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                     U.S. 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 September 30, 1998

                                       or

  [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
                        For the transition period from to

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                        Commission file number: 333-34765


                           Ixion Biotechnology, Inc..
        (Exact Name of Small Business Issuer as Specified in Its Charter)


                                  -------------
      Delaware                                               59-3174033
State of incorporation)                         (I.R.S. Employer Identification
                                                              No.)

                          13709 Progress Blvd., Box 13
                                Alachua, FL 32615
                    (Address of principal executive offices)

                   Registrant's telephone number: 904-418-1428

                                  -------------

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  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
 

The  number of shares of the  registrant's  common  stock,  par value  $0.01 per
share, outstanding as of November 11, 1998 was 2,508,744.

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<PAGE>


                               Index to Form 10QSB


Part 1 - Financial Information                                              Page

Item 1.  Financial Statements (unaudited)

         Condensed Balance Sheet  September 30, 1998.........................2

         Condensed Statements of Operations - Three and Nine Months Ended
         September 30, 1998 and 1997 and for the period March 25, 1993
         (Date of Inception) through September 30, 1998.......................3

         Condensed Statements of Cash Flows - Nine Months Ended
         September 30, 1998 and 1997 and for the period March 25, 1993
         (Date of Inception) through September 30, 1998.......................5

         Notes to Condensed Financial Statements..............................6

Item 2.  Management's Discussion and Analysis of Financial Condition and
              Results of Operations or Plan of Operation......................8

Part II - Other Information

Item 4. Submission of Matters to a Vote of Security Holders
          13

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

Signatures...................................................................14

Exhibit Index................................................................15



<PAGE>

Part I.  Financial Information

Item 1.  Financial Statements

Balance Sheet
September 30, 1998
Unaudited

                                     Assets
Current  Assets:
   Cash and cash equivalents                                $           39,073
   Accounts receivable                                                   1,811
   Prepaid expenses                                                        140
   Other current assets                                                    500
                                                            -------------------
                 Total current assets                                   41,524

Property and Equipment, net                                             30,349

Other Assets:
    Patents and patents pending, net                                   280,466
    Other, net                                                           6,513
                                                            -------------------
                 Total other assets                                    286,979
                                                            -------------------
                  Total Assets                              $          358,852
                                                            ===================

                       Liabilities and Capital Deficiency

Current Liabilities:
    Accounts payable                                        $           61,721
    Bridge loans payable to officers                                   250,000
    Current portion of notes payable                                     8,975
    Accrued expenses                                                    48,501
    Interest payable                                                     1,797
                                                            -------------------
         Total current liabilities                                     370,994
                                                            -------------------

Long-Term Liabilities:
    Notes payable                                                      620,535
    Liability under research agreement                                  42,317
    Deferred rent, including accrued interest                           17,822
    Deferred fees and salaries, including accrued interest             666,385
                                                            -------------------
                   Total long-term liabilities                       1,347,059
                                                            -------------------
                     Total liabilities                               1,718,053
                                                            -------------------

Capital Deficiency:
    Common stock, $.01 par value; authorized 4,000,000, 
       issued and outstanding 2,508,144 shares at September 30          25,081
    Common stock warrants outstanding                                   35,494
    Additional paid-in capital                                       1,571,322
    Deficit accumulated during the development stage                (2,649,623)
    Less unearned compensation                                        (341,475)
                                                            -------------------
                  Total capital deficiency                          (1,359,201)
                                                            -------------------
Total Liabilities and Capital Deficiency                      $        358,852
                                                            ===================

See accompanying notes to condensed financial statements

<PAGE>

Statements of Operations
<TABLE>
<CAPTION>

                                                              Three Months Ended
                                                                         September 30,
                                                           __1998__             __1997__
                                                                      Unaudited
Revenues:
<S> ...................................             <C>                 <C>

   Income under research agreement ....             $              0    $               0
   Income from SBIR Grant .............                            0               53,650
   Interest income ....................                          152                1,744
   Other income .......................                          981                  954
         Total revenues ...............                        1,133               56,348

Expenses:
  Operating, general and administrative                      107,135              117,287
  Research and development ............                       80,771              110,154
  Interest ............................                       40,723               29,106
         Total expenses ...............                      228,629              256,547

