<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

   [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

             For the transition period from ________ to ___________


                         Commission file number: 0-21130


                        ENCHIRA BIOTECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)


             Delaware                                       04-3078857
  (State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                         Identification No.)

      4200 Research Forest Drive
        The Woodlands, Texas                                   77381
(address of principal executive offices)                    (zip code)

                                  281-419-7000
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

      As of May 4, 2001, there were outstanding 9,267,993 shares of Common
Stock, par value $.01 per share, of the registrant.

<PAGE>
                        ENCHIRA BIOTECHNOLOGY CORPORATION


                 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001

                                      INDEX

                                                                    PAGE
                                                                  --------
Factors Affecting Forward-Looking Statements                          3

PART I.         FINANCIAL INFORMATION

Item 1.         Financial Statements                                  4

                Balance Sheets as of March 31, 2001 (Unaudited)
                and December 31, 2000                                 5

                Statements of Operations for the Three Months
                Ended March 31, 2001 and 2000 (Unaudited)             6

                Statements of Cash Flows for the Three Months
                Ended
                March 31, 2001 and 2000 (Unaudited)                   7

                Notes to Financial Statements                         8

                Management's Discussion and Analysis of
Item 2.         Financial                                            10
                Condition and Results of Operations

                Quantitative and Qualitative Disclosures about
Item 3.         Market Risk                                          13

PART II.        OTHER INFORMATION

Item 1.         Legal Proceedings                                    13

Item 6.         Exhibits and Reports on Form 8-K                     13

SIGNATURES                                                           14

                                       2
<PAGE>
                 FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

      This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"anticipate", "believe", "expect", "estimate", "project" and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, believed,
expected, estimated or projected. These risks and uncertainties include
technological uncertainty and risks associated with the commercialization of the
Company's technology, the pending dispute and arbitration with Maxygen relating
to the Company's rights to its RACHITT(TM) technology, the Company's history of
operating losses aNd uncertainty of future profitability, manufacturing risks
and uncertainties, uncertainty of market acceptance of the Company's technology,
uncertainties as to the protection offered by the Company's patents and
proprietary technology, the Company's dependence on collaborations, the
Company's need for additional funds, limited marketing experience and dependence
on key personnel, government regulations, competition and other risks and
uncertainties described in the Company's filings with the Securities and
Exchange Commission. For additional discussion of such risks, uncertainties and
assumptions ("Cautionary Statements"), see "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" included elsewhere in this report and "Item 1. Business -
Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 ("2000 Form 10-K"). All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.


                                       3
<PAGE>
                        PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

      The following unaudited financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made herein are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the 2000 Form 10-K.

      The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.


                                       4
<PAGE>
                        ENCHIRA BIOTECHNOLOGY CORPORATION
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               March 31,      December 31,
                                                                 2001             2000
                                                              ------------    ------------
                                                              (Unaudited)
<S>                                                           <C>             <C>
                            ASSETS
Current assets:
      Cash and cash equivalents                               $  9,426,918    $  7,524,191
      Short-term investments                                     2,514,275       4,475,679
      Prepaid expenses and other current assets                    485,087         900,266
                                                              ------------    ------------
          Total current assets                                  12,426,280      12,900,136

Long-term investments                                                 --         1,280,937
Furniture, equipment and leasehold improvements, net               585,239         638,865
Intangible and other assets, net                                 1,053,337       1,038,175
                                                              ------------    ------------
          Total assets                                        $ 14,064,856    $ 15,858,113
                                                              ============    ============

             LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable and accrued liabilities                $    451,003    $    544,836
      Capital lease, short-term                                     12,626          12,304
      Deferred revenue                                             813,333         730,000
      Note payable                                                 142,149         255,867
                                                              ------------    ------------
          Total current liabilities                              1,419,111       1,543,007

Capital lease, long-term                                            54,428          57,991

