================================================================================

                     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 June 30, 2002


                                       or

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

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

                        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: 386-418-1428

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

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 July 31, 2001 was 7,218,177.

================================================================================



<PAGE>



                            Ixion Biotechnology, Inc
                               Index to Form 10QSB
<table>
                 <S>                                                                                           <C>

Part 1 - Financial Information                                                                                 Page
                                                                                                               ----

Item 1.  Financial Statements (unaudited)

         Condensed Balance Sheet - June 30, 2002................................................................2

         Condensed Statements of Operations - Three Months and Six Months Ended
         June 30, 2002 and 2001 ................................................................................3

         Condensed Statements of Cash Flows - Six Months Ended

         June 30, 2002 and 2001.................................................................................5

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

Item 2.  Management's Discussion and Analysis or Plan of Operations............................................10

Part II - Other Information

Item 6.  Exhibits and Reports on Form 8-K......................................................................18

Signatures.....................................................................................................19

Exhibit Index .................................................................................................19



</table>
                                              Page 1
<PAGE>



Part I.  Financial Information
Item 1.  Financial Statements


Ixion Biotechnology, Inc.
Condensed Balance Sheet

June 30, 2002
Unaudited
<table>
              <S>                                                                     <C>

                                     Assets

Current  Assets:
   Cash and cash equivalents                                                     $      354,484
   Short-term investments                                                              1,131,254
   Accounts receivable                                                                   78,376
   Prepaid expenses                                                                     119,164
   Other current assets                                                                   2,750
                                                                                ----------------
                        Total current assets                                          1,686,028
                                                                                ----------------

Property and Equipment, net                                                             392,344
                                                                                ----------------

Other Assets:
    Patents and patents pending, net                                                    498,508
    .....
                                                                                ----------------
                       Total Assets                                              $    2,576,880
                                                                                ================

                      Liabilities and Stockholders' Equity

Current Liabilities:
    Accounts payable                                                             $      242,070
    Current portion of note payable                                                       6,000
    Accrued expenses                                                                    172,730
    Deferred revenue                                                                     59,862
                                                                                ---------------
         Total current liabilities                                                      480,662
                                                                                ---------------

Long-Term Liabilities:
    Liability under research agreement                                                   42,317
     Note Payable                                                                        22,742
    Deferred rent, including accrued interest                                            30,296
                                                                                ---------------
                   Total long-term liabilities                                           95,355
                                                                                ---------------
                     Total liabilities                                                  576,017
                                                                                ---------------

Commitments (Note 5)

Stockholders' Equity:
    Common stock, $.01 par value; authorized 20,000,000, issued and
       outstanding 7,218,177 shares                                                      72,182
    Additional paid-in capital                                                       11,931,041
    Accumulated deficit                                                              (9,695,894)
    Less unearned compensation                                                         (306,466)
                                                                                ---------------
                  Total stockholders' equity                                          2,000,863
                                                                                ---------------

Total Liabilities and Stockholders' Equity                                       $    2,576,880
                                                                                ===============
</table>

See accompanying notes to condensed financial statements

                                        Page 2
<PAGE>



Ixion Biotechnology, Inc.
Condensed Statements of Operations
Unaudited
<table>
                <S>                                             <C>                   <C>

..........                                                     Three Months Ended
..........                                                              June 30,
..........                                                     __2002__               __2001__
                                                                ----                   ----
..........
Revenues:
   Income under research agreement                              17,000                             -
   Income from research grants                       $         342,391                  $       50,979
                                                     -----------------                  --------------
         Total revenues                                        359,391                          50,979
                                                     -----------------                  --------------

Expenses:
  General and administrative                                   230,241                         215,591
  Research and development                                     727,159                         604,248
                                                     -----------------                  --------------
                 Total operating expenses                      957,400                         819,839
                                                     -----------------                  --------------

Other Income (Expense):
  Interest Expense                                                (714)                        (19,865)
  Interest Income                                                9,607                          15,530
                                                     ------------------                 ---------------
                   Total other income (expense)                  8,893                          (4,335)
                                                     ------------------                 ---------------

                       Net Loss.                            $ (589,116)                     $ (773,195)
                                                     ==================                 ===============

Basic and Diluted Net Loss per Share                 $           (0.08)                 $        (0.11)
                                                      ==================                ===============

Weighted Average Common Shares                               7,190,926                       6,861,991
                                                      ==================                ===============
</table>