Net Loss ..............................             $       (227,496)   $        (200,199)

Basic and Diluted Net Loss per Share ..             $         (0.09)    $          (0.08)

Weighted Average Common Shares ........                    2,505,361            2,464,644

</TABLE>





















See accompanying notes to condensed financial statements


<PAGE>
<TABLE>
<CAPTION>
                                                                                                  For the Period
                                                                                                     March 25,
Statements of Operations                                                                            1993 (Date
                                                                                                   of inception)
                                                             Nine Months Ended                        through
                                                                September 30,                      September 30,
                                                        __1998__             __1997__              ____1998____
                                                                  Unaudited                          Unaudited
Revenues:
<S> ...................................             <C>                 <C>                       <C>           
   Income under research agreement                  $            0      $       135,922           $        275,001
   Income from SBIR Grant                                        0               71,650                     91,650
   Interest income                                             367                9,223                     23,334
   Other income                                              3,257                2,752                     17,805
         Total revenues                                      3,624              219,547                    407,790

Expenses:
  Operating, general and administrative                    307,097              290,271                  1,405,038
  Research and development                                 269,474              432,378                  1,355,744
  Interest                                                  97,317               83,858                    296,601
        Total expenses                                     673,888              806,507                  3,057,413

Net Loss                                             $     (670,264)    $      (586,960)          $     (2,649,623)

Basic and Diluted Net Loss per Share                 $      (0.27)      $       (0.24)

Weighted Average Common Shares                           2,482,687            2,456,412



</TABLE>



















See accompanying notes to condensed financial statements

<PAGE>

Statements of Cash Flows
                                                                         
<TABLE>                                                                       
<CAPTION> 
                                                                                                 For the period
                                                                                                    March 25,
                                                                                                    1993 (Date
                                                                                                   of inception)
                                                             Nine Months Ended                        through
                                                                September 30,                      September 30,
                                                        __1998__             __1997__              ____1998____
                                                                  Unaudited                          Unaudited
Cash Flows from Operating Activities:
<S>                                                  <C>                  <C>                     <C> 
    Net loss                                         $    (670,264)       $     (586,960)         $  (2,649,623)
    Adjustments to reconcile net loss to 
        net cash used in operating activities:
         Depreciation                                        8,412                 8,542                 32,812
         Amortization                                        2,367                 2,235                  6,211
         Amortization of debt discount                      42,876                42,875                119,100
         Stock warrants issued under license 
         agreement                                             -                     -                   20,465
         Stock options/warrants issued for 
           consulting services                                 -                     -                   30,000
         Stock compensation                                 68,274               121,640                325,087
         Decrease (increase) in prepaid expenses 
           and other current assets                          1,262                 7,666                   (465)
         Decrease (increase) in accounts receivable            (41)                3,637                 (1,811)
         Increase (decrease) in deferred revenue               -                (100,000)                   -
         Increase (decrease) in liability under
           research agreement                                  -                  42,317                 42,317
         Increase (decrease) in accounts payable 
           and accrued expenses                             15,700                12,322                110,893
         Increase in deferred fees and salaries            189,969                22,828                639,833
         Increase in deferred rent                          10,445                   -                   16,931
         Increase in interest payable                          -                   1,593                 33,198
                  Net cash used in operating 
                    activities                            (331,000)             (421,305)            (1,275,052)

Cash Flows from Investing Activities:
     Purchase of property and equipment                     (2,302)               (5,758)               (34,199)
     Organization Costs                                        -                     -                     (436)
     Payments for patents and patents pending              (62,154)              (50,450)              (271,924)
                  Net cash used in investing 
                     activities                            (64,456)              (56,208)              (306,559)

Cash Flows from Financing Activities:
     Bridge loans payable to officers                      175,000                   -                  280,307
     Proceeds from issuance of convertible 
         notes payable                                         -                     -                  787,270
     Proceeds from issuance of common stock                275,500                   -                  698,200
     Principal reductions in notes payable                  (6,482)               (9,874)               (17,452)
     Deferred registration costs  IPO                          -                 (42,049)                   -
     Payment of deferred registration costs - IPO          (53,932)                  -                 (116,561)
     Decrease (increase) in note receivable from 
          shareholder                                          -                   6,000                    -
     Payment of loan costs                                     -                     -                  (11,080)
                  Net cash provided by (used in)
                        financing activities               390,086               (45,923)             1,620,684 
Net Increase (Decrease) In Cash and Cash Equivalents        (5,370)             (523,436)                39,073