Stockholders' equity:
      Series B Convertible Preferred Stock, $0.01 par value
          (liquidation value $24,513,243; 760,000 shares
          authorized, 387,700 and 387,700 shares,
          respectively, issued and outstanding)                 24,065,107      23,512,474
      Common Stock, $0.01 par value (30,000,000 shares
          authorized, 9,079,313 and 9,067,700 shares,
          respectively, issued and outstanding)                     90,793          90,677
      Additional paid-in capital                                73,564,160      73,626,674
      Accumulated deficit                                      (85,128,743)    (82,972,710)
                                                              ------------    ------------
          Total stockholders' equity                            12,591,317      14,257,115
                                                              ------------    ------------
          Total liabilities and stockholders' equity          $ 14,064,856    $ 15,858,113
                                                              ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>
                        ENCHIRA BIOTECHNOLOGY CORPORATION
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                          March 31,
                                                ----------------------------
                                                   2001              2000
                                                -----------      -----------
<S>                                             <C>              <C>
Sponsored research revenues                     $   256,636      $   287,697
                                                -----------      -----------

Costs and expenses:
    Research and development                      1,058,238        1,006,463
    General and administrative                      967,803          471,588
                                                -----------      -----------

            Total costs and expenses              2,026,041        1,478,051
                                                -----------      -----------

Interest and investment income                       49,534           70,976
                                                -----------      -----------
Net loss                                        $(1,719,871)     $(1,119,378)
                                                ===========      ===========

Net loss per common share-- basic
    and diluted                                 $     (0.25)     $     (0.27)
                                                ===========      ===========

Shares used in computing net loss per
    common share-- basic and diluted              9,078,426        6,645,402
                                                ===========      ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       6
<PAGE>
                        ENCHIRA BIOTECHNOLOGY CORPORATION
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                                           March 31,
                                                                   --------------------------
                                                                      2001           2000
                                                                   -----------    -----------
<S>                                                                <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net loss                                                    $(1,719,871)   $(1,119,378)
       Adjustments to reconcile net loss to net cash used in
          operating activities:
             Depreciation and amortization                              80,676        116,787
             Issuance of common stock for services                      50,000           --
       Changes in assets and liabilities:
             Decrease (increase) in prepaid expenses and other
                 current assets                                        415,179       (339,487)
             Increase (decrease) in accounts payable and accrued
                 liabilities                                           (93,833)        27,179
             Increase in deferred revenue                               83,333           --
                                                                   -----------    -----------
                 Net cash used in operating activities              (1,184,516)    (1,314,899)
                                                                   -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                            (18,050)       (84,767)
       Patent expenditures                                             (24,162)       (97,970)
       Net sale of investments held to maturity                      3,242,341      1,945,199
                                                                   -----------    -----------
          Net cash provided by investing activities                  3,200,129      1,762,462
                                                                   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Capital lease obligations                                        (3,241)        80,512
       Issuance (payments) on note payable                            (113,718)        73,067
       Issuance of common stock                                          4,073        146,517
                                                                   -----------    -----------
          Net cash provided by (used in) financing activities         (112,886)       300,096
                                                                   -----------    -----------

NET INCREASE IN CASH AND CASH
       EQUIVALENTS                                                   1,902,727        747,659
CASH AND CASH EQUIVALENTS AT BEGINNING OF
       PERIOD                                                        7,524,191      2,510,274
                                                                   -----------    -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $ 9,426,918    $ 3,257,933
                                                                   ===========    ===========

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       7
<PAGE>
                        ENCHIRA BIOTECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2001


NOTE 1.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

   Enchira Biotechnology Corporation ("Enchira" or the "Company"), formerly
Energy BioSystems Corporation, was incorporated in the State of Delaware on
December 20, 1989, and commenced operations in January 1990. Enchira is a
biotechnology company incorporating genetic recombination, high throughput
screening and bioprocessing in an integrated, directed evolution technology
platform. The Company believes that its proprietary platform technology can be
used to generate libraries of novel genes for the creation of improved enzymes
for a broad range of applications, such as protein-based pharmaceuticals,
agricultural crop enhancement and protection products, and industrial enzymes
for the manufacture of specialty chemicals, fine chemicals and pharmaceutical
intermediates.