See accompanying notes to condensed financial statements

                                           Page 3
<PAGE>


..........
Ixion Biotechnology, Inc.
Condensed Statements of Operations
Unaudited
<table>
          <S>                                              <C>                           <C>
..........
..........                                                     Six Months Ended
..........                                                              June 30,
    .....                                                  2002                            2001
                                                         --------                       ---------
Revenues:
   Income under research agreement                   $         17,000                $        3,913
   Income from research grants                                395,751                       187,772
                                                     ----------------                 -------------
..........
            Total revenues                                    412,751                       191,685
                                                     ----------------                 -------------

Expenses:
  General and administrative                                  440,245                       423,505
  Research and development                                  1,235,257                     1,151,481
                                                      ---------------                 -------------
..........
                 Total operating expenses                   1,675,502                     1,574,986
                                                      ---------------                 -------------

Other Income (Expense):
  Interest expense                                               (897)                      (39,832)
  Interest income                                              21,988                        42,517
                                                     -----------------               --------------
                Total other income (expense)                   21,091                         2,685
                                                     -----------------              ---------------

Net Loss.                                              $   (1,241,660)               $   (1,380,616)
                                                     =================               ===============

Basic and Diluted Net Loss per Share                   $        (0.17)               $        (0.20)
                                                     =================               ===============

Weighted Average Common Shares                              7,188,186                     6,861,890
                                                     =================               ===============


</table>

See accompanying notes to condensed financial statements

                                                 Page 4

<PAGE>

Ixion Biotechnology, Inc.                                      I
Condensed Statements of Cash Flows
Unaudited
<table>
                 <S>                                                 <C>                  <C>
..........
..........                                                                        Six Months
..........                                                                        Ended June 30,
                                                                                __2002__             __2001__
..........
Cash Flows from Operating Activities
    Net loss                                                                    $  (1,241,660)       $  (1,380,616)

 Adjustments to reconcile net loss to net cash used in
        operating activities:
..........Depreciation                                                                  50,017               44,550
                Amortization                                                            3,441                6,466

     .........Amortization of debt discount                                               -                 28,581

     .........Stock options & warrants issued for consulting services                   1,260                2,520

     .........Stock compensation expense                                              103,386               89,233
..........Decrease (increase) in prepaid expenses and
..........       other current assets                                                  (58,909)              13,140
..........Increase in accounts receivable
      ...       and other assets                                                       (7,178)             (36,311)
              Increase (decrease) in deferred revenue                                  59,862               (1,281)

..........Increase (decrease) in accounts payable and
..........       accrued expenses                                                       (3,100)              208,429

..........Increase in deferred rent                                                      1,576                 1,407
..........Increase in interest payable                                                     -                    (875)
                                                                                -----------------        -----------
..........         Net cash used in operating activities                             (1,091,305)          (1,024,757)
                                                                                -----------------        -----------

Cash Flows from Investing Activities:
     Purchase of property and equipment                                                (95,516)             (72,101)

     Payments for patents and patents pending                                          (48,747)             (10,764)
      Redemption of short-term investments                                             600,000                  -
                                                                                ----------------        ------------
..........         Net cash provided by (used in) investing activities                  455,737              (82,865)
                                                                                ----------------        ------------

Cash Flows from Financing Activities:
     Proceeds from note payable issuance                                                30,000                  -
     Repayment of note payable principal                                                (1,258)                 -
     Proceeds from issuance of common stock                                                -                 (4,680)
                                                                                ----------------        -------------
                           Net cash provided by (used in)
..........               financing activities                                            28,742               (4,680)
                                                                                ----------------        -------------

Net Decrease In Cash and Cash Equivalents                                             (606,826)          (1,112,302)

Cash and Cash Equivalents at Beginning of Period                                       961,310            2,160,278
                                                                                ----------------        -------------
Cash Equivalents Cash at End of Period                                            $    354,484           $1,047,976
                                                                                ================         =============
</table>

See accompanying notes to condensed financial statements

                                            Page 5
<PAGE>


Notes to Condensed Financial Statements

Three and Six Month Period Ended June 30, 2002 and 2001

1.       Basis Of Presentation:

          The  accompanying  unaudited  condensed  financial  statements for the
          three and six months ended June 30, 2002 and 2001  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,  2001  financial  statements  and  related  notes  included in the
          Company's Annual Report on Form 10-KSB for the year ended December 31,
          2001.  In the  opinion  of the  Company,  the  accompanying  unaudited
          condensed  financial  statements  contain all adjustments,  consisting
          only of normal recurring  accruals,  necessary for a fair presentation
          of the Company's financial position,  results of operations,  and cash
          flows for the periods  presented.  The results of  operations  for the
          interim period ended June 30, 2002 are not  necessarily  indicative of
          the results to be expected for the full year.

