EastWest Herbs Ltd - - (340,000)
--------------------------------------------------
Net cash used in investing activities (59,838) (498,726) (1,892,806)
-------------------------------------------------
Cash flows from financing activities:
Sale of common stock, initial public
offering, net of costs - - 5,124,014
Sale of common and preferred stock,
net of costs - 4,000,000 10,330,109
Proceeds from the exercise of warrants - 155,409 666,295
Proceeds from the exercise of options - - 37,500
Proceeds from the sale of warrants (35,000) - -
Purchase of treasury stock - (1,342,515) (1,342,515)
Cost of warrant dividend - - (63,102)
Payments on equipment contract - - (90,950)
-------------------------------------------------
Net cash provided by financing activities (35,000) 2,812,894 14,661,351
-------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (2,094,553) 418,102 2,076,849
Cash and cash equivalents,
beginning of period 4,171,402 1,416,022 -
-------------------------------------------------
Cash and cash equivalents, end of period $2,076,849 $1,834,124 $2,076,849
==================================================
Supplemental disclosure:
Cash paid during the period for interest $1,785 $7,019 $16,585
======= ====== ========
Supplemental disclosure of non-cash investing and financing activities:
Fair value of assets acquired,
net of cash acquired $ - $ - $1,702,000
Less - liabilities assumed - - (52,000)
Less - issuance of common stock - - (1,644,000)
-------------------------------------------------
Net cash paid $ - $ - $6,000
=================================================
Warrant dividend $ - $ - $500,000
Issuance of common stock to reduce
short-term liabilities $ 22,907 $ 38,125 $519,981
Purchase of equipment $ - $ - $90,950
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
MARCH 31, 1997 AND 1996
1. MANAGEMENT REPRESENTATION
The consolidated financial statements included herein have been
prepared by Paracelsian, Inc. and subsidiary (the "Company") without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to quarterly reporting on Form 10-QSB
and reflect, in the opinion of the Company, all adjustments necessary
to present fairly the financial information for Paracelsian, Inc. and
its consolidated subsidiary. All such adjustments are of a normal and
recurring nature. Certain information and footnote disclosures
normally included in financial statements, prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted as permitted by such regulations. These consolidated financial
statements and related notes should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1996.
2. ORGANIZATION, BUSINESS, AND RISK FACTORS:
Organization and Business
The Company is a biotechnology company that markets and develops
products from technology related to the detectionobservation of
transmissions of signals from the exterior of a cell to its nucleus
(signal transduction). These signals which results in the activation
or suppression of specific genes and culminates in cell division or
death (signal transduction).
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 pathways and measure
the effects of chemicals contained in synthetic and natural compounds,
and chemicals ocurring 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
promisingfavorable 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, 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 p34 screening
assay. 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.
In November 1995, the Company purchased substantially all the assets
related to New Century Nutrition, a newsletter promoting disease
prevention through nutrition. In December 1996, the Company decided to
cease publication of the newsletter and seek potential buyers for the
newsletter and/or its subscriber list. All costs associated with the
cessation of publication have been included in the financial statements
of September 30, 1996.
Development Stage Company and Risk Factors
The Company is a development stage company as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises." Since inception, the Company has been
primarily engaged in research, product engineering and raising capital.
The Company, as a development stage enterprise, has yet to generate
significant revenues and has no assurance of substantial future
revenues. Even if marketing efforts are successful, it may take
several years before significant revenues are realized. 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, 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 consolidated financial statements, the
Company incurred a net loss of approximately $1,683,000 for the six
months ended March 31, 1997 and has working capital of approximately
$2,371,000 at that date. The Company continues to expend funds on
product research and development and general and administrative
expenses and has not generated significant revenues.
3. SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The consolidated financial statements of the Company include the
accounts of Paracelsian, Inc. and its wholly owned subsidiary ParaComm,
Inc. formerly known as Para Acquisition Corp. All intercompany
balances and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with an
original maturity of three months or less. Cash equivalents as of
March 31, 1997 and September 30, 1996 approximated $2,077,000 and
$4,171,000 respectively.