   On April 27, 2000, Enchira received notice from Maxygen Inc. ("Maxygen") that
they had elected to seek arbitration under the License and Development Agreement
dated May 19, 1997 (the "Development Agreement") between Enchira and Maxygen.
Maxygen claims that Enchira used their confidential information to develop the
RACHITT(TM) technology, which they allege was provided to EnchiRa under the
Development Agreement. The arbitration was held in November 2000.

   On March 6, 2001, Enchira received an unfavorable ruling from the arbitrator
in its arbitration proceeding with Maxygen. The arbitrator's opinion found that
Enchira breached several provisions of the Development Agreement with respect to
Enchira's RACHITT(TM) and HTS technologies, bUt remedies for such breaches were
not specified in the ruling. The arbitrator directed that the parties attempt to
arrive at an agreement for an appropriate remedy. If the parties cannot reach an
agreement, they will again appear before the arbitrator who will issue a
decision on damages or some other remedy. While Enchira will work with Maxygen
and the arbitrator to reach a conclusion to this proceeding, it also intends to
investigate alternative actions that will permit Enchira to continue to develop
the RACHITT(TM) technology that Enchira continues to believe is its independeNt
technology. To this end, Enchira has met with Maxygen and made certain
proposals. Enchira is currently awaiting Maxygen's response to its proposals.
While Enchira continues to deny all of Maxygen's allegations and believes that
its technology was independently developed after the collaboration terminated,
the ultimate resolution of the arbitrator's ruling could require Enchira to pay
costly licensing or royalty fees or result in an outright prohibition of
Enchira's use of such technology.

   Enchira has devoted substantially all of its efforts to research and
development. There have been no revenues from operations other than sponsored
research revenues and one site license fee in 1998 and there is no assurance of
future revenues. Enchira has an accumulated deficit since inception of
approximately $85 million and expects that its existing financial resources,
exclusive of any financial settlement that may be required as a remedy in the
Maxygen arbitration case, will fund operations through 2002. Enchira may seek
additional financing through various alternatives that include: an equity
financing, government funding and alliances with pharmaceutical companies and
corporate partners. Adequate funds for these purposes, whether obtained through
financial markets or collaborative or other arrangements with corporate partners
or from other resources, may not be available when needed or on terms acceptable
to Enchira. Enchira's inability to raise funds when needed may require Enchira
to


                                       8
<PAGE>
                      ENCHIRA BIOTECHNOLOGY CORPORATION
                  NOTES TO FINANCIAL STATEMENTS (CONTINUED)


delay, scale back or eliminate some or all of its research and product
development programs. Enchira shall also have increased expenses as a result of
its ongoing arbitration with Maxygen. These expenses and any fees associated
with any license, cross licenses or other remedies that Enchira may be required
to enter into with Maxygen may significantly deplete our existing capital and
cause Enchira to seek additional capital, which may not be available on
favorable terms, if at all.

   The accompanying unaudited interim financial statements reflect all
adjustments, which, in the opinion of management, are necessary for a fair
presentation of the results for the interim periods presented. These financial
statements should be read in conjunction with the 2000 Form 10-K.

NOTE 2.  SERIES B CONVERTIBLE PREFERRED STOCK

   Shares of Series B Preferred Stock are convertible into shares of common
stock at an adjusted conversion price currently equal to $16.76 per share,
subject to certain adjustments. The Series B Preferred Stock may be redeemed by
the Company under certain circumstances after February 26, 1999 and is required
to be redeemed, subject to certain limitations, on February 26, 2002 at a
redemption price of $50.00 per share, plus accrued and unpaid dividends. The
redemption price is payable in cash or common stock at the option of the
Company. It is the Company's present intent, however, to redeem the Series B
Preferred Stock for common stock, subject to certain requirements. Accordingly,
the Series B Preferred Stock is included in stockholders' equity. As of March
31, 2001, 314,400 aggregate shares of Series B Preferred Stock have been
converted to 508,255 shares of common stock. The remaining 387,700 shares of
Series B Preferred Stock are convertible into 1,156,622 shares of common stock.