Cash and Cash Equivalents at Beginning of Period            44,443               611,539                    -        
Cash and Cash Equivalents at End of Period           $      39,073        $       88,103          $      39,073
</TABLE>

See accompanying notes to condensed financial statements

<PAGE>

Notes to Condensed Financial Statements
Nine Month Period Ended September 30, 1998

1.   Basis Of Presentation:

The accompanying unaudited condensed financial statements for the three and nine
months  ended  September  30, 1998 and 1997,  and for the period  March 25, 1993
(date of inception)  through September 30, 1998 have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly,  they do not include all the information and footnotes  required by
generally  accepted  accounting  principles for complete  financial  statements.
These  interim  financial  statements  should  be read in  conjunction  with the
December  31,  1997  financial  statements  and  related  notes  included in the
Company's  Annual Report on Form 10-KSB for the year ended December 31, 1997. In
the opinion of the  Company,  the  accompanying  unaudited  condensed  financial
statements  contain  all  adjustments,   consisting  only  of  normal  recurring
accruals,  necessary to present fairly the Company's financial position, results
of  operations,  and cash  flows  for the  periods  presented.  The  results  of
operations for the interim period ended  September 30, 1998 are not  necessarily
indicative of the results to be expected for the full year.

2.   Income Taxes:

The  components  of the  Company's net deferred tax asset and the tax effects of
the primary  temporary  differences  giving rise to the  Company's  deferred tax
asset are as follows as of September 30, 1998:
                                                

            Deferred compensation .........   $   263,000
            Net operating loss carryforward       783,000
            Deferred tax asset ............     1,046,000
            Valuation allowance ...........   $(1,046,000)

            Net deferred tax asset ........   $    __0__

3.    Stockholder's Equity

In December,  1997, the Company  commenced the public  offering of up to 400,000
Units of  newly-issued  securities  for an  aggregate of  $4,000,000.  Each Unit
consists of one share of Common  Stock,  $0.01 par value,  and a .25  Charitable
Benefit Warrants.  Each whole Charitable  Benefit Warrant entitles the holder to
purchase  one share of the  Common  Stock at a price of $20.00  per  share.  The
Company  requires  the  proceeds  of the  public  offering  to meet its  planned
operating  requirements  through  December  31,  1998.  The Company had received
proceeds of $285,500  through  September  30, 1998.  The offering  will continue
until  all Units  have  been sold or until  December  10,  1998,  unless  sooner
terminated  or  extended.  If  the  proceeds  from  the  offering  prove  to  be
insufficient,  then the Company  would be required  to obtain  additional  funds
through equity or debt financing,  strategic  alliances with corporate partners,
or through other sources.

There can be no assurance  that the Company will be  successful in obtaining the
required  financing.  Under  current  circumstances,  the  Company's  ability to
continue as a going concern depends upon obtaining additional financing.

Offering costs of $116,561 have been offset against the proceeds of the offering
through September 30, 1998.

In February of 1998, 8,400 shares of stock  previously  issued to an employee in
exchange  for  services to be  rendered  were  returned to the Company  when the
employee  resigned.  This resulted in a reversal of paid-in capital and unearned
compensation, but had no net effect on capital deficiency.

On July 1, 1998, the Company granted an additional  17,000 shares of stock under
the Board  Retainer Plan.  Compensation  expense  recognized in connection  with
these  awards for the nine  months  ended  September  30,  1998 was  $18,500 and
unearned compensation of $151,500 remains to be recognized.

4.    Stock Options

On July 1, 1998,  the  Company  granted  ten-year  options  under the 1994 Stock
Option Plan to purchase  62,000  shares of Common Stock at an exercise  price of
$10.00 per share.  Stock options are exercisable only if vested.  12,500 of such
options,  granted to members of the  Scientific  Advisory  Board,  vest over one
year; the remainder vest over five years. In addition, as of September 30, 1998,
5,500 options previously granted to terminated employees expired unexercised.