Research and Product Engineering
Company-sponsored research and product engineering expenditures have
been charged to expense as incurred. These costs consist primarily of
employee salaries and direct laboratory costs. The cost of extracts
used in research and development activities is expensed as consumed.
Net Loss Per Share
Net loss per share was computed by dividing net loss for the period by
the weighted average number of shares of common stock outstanding
during the period. Common stock equivalents are not included in the
computation of average shares outstanding because the effect of such
inclusion would be to decrease the loss per share.
Patents and Trademarks
The Company has acquired or applied for certain patent and trademark
rights. Costs associated with the acquisition and application for
these rights have been capitalized and are being amortized on the
straight-line method over the estimated legal life of the assets which
range from 15 to 17 years. Accumulated amortization of the patents and
trademarks totaled $66,247 and $58,747 at March 31, 1997 and
September 30, 1996, respectively.
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 as of:
Useful March 31, September 30,
Lives 1997 1996
Laboratory Equipment 10 years $511,691 $500,623
Office Furniture and Equipment 10 years 86,345 88,095
Computer Equipment and Software 5 years 133,852 133,033
--------- -------
$731,888 $721,751
Less Accumulated Depreciation 372,721 336,961
--------- --------
$359,167 $384,790
========= ========
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates also
affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. SUBSEQUENT EVENTS:
On April 9, 1997 the Company's option to acquire East West Herbs, Ltd.
of Kingham, England expired.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Three Months Ended March 31, 1997 as compared to the Three Months
Ended March 31, 1996
For the three month period ending March 31, 1997 the Company generated
revenues of $3,500 from the sale of the Company's ELISA(trademark) kits and $140
of royalty income from the exclusive license agreement with
Calbiochem-Novabiochem International for the licensing of products
utilizing the cdk 1 Assay technology. This represents a 77% decrease
from the three month period ending March 31, 1996 when sales of $
13,000 were generated from the sales of the Company's ELISA(trademark) kits and
$3,500 of subscription revenue from New Century Nutrition newsletter.
A portion of the Company's strategy is to develop certain of its
products to a point where its value can be clearly established and then
license marketing and other rights to third parties. To this end, the
Company completes sufficient product development so that prospective
licensees can more readily recognize the value of completing the
product's development and its ultimate commercialization.
In addition, the Company's strategy is to directly market those
products which it believes can be marketed without significant
marketing expenditures and without the time-consuming process of
having such products approved by regulatory agencies such as the Food
and Drug Administration.
It is the Company's experience that a product's value to a prospective
licensee varies significantly depending on the remaining product
development risk perceived by the prospect. The Company, therefore,
tailors its development plans for each product based on the interest of
prospective licensees and the critical risk factors perceived. The
Company also adjusts its plans as conditions change during the course
of development. As novel technologies become better understood by the
Company, perceived risks are frequently reduced. Similarly, as the
Company introduces novel technologies and approaches, significant
effort is expended to verify the scientific basis and document the
findings.
Since the Company's inception (April 15, 1991) through March 31, 1997,
it has invested $ 6,053,000 in product research, development and
engineering. The amount expended in the second quarter of fiscal 1997,
$448,000, as compared to $323,000 in the second quarter of fiscal 1996
represented an increase of 39%. This increase was attributable to the
continued expanded clinical studies of ANDROVIR(trademark), the compassionate
use trial of PN27,1 and increased personnel expenses.
The Company intends to incur continuing product research, development
and engineering expenses at a slightly higher amount than expenditures
in the second quarter of fiscal 1997. A significant amount of this
effort during the remainder of fiscal 1997 will be directed at the
National Cancer Institute as part of the CRADA. The proposed terms of
the CRADA are included in an agreement signed by the parties in
December 1996. Under the proposed terms, the parties have agreed to
share certain, extensive proprietary data, methods and models for use
in evaluating the efficacy of certain of the Company's compounds
against HIV and certain cancers.