   Dividends on the Series B Preferred Stock are cumulative from the date of the
initial closing, February 27, 1997, and are payable, at the Company's election,
in cash or common stock of the Company, or a combination thereof, at an annual
rate equal to (i) $4.00 per share to the extent the dividend is paid in cash and
(ii) $4.50 per share to the extent the dividend is paid in common stock. The
Company has not declared a dividend payment since November 1998, and since that
date, has not paid dividends on Series B Preferred Stock except on conversion of
Series B Preferred Stock to common stock. As of March 31, 2001, Enchira has paid
common stock dividends of 509,451 shares of common stock and cash dividends of
$115,522 on Series B Preferred Stock.


                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

   To date, Enchira has devoted substantially all of its efforts to research and
development. There have been no revenues from operations other than sponsored
research revenues and one site license fee in 1998 and there is no assurance of
future revenues. The Company has incurred cumulative net losses since inception
and expects to incur substantial losses for at least the next several years, due
primarily to its research and development activities and the development of its
directed evolution technology, organosulfur compounds and biocatalyst
development. The Company expects that losses will fluctuate from quarter to
quarter and that such fluctuations may be substantial. Enchira has an
accumulated deficit since inception of approximately $85 million and believes
that it can conserve its existing financial resources to fund operations through
2002, assuming that there is no material change in its development strategy and
no material expenditures as a result of the Maxygen arbitration.

   On April 27, 2000, Enchira received notice from Maxygen Inc. ("Maxygen") that
they had elected to seek arbitration under the License and Development Agreement
dated May 19, 1997 (the "Development Agreement") between Enchira and Maxygen.
Maxygen claims that Enchira used their confidential information to develop the
RACHITT(TM) technology, which they allege was provided to EnchiRa under the
Development Agreement. The arbitration was held in November 2000.

   On March 6, 2001, Enchira received an unfavorable ruling from the arbitrator
in its arbitration proceeding with Maxygen. The arbitrator's opinion found that
Enchira breached several provisions of the Development Agreement with respect to
Enchira's RACHITT(TM) and HTS technologies, bUt remedies for such breaches were
not specified in the ruling. The arbitrator directed that the parties attempt to
arrive at an agreement for an appropriate remedy. If the parties cannot reach an
agreement, they will again appear before the arbitrator who will issue a
decision on damages or some other remedy. While Enchira will work with Maxygen
and the arbitrator to reach a conclusion to this proceeding, it also intends to
investigate alternative actions that will permit Enchira to continue to develop
the RACHITT(TM) technology that Enchira continues to believe is its independeNt
technology. To this end, Enchira has met with Maxygen and made certain
proposals. Enchira is currently awaiting Maxygen's response to its proposals.
While Enchira continues to deny all of Maxygen's allegations and believes that
its technology was independently developed after the collaboration terminated,
the ultimate resolution of the arbitrator's ruling could require Enchira to pay
costly licensing or royalty fees or result in an outright prohibition of
Enchira's use of such technology.

RESULTS OF OPERATIONS

   The Company had sponsored research revenues of $256,636 during the first
three months of 2001 as compared to $287,697 during the first three months of
2000. The decrease of $31,061 in sponsored research revenues resulted primarily
from the decrease in sponsored research revenues from a Department of Energy
("DOE") grant.

   The Company had research and development expenses for the three months ended
March 31, 2001 and 2000 of $1,058,238 and $1,006,463, respectively. The increase
in research and development expenses of $51,775 for the three months ended March
31, 2001 as compared to the


                                       10
<PAGE>
corresponding prior year period resulted primarily from an increase in research
and development personnel costs in the first quarter of 2001. The Company
expects its research and development expenses to increase in 2001, as it
increases personnel to continue development of its directed evolution technology
platform.