5.    Related Party Transactions

In 1997,  the Company  engaged the services of a printer in connection  with its
public offering.  The printer is partially-owned by the Companys President,  who
is also CEO of the printer.  Through September 30, 1998, the printer has charged
$13,033 in connection with its services.

In addition,  the Chairman and Chief Executive  Officer and the President of the
Company  have agreed to extend the Company not less than  $150,000  and not less
than $155,000,  respectively, in bridge loans. Interest on the bridge loans from
officers is at 8% but can be reset annually, at the election of either party, to
the prime rate in effect on January 1 of any given  year,  plus 3%.  Under these
agreements,   the  Company  borrowed  a  total  of  $250,000,  which  was  still
outstanding at September 30, 1998.

6.  Subsequent  Events

Through  November  11, 1998,  the Company has  received  proceeds of $291,500 by
selling  29,150 units of Common  Stock and  Charitable  Benefit  Warrants in its
initial public offering at $10.00 per unit

On  October  8,  1998,  upon the  expiration  of its lease at the  Biotechnology
Development  Institute,  the Company  relocated to comparable  rental facilities
across the street from its former location.  The new lease will be for increased
space and rent and for a three-year term with two one-year renewal options.  The
estimated annual payments under the new lease (including  amortization of tenant
improvements and an emergency generator) will be approximately  $84,000 per year
(not  including  utilities)  compared  to the  current  annual  rent  (including
utilities) of $43,200.  The Company will continue to have access,  as a graduate
affiliate, to the Biotechnology  Development Institute's specialized facilities,
centralized  equipment,  and core  laboratories.  Relocation will not materially
affect the Company's research and development  operations;  however, the Company
has  incurred  relocation  expenses  and will be  obliged to  purchase  or lease
laboratory and office furnishings and equipment.  The Company estimates that the
principal amount of such lease or purchase is approximately $100,000.





<PAGE>

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

     The following  discussion and analysis  should be read in conjunction  with
the  Condensed  Financial  Statements  and the related  Notes  thereto  included
elsewhere in this report. This report contains  forward-looking  statements that
involve  risks and  uncertainties.  The  Company's  actual  results  may  differ
significantly  from the results  discussed  in the  forward-looking  statements.
These and  additional  risk factors are  identified  in our annual report to the
Securities  and  Exchange  Commission  filed on forms  10-KSB  and in other  SEC
filings.


Overview

     The Company is a development stage,  biotechnology  company. The Company is
considered to be in the development  stage because it is devoting  substantially
all of its  efforts to  establishing  its  business  and its  planned  principal
operations have not commenced.

     Since its  inception  in March of 1993,  the  Company's  efforts  have been
principally devoted to research and development, securing patent protection, and
raising  capital.  The Company has not received  any  revenues  from the sale of
products.  In June 1998, the Company  reached an agreement in principle with the
University of Florida Diagnostic Referral Laboratories (the "DRL"),  pursuant to
which the DRL is offering the Company's initial product, a molecular  diagnostic
test, the XEntrIx TM Oxalobacter  formigenes Monitor, to physicians.  Under this
agreement,  the Company may generate  revenue  during 1998;  however it does not
expect any of its other product  candidates to be commercially  available for at
least the next several  years.  From inception  through  September 30, 1998, the
Company  has  sustained  cumulative  losses of  $2,649,623.  These  losses  have
resulted  primarily from  expenditures  incurred in connection  with general and
administrative  activities,  research and  development,  patent  preparation and
prosecution, and interest.

     The  Company  expects  to  continue  to  incur  substantial   research  and
development  costs in the future resulting from ongoing research and development
programs,  manufacturing  of products for use in clinical trials and preclinical
and clinical  testing of the Company's  products.  The Company also expects that
general  and  administrative  costs,  including  patent  and  regulatory  costs,
necessary to support clinical trials,  research and development,  manufacturing,
and the  creation of a marketing  and sales  organization,  if  warranted,  will
increase  in  the  future,  assuming  the  Company  can  finance  the  increased
requirements.  Accordingly,  the Company expects to incur  increasing  operating
losses for the  foreseeable  future.  There can be no assurance that the Company
will ever achieve profitable operations.