General and administrative expenses totaled $ 6,393,000 during the
period from inception to March 31, 1997. Of this amount $ 584,000 was
incurred in the second quarter of fiscal 1997 and $571,000 in the
second quarter of fiscal 1996, representing an increase of 2%. These
expenses relate to the administration of the research, development and
product engineering activities and support services including raising
capital, arranging for facilities, hiring employees, market analysis
and the development and administration of the Company's business and
marketing plans. The increase from the prior year period is
attributable to additional consultant and other professional fees
incurred in the current quarter. The Company expects general and
administrative expenses in the third quarter of fiscal 1997 to grow
slightly over expenditures in the second quarter of fiscal 1997.
The Company has incurred net losses of $14,234,000 as a development
stage company from inception to March 31, 1997, of which $961,000 was
incurred in the second quarter of fiscal 1997 and $1,062,000 was
incurred in the second quarter of fiscal 1996. The net loss per share
of common stock amounted to $.09 for the quarter ended March 31, 1997
and $.13 for the quarter ended March 31, 1996. The Company
anticipates that losses will continue throughout fiscal 1997,
increasing slightly from the amount in the second quarter of fiscal
1997 for the reasons described above.
Liquidity and Capital Resources
At March 31, 1997, the Company had cash and cash equivalents of
$2,077,000 as compared to $4,171,000 at September 30, 1996.
The Company expects to incur additional research and development and
product engineering expenses, including personnel costs and costs
related to preclinical testing and clinical trials.
In April 1997, the Company was advised by the Food and Drug Administration
that the dietary supplement marketing of AndroVir(trademark) for HIV positive
individuals and of AndroCar(trademark) to persons with cancer would constitute
claims that the products are intended to treat persons with serious
diseases and thus intended for drug use and not dietary supplement
use. As a result of this advice, the Company is modifying its proposed
marketing plan to ensure that any products introduced as dietary supplements
meet regulatory requirements for this product category.
If the Company ultimately determines to proceed with a product launch prior
to the end of fiscal 1997, the Company believes that the initial
funding required for such launch could be provided out of the Company's
existing cash.
The Company intends to seek additional funding sources of capital and
liquidity through collaborative agreements. In addition, the Company is
continually evaluating various financing alternatives including public
and private sources of debt and equity. There can be no assurance
that such additional financing will be available on acceptable terms or
at all. If additional financing is not available, the Company
anticipates that its available cash and existing sources of funding
will be adequate to satisfy its operating cash and capital requirements
only until September 1997. The Company's future capital requirements
will depend on many factors, including continued scientific progress in
its research and development programs, the magnitude of such programs
and its acquisition plans.
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
On April 25, 1997 the Company filed a complaint in the U.S. District
Court for the Northern District of New York against John G. Babish, a
former officer and director of the Company. The complaint alleges that
Mr. Babish engaged in a pattern of wrongful conduct by which he sought
to unjustly enrich himself and to seize control of the Company at the
expense of the Company and its shareholders. That conduct included in
part the manipulation of the Company's stock price, trading in the
Company's stock on inside information, breach of fiduciary and
contractual duties, theft of Company property, and usurpation of
corporate opportunities.
The Company seeks compensatory and exemplary damages, injunctive relief
and recovery of litigation costs and fees.
The complaint has been served and filed. However, defendant's answer
is not yet due.
The Company has obtained a temporary restraining order prohibiting the
defendant alone or in cooperation with others from transferring any of
the stock or assets of or other interests in the Company, from issuing
a press release, or contacting stock brokers or major shareholders with
the intent to affect the price of plaintiff's stock or from
disseminating any trade secrets or other confidential information of
the plaintiffs. A hearing on the Company's application for a
preliminary injunction against defendant is scheduled for May 19, 1997.
Item 6(a). Exhibits
None.
Item 6(b). Reports on Form 8-K.
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 12, 1997
PARACELSIAN, INC.
By: /s/KEITH A. RHODES
Keith A. Rhodes
Chairman of the Board and
President
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SECOND QUARTER 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,076,849
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0
0
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</TABLE>