   The Company had general and administrative expenses for the three months
ended March 31, 2001 and 2000 of $967,803 and $471,588, respectively. The
increase in general and administrative expenses of $496,215 for the three months
ended March 31, 2001 as compared to the corresponding prior year period resulted
primarily from an increase in legal expenses related to the arbitration with
Maxygen, the addition of a Vice President of Business Development in September
2000 and certain increases in employee compensation. The Company expects its
general and administrative expenses to increase as it continues to pursue a
resolution to its dispute with Maxygen.

   The Company had interest and investment income of $49,534 and $70,976 for the
first three months of 2001 and 2000, respectively. The decrease in investment
income of $21,442 resulted primarily from unrealized losses on cash equivalents.

LIQUIDITY AND CAPITAL RESOURCES

   Since its inception in December 1989, Enchira has devoted substantially all
of its resources to research and development. To date, all of the Company's
revenues have resulted from interest and investment income and sponsored
research payments from collaborative agreements. Enchira has incurred cumulative
losses since inception and expects to incur continued losses for at least the
next several years, due primarily to continued research and development
activities and acceleration of the development of its directed evolution
technology platform and analytical and high throughput screening capabilities.
Enchira expects that losses will fluctuate from quarter to quarter and that such
fluctuations may be substantial. As of March 31, 2001, the Company's accumulated
deficit was approximately $85 million.

   As of March 31, 2001, 314,400 aggregate shares of Series B Preferred Stock
have been converted to 508,255 shares of common stock. Dividends on the Series B
Preferred Stock are cumulative from the date of the initial closing, February
27, 1997, and are payable, at the Company's election, in cash or common stock of
the Company, or a combination thereof, at an annual rate equal to (i) $4.00 per
share to the extent the dividend is paid in cash and (ii) $4.50 per share to the
extent the dividend is paid in common stock. The Company has not declared a
dividend payment since November 1998, and since that date, has not paid
dividends on Series B Preferred Stock except on conversion of Series B Preferred
Stock to common stock. As of March 31, 2001, Enchira has paid common stock
dividends of 509,451 shares of common stock and cash dividends of $115,522 on
Series B Preferred Stock.

   For the three months ended March 31, 2001, the Company used $1,184,516 in
operating activities, incurred $42,212 in capital and patent expenditures and
used $112,886 in financing activities. At March 31, 2001, the Company had cash,
cash equivalents and short-term investments totaling $11,941,193, and working
capital of $11,007,169.

   Enchira expects to incur substantial additional research and development
expenses, including expenses associated with its directed evolution technology
platform and analytical and high throughput screening capabilities. Enchira is
subject to cost sharing arrangements under various collaborative agreements, as
discussed below. Enchira also expects its general and


                                       11
<PAGE>
administrative expenses to increase as it increases its business development
efforts and continues to pursue a satisfactory resolution to the dispute with
Maxygen.

   In August 2000, the Company entered into a collaboration agreement with
Genencor International Inc. ("Genencor") for research and development work on
improved industrial proteins. Under the agreement Genencor will provide $1
million of funding to the Company over a two-year period.

   In May 2000, the Company entered into a licensing agreement with Genencor
involving Enchira's proprietary gene shuffling technology for directed
evolution. Under the agreement, Genencor will use the Company's proprietary
RACHITT(TM) technology to develop gene-based products for the cleaninG,
textiles, grain processing, animal feed and food ingredients industries.
Genencor paid an initial licensing fee and an additional fee for an option to
expand the licensing field in June 2000. In the event that Genencor's rights to
the RACHITT(TM) technology are materially and adversely affected as a resuLt of
the arbitration with Maxygen, the payments received from Genencor are
refundable. Payments received under the licensing and collaboration agreements
during 2000 have been recorded as deferred revenue on the balance sheet.