     The Company has only a limited  operating  history upon which an evaluation
of the  Company  and  its  prospects  can be  based.  The  risks,  expenses  and
difficulties  encountered by companies at an early stage of development  must be
considered when evaluating the Company's prospects.  To address these risks, the
Company must, among other things,  successfully  develop and  commercialize  its
product  candidates,   secure  all  necessary  proprietary  rights,  respond  to
competitive developments, and continue to attract, retain and motivate qualified
persons.  There can be no  assurance  that the  Company  will be  successful  in
addressing these risks.

     The  operating  expenses  of the Company  will  depend on several  factors,
including  the level of research  and  development  expenses  and its success in
raising capital.  Research and development  expenses will depend on the progress
and results of the  Company's  product  development  efforts,  which the Company
cannot  predict.  Management  may in some cases be able to control the timing of
development expenses in part by accelerating or decelerating preclinical testing
and  clinical  trial  activities.  As a result  of these  factors,  the  Company
believes that  period-to-period  comparisons  in the future are not  necessarily
meaningful and should not be relied upon as an indication of future performance.
Due to all of the foregoing factors, it is possible that the Company's operating
results  will be  below  the  expectations  of  market  analysts,  if  any,  and
investors.  In such event,  the prevailing  market price,  if any, of the Common
Stock would likely be materially adversely affected.





Results of Operations

Three Months Ended September 30, 1998 and 1997

     Income from a Small Business  Innovation  Research ("SBIR") grant decreased
from  $53,650 in the third  quarter of 1997 to $0 in the third  quarter of 1998.
The SBIR grant expired at the end of 1997.  Interest  income  decreased 91% from
$1,744 in the third quarter of 1997 to $152 in the third  quarter of 1998.  This
decrease was  attributable to the expenditure of the proceeds from the 1996 sale
of Unsecured  Convertible Notes which were invested during 1997. Interest income
relating to the proceeds of the Unsecured Convertible Notes ceased in 1998.

     Operating, general and administrative expenses decreased 8.7% from $117,287
in the third quarter of 1997 to $107,135 in the equivalent period of 1998. These
decreased expenses reflect decreased personnel,  offset by increased advertising
and promotion expense, and increased legal expenses in the third quarter of 1998
compared  to the third  quarter of 1997.  The  Company  expects  its general and
administrative  expense to slightly  increase  during the remainder of 1998 as a
result of increased  amortization of capitalized patent costs as new patents are
issued,  continued  amortization of capitalized private placement expenses,  and
increased  legal  and  accounting  expenses  resulting  from  filings  with  the
Securities and Exchange Commission under the Securities Exchange Act of 1934.

     Research and development  expenditures consist primarily of payroll-related
expenses of research and  development  personnel,  laboratory  supplies,  animal
supplies,  laboratory rent,  depreciation on laboratory  equipment,  development
activities,  payments for sponsored  research,  and payments to  scientific  and
regulatory  consultants.  Research and development expenses decreased 26.7% from
$110,154 in the third  quarter of 1997 to $80,771 in the third  quarter of 1998,
mainly due to a reduction of one technician (and  accompanying  reduction in lab
supplies),  the  termination  of the  Company's  consulting  contract  with  its
regulatory  advisor,  and a  significant  reduction in the  compensation  of the
Company's  scientific  advisors  resulting from a decline in stock  compensation
expense. The Company anticipates that its research and development expenses will
increase slightly during the remainder of 1998.

     Interest expense  increased 39.9% from $29,106 in the third quarter of 1997
to $40,723 in the third  quarter of 1998 due  primarily  to  interest  on bridge
loans from  officers,  and the  compounding  of interest  on  deferred  fees and
salaries,  including  deferred  interest,  payable to related parties.  Interest
expense  will  continue to increase  during 1998,  as a result of the  continued
compounding  of interest on deferred fees and salaries  accounts and  additional
bridge loans and other working capital loans the Company expects to receive.

Nine Months Ended September 30, 1998 and 1997

     The Company's  revenues under a research  agreement with Genetic  Institute
("GI")  decreased from $135,922 in the nine months ended September 30 of 1997 to
$0 for that period in 1998..  Revenues  under the Company's  SBIR grant declined
from  $71,650  in the first nine  months of 1997 to $0 for that  period in 1998.
Revenues under the GI agreement and the SBIR ceased at the end of 1997.

     Interest income  decreased 96% from $9,223 in the first nine months of 1997
to $367 in the first nine months of 1998. This decrease was  attributable to the
expenditure of the proceeds from the sale of Unsecured  Convertible Notes in the
last quarter of 1996,  which  proceeds had been invested  during 1997.  Interest
income relating to the investment of proceeds of the Unsecured Convertible Notes
ceased in the first quarter of 1998.

     Operating, general and administrative expenses increased 1.4% from $302,771
in the first nine months of 1997 to $307,097 in the  equivalent  period of 1998.
These increased expenses reflect increased legal expenses, increased advertising
and promotion,  and increased  legal and accounting  fees relating to Securities
and Exchange Commission filing and reporting, offset to some degree by decreased
directors' fees,  compared to the first nine months of 1997. The Company expects
its general and  administrative  expense to modestly  increase  during 1998 as a
result of increased  amortization of capitalized patent costs as new patents are
issued, and increased legal and accounting  expenses resulting from filings with
the Securities  and Exchange  Commission  under the  Securities  Exchange Act of
1934.

     Research and development  expenditures consist primarily of payroll-related
expenses of research and  development  personnel,  laboratory  supplies,  animal
supplies,  laboratory rent,  depreciation on laboratory  equipment,  development
activities,  payments for sponsored  research,  and payments to  scientific  and
regulatory  consultants.  Research and development  expenses  decreased 35% from
$419,878  in the first nine  months of 1997 to $269,474 in the first nine months
of  1998,  primarily  as a result  of a  temporary  reduction  in  research  and
development  personnel  during  the  first  quarter  of  1998,  and  concomitant
reduction in lab supplies,  together with a reduction of one technician for most
of  1998,  the  termination  of  the  Company's  consulting  contract  with  its
regulatory  advisor,  and a  significant  reduction in the  compensation  of the
Company's  scientific  advisors  resulting from a decline in stock  compensation
expense.

     Interest  expense  increased  16% from  $83,858 in the first nine months of
1997 to $97,317 in the first nine  months of 1998 due  primarily  to interest on
bridge loans from officers, and the compounding of interest on deferred fees and
salaries,  including  deferred  interest,  payable to related parties.  Interest
expense  will  continue to increase  during 1998,  as a result of the  continued
compounding  of interest on deferred fees and salaries  accounts and  additional
bridge loans from officers that the Company expects to receive.


Liquidity and Capital Resources

     In December,  1997,  the Company  commenced the public  offering of 400,000
Units of newly issued  securities,  for an aggregate  of  $4,000,000.  Each Unit
consists  of one share of Common  Stock,  $0.01 par  value,  and .25  Charitable
Benefit Warrants.  Each whole Charitable  Benefit Warrant entitles the holder to
purchase one share of Common Stock at a price of $20.00 per share.  The Offering
is being  made in ten  states,  primarily  over the  Internet,  directly  by the
Company,  except in Florida where sales must be made through a broker.  There is
no minimum  number of Units to be sold in the Offering,  and all funds  received
will go  immediately  to the Company.  The offering will be terminated  upon the
earliest of: the sale of all Units, December 10, 1998 (unless extended),  or the
date on which the Company decides to close the offering. At November 11, 1998, a
total of 29,150 Units ($291,500) had been sold pursuant to the offering.

     During 1997, the Company's development  activities were funded primarily by
a private placement transaction in which it sold Unsecured Convertible Notes for
an aggregate  gross  consideration  of $787,270.  In addition,  the Chairman and
Chief  Executive  Officer and the  President  of the Company  have  entered into
agreements   to  extend  the  Company  up  to  $150,000   and  up  to  $140,000,
respectively,  in bridge loans. Interest on the bridge loans from officers is at
8% but can be reset annually, at the election of either party, to the prime rate
in effect on January 1 of any given year, plus 3%. Under these  agreements,  the
Company borrowed a total of $250,000,  which was still  outstanding at September
30, 1998. The Company  expects to borrow and repay under these  facilities  from
time to time to meet working  capital needs.  The Company does not have any bank
financing arrangements.  The Company's long-term indebtedness consists primarily
of deferred fees and salaries  payable to related  individuals and the Unsecured
Convertible Notes.