   In August 1997, Enchira was awarded funding by the DOE for a $2.9 million, as
amended and extended to May 2001, program dedicated to the development of a BDS
application for gasoline. Through March 31, 2001 the Company has recognized
approximately $2.7 million in sponsored research revenue from the grant, of
which approximately $131,600 was receivable at March 31, 2001. This receivable
is included in prepaid expenses and other current assets on the balance sheet.

   The Company has experienced negative cash flow from operations since its
inception and has funded its activities to date primarily from equity financings
and sponsored research revenues. The Company will continue to require
substantial funds to continue its research and development activities and to
market, sell and commercialize its technology. The Company believes that its
available cash, investments and interest income will be adequate to fund its
operations through 2002, assuming no material change in its development strategy
and no additional material expenditures under the Maxygen proceeding.

   The Company's capital requirements will depend on many factors, including the
outcome of the Maxygen dispute; the problems, delays, expenses and complications
frequently encountered by companies developing and commercializing new
technologies; the progress of the Company's research and development activities;
timing of environmental regulations; the rate of technological advances;
determinations as to the commercial potential of the Company's technology under
development; the status of competitive technology; the establishment of
biocatalyst manufacturing capacity or third-party manufacturing arrangements;
the establishment of collaborative relationships; the success of the Company's
sales and marketing programs; the cost of filing, prosecuting and defending and
enforcing patents and intellectual property rights and of defending the Maxygen
claims; and other changes in economic, regulatory or competitive conditions in
the Company's planned business. Estimates about the adequacy of funding for the
Company's activities are based upon certain assumptions, including assumptions
that the research and development programs relating to the Company's technology
can be conducted at projected costs and that progress towards the
commercialization of its technology will be timely and successful. There can be
no assurance that changes in the Company's research and development plans,
acquisitions or other events will not result in accelerated or unexpected
expenditures.


                                       12
<PAGE>
   To satisfy its capital requirements, the Company may seek additional funding
through various alternatives that include: an equity financing, government
funding, and alliances with chemical companies and corporate partners. There can
be no assurance that any such funding will be available to the Company on
favorable terms or at all. If adequate funds are not available when needed, the
Company may be required to delay, scale back or eliminate some or all of its
research and product development programs. If the Company is successful in
obtaining additional financing, the terms of such financing may have the effect
of diluting or adversely affecting the holdings or the rights of the holders of
the Company's Common Stock.

   See Note 1 to the Notes to Financial Statements herein for a discussion of
recent developments in the Maxygen arbitration.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

   None

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

   On March 6, 2001, Enchira received an unfavorable ruling from the arbitrator
in its arbitration proceeding with Maxygen. His opinion found that Enchira
breached several provisions of the Development Agreement with Maxygen with
respect to Enchira's RACHITT(TM) and HTS technologies, but he dId not specify a
remedy for such breaches in his ruling. The arbitrator directed that the parties
attempt to arrive at an agreement for an appropriate remedy. If the parties
cannot reach an agreement, they will again appear before the arbitrator who will
issue a decision on damages or some other remedy. While Enchira will work with
Maxygen and the arbitrator to reach a conclusion to this proceeding, it also
intends to investigate alternative actions that will permit Enchira to continue
to develop the RACHITT(TM) technology that Enchira believes is its independent
technologY. Enchira has met with Maxygen and is currently awaiting Maxygen's
response to Enchira's proposals.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        a. Exhibits

           11.1  Statement regarding Computation of Per Share Earnings.

        Reports on Form 8-K

        On March 9, 2001, the Company filed a Current Report on Form 8-K
reporting an event under Item 5.


                                       13
<PAGE>
                                  SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


Enchira Biotechnology Corporation


By:   /s/ PETER P. POLICASTRO
      ------------------------------------------
      Peter P. Policastro
      Chief Executive Officer and President


Date: May 11, 2001

By:   /s/ PAUL G. BROWN III
      ------------------------------------------
      Paul G. Brown III
      Vice President, Finance and Administration and
      Chief Financial Officer

Date: May 11, 2001


                                       14