     At  September  30,  1998,   the  Company  had  $39,073  in  cash  and  cash
equivalents.  Until required for operations,  the Company's  policy is to invest
any cash reserves in bank deposits, money market funds, certificates of deposit,
commercial  paper,  corporate  notes,  U.S.  government  instruments  and  other
investment-grade quality instruments.

     On January 1, 1996, the Company purchased  laboratory equipment pursuant to
a chattel mortgage  agreement in the amount of $32,309.  The agreement calls for
monthly  payments of $897,  commencing  August 1, 1996.  At September  30, 1998,
$8,975 in principal remains outstanding under this agreement..

     In connection with the GI sponsored  research  agreement referred to above,
certain  patent-related  expenses were paid by the Company and reimbursed by GI.
The Company is  contractually  obligated to repay these  reimbursed  expenses in
installments  over a 36 month period upon a determination  by GI not to exercise
an option contained in the sponsored research  agreement.  Reimbursement has not
commenced,  and the Company has accrued $42,317 as a long term liability pending
final action under the agreement.

     Through September 30, 1998, the Company had paid offering-related  expenses
of $116,561 which have been applied against the proceeds of the public offering.

     On October 8, 1998,  upon the expiration of its lease at the  Biotechnology
Development  Institute,  the Company  relocated to comparable  rental facilities
across the street from its former location.  The new lease will be for increased
space and rent and for a three-year term with two one-year renewal options.  The
estimated annual payments under the new lease (including  amortization of tenant
improvements and an emergency generator) will be approximately  $84,000 per year
(not  including  utilities)  compared  to the  current  annual  rent  (including
utilities) of $43,200.  The Company will continue to have access,  as a graduate
affiliate, to the Biotechnology  Development Institute's specialized facilities,
centralized  equipment,  and core  laboratories.  Relocation will not materially
affect the Company's research and development  operations;  however, the Company
has  incurred  relocation  expenses  and will be  obliged to  purchase  or lease
laboratory and office furnishings and equipment.  The Company estimates that the
principal amount of such lease or purchase is approximately $100,000.

     The Company has  incurred  negative  cash flows from  operations  since its
inception,  and has  expended  and  expects to continue to expend in the future,
substantial funds to complete its planned product development efforts,  commence
clinical  trials,  and diversify its  technology.  The Company's  future capital
requirements  and the  adequacy  of  available  funds  will  depend on  numerous
factors,  including  the  success  of  the  continuing  public  offering  of its
securities,  the successful  commercialization  of the XEntrIx (TM)  Oxalobacter
formigenes  Monitor (the  Company's new  diagnostic  test) and  IxC1-62/47  (the
Company's  lead  therapeutic  compound),  progress  in its  product  development
efforts,  the  magnitude and scope of such  efforts,  progress with  preclinical
studies and clinical  trials,  the cost of contract  manufacturing  and research
organizations,  cost of filing,  prosecuting,  defending  and  enforcing  patent
claims and other  intellectual  property  rights,  competing  technological  and
market  developments,  and  the  development  of  strategic  alliances  for  the
development  and  marketing  of its  products.  The Company  requires all of the
proceeds of the public  offering  commenced in December 1997 to meet its planned
operating  requirements through December 31, 1998. Shortfalls in the proceeds of
the public offering have forced a curtailment in the Company's planned operating
requirements  to adjust to reduced  resources.  In the event the Company's plans
change or its  assumptions  change or prove to be  inaccurate or the proceeds of
the offering continue to be insufficient to fund operations at the planned level
(due to further  unanticipated  expenses,  delays,  problems or otherwise),  the
Company  will be  required to seek  additional  financing.  The Company  will be
required  to  obtain  additional  funds  in any  event  through  equity  or debt
financing,  strategic  alliances with corporate  partners and others, or through
other  sources in order to bring its  products  through  regulatory  approval to
commercialization.  The terms and prices of any equity or debt financings may be
significantly  more  favorable to new investors  than those of the units sold in
the offering resulting in significant dilution to current investors. The Company
does not have any material committed sources of additional financing,  and there
can be no assurance that additional funding, if necessary,  will be available on
acceptable  terms,  if at all. If adequate funds are not available,  the Company
may be required to further delay,  scale-back,  or eliminate  certain aspects of
its   operations   or  attempt  to  obtain  funds  through   arrangements   with
collaborative  partners or others  that may  require  the Company to  relinquish
rights  to  certain  of  its  technologies,  product  candidates,  products,  or
potential markets. If adequate funds are not available,  the Company's business,
financial condition,  and results of operations will be materially and adversely
affected.


Product Research and Development Plan

          The Company's  plan of operation for 1998-1999  consists  primarily of
     research and development and related activities including:

C    further  development  of the  Company's  IPSC  research  programs  aimed at
     proprietary  populations of  functioning  islets for  transplantation  into
     diabetic patients;

C    continuing  the  funding  of the  ongoing  discovery  program  in which the
     Company  intends  to  identify  and   characterize   novel  growth  factors
     associated  with the IPSCs,  to discover  factors  important  in islet cell
     differentiation  and possible  regulation  of diabetes and to identify stem
     cell  markers to which the Company  hopes to produce  antibodies  useful in
     stem cell isolation;

C    further preclinical  development of a quantitative version of the Company's
     molecular diagnostic, the XEntrIx (TM) Oxalobacter formigenes Monitor,

C    further   development  of  IxC1-62/47,   including   formulation,   product
     characterization,  method development, testing (including toxicology), cell
     line  characterization,  process  development,  clinical lot manufacturing,
     stability,  research  protocols,  and preclinical studies for the Company's
     proposed products, primarily its oxalate-related products;

C    continuing the prosecution and filing of patent applications; and

C    hiring additional employees.

     The actual research and  development and related  activities of the Company
may vary  significantly  from  current  plans  depending  on  numerous  factors,
including  changes in the costs of such activities from current  estimates,  the
results of the  Company's  research  and  development  programs,  the results of
clinical studies, the timing of regulatory submissions,  technological advances,
determinations as to commercial  potential,  the status of competitive products,
and the  Company's  success in raising  capital.  The focus and direction of the
Company's   operations  will  also  be  dependent  upon  the   establishment  of
collaborative arrangements with other companies, and other factors.
 
     There can be no assurance  that the Company  will be able to  commercialize
its  technologies  or that  profitability  will ever be  achieved.  The  Company
expects that its operating results will fluctuate  significantly from quarter to
quarter in the future and will depend on a number of factors,  many of which are
outside the Company's control.




<PAGE>

Part II - Other Information

Item 4.  Submission of matters to a Vote of Security Holders.

         None

Item 6.  Exhibits and Reports on Form 8-K
    (a)     Exhibits
ExhibitDescription .......................................   Page

 (2)   Plan of Acquisition, Reorganization, Arrangement,
       Liquidation or Succession .........................   None

 (4)   Instruments defining the Rights of Security Holders   None

(10)   Material Contracts ................................   None

(11)   Statement re: Computation of Per Share Earnings ...   None

(15)   Letter re: Unaudited Interim Financial Information    None

(18)   Letter re: Change in Accounting Principles ........   None

(19)   Report Furnished to Security Holders ..............   None

(22)   Published Report re: Matters Submitted to Vote of
       Security Holders ..................................   None

(23)   Consents of Experts and Counsel ...................   None

(24)   Power of Attorney .................................   None

(27)   Financial Data Schedule

(99)   Additional Exhibits ...............................   None
   (b) Reports on Form 8-K ...............................   None

<PAGE>

                                   Signatures

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                            Ixion Biotechnology, Inc.


Dated: November 11, 1998          By: /s/ Weaver H. Gaines
                                       Weaver H. Gaines
                                       Chairman and Chief  Executive Officer

Dated: November 11, 1998          By: /s/ David C. Peck
                                       David C. Peck
                                       President and Chief Financial Officer
                                       (Principal Financial Officer)

Dated: November 11, 1998           By /s/ Kimberly A. Ramsey
                                       Kimberly A. Ramsey
                                       Controller (Principal Accounting Officer)