         The  accompanying  financial  statements  have been prepared on a basis
         which  assumes  that the Company will  continue as a going  concern and
         which  contemplates  the realization of assets and the  satisfaction of
         liabilities and commitments in the normal course of business.

         The Company  incurred a net loss of $1,241,660 for the six months ended
         June 30, 2002, and as of June 30, 2002, had a total accumulated deficit
         of  $9,695,894.  The  Company  had  deficit  cash  from  operations  of
         $1,091,305 for the six months ended June 30, 2002.

          The  $3,353,300  received  from  Qvestor in July 2001 is being used to
          fund  continuing  operations  and the  expansion of the  Company.  The
          Company  expects  to incur  additional  operating  losses for the next
          several  years and will require  additional  financing to continue its
          development and  commercialization  of products.  These  circumstances
          raise  substantial  doubt about the Company's ability to continue as a
          going concern.  Management is currently seeking significant additional
          equity  investment  from   institutional   investors.   If  additional
          financing is not available,  management believes that the cash on hand
          and cash flows from operations including additional NIH grants, during
          2002,  should be sufficient to meet its cash  requirements in 2002. If
          the funds  available  to the  Company are not  sufficient,  management
          believes that it can take certain actions such as undertaking  certain
          expense reduction actions to mitigate the impact.  Although management
          continues  to  pursue  these  plans,  there is no  assurance  that the
          Company will be successful in obtaining  financing on terms acceptable
          to the Company or at all. The financial  statements do not include any
          adjustments that might result from the outcome of this uncertainty.

          Research and Development

          Costs incurred for research  projects funded by grants for the quarter
          and six months  ended June 30, 2002 were  approximately  $379,000  and
          $443,000, respectively.

          Recent Accounting Pronouncements

          In June 2001, the Financial Accounting Standards Board ("FASB") issued
          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  142,
          "Goodwill and Other Intangible  Assets." SFAS No. 142 requires the use
          of a  non-amortization  approach to account for purchased goodwill and
          certain intangibles.  Under a non-amortization approach,  goodwill and
          certain  intangibles will not be amortized into results of operations,
          but instead  would be reviewed  for  impairment  and written  down and
          charged  to  results of  operations  only in the  periods in which the
          recorded  value of goodwill and certain  intangibles  is more than its
          fair value.  The  provisions  of SFAS No. 142 were  effective  for the
          Company beginning on January 1, 2002 and  implementation had no effect
          on its results of operations or financial position.  Intangible assets
          subject to amortization  consist of patents and patents pending. As of
          June 30, 2002,  accumulated  amortization on patents was $32,983.  For
          the quarter and six months ended June 30, 2002,  amortization  expense
          for patents was $2,094 and $3,441, respectively.  The estimated annual
          amortization

                                 Page 6

<PAGE>

          expense  related to these  intangible  assets for the current and next
          five fiscal years is expected to approximate a minimium of $41,000.

          In June  2001,  the FASB  issued  SFAS No. 143  "Accounting  for Asset
          Retirement Obligations." The The Basis of Presentation - Continued:
          Recent Accounting Pronouncements - continued:

          statement addresses financial accounting and reporting for obligations
          associated with the retirement of tangible  long-lived  assets and the
          associated asset retirement costs. The provisions of SFAS No. 143 will
          be  effective   for  the  Company   beginning   January  1,  2003  and
          implementation  will  not  have a  material  effect  on the  Company's
          results of operations or financial position.

          In August  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
          Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 supersedes
          SFAS No. 121 "Accounting  for the Impairment of Long-Lived  Assets and
          for  Long-Lived  Assets to be Disposed  of",  and the  accounting  and
          reporting  provisions of Accounting  Principles  Board ("APB") Opinion
          No. 30,  "Reporting  the Results of Operations - Reporting the Effects
          of Disposal of a Segment of a Business, and Extraordinary, Unusual and
          Infrequently  Occurring  Events and  Transactions."  The provisions of
          SFAS No. 144 were effective for the Company  beginning January 1, 2002
          and  implementation  had no effect on its  results  of  operations  or
          financial position.

          On April 30, 2002 the FASB issued  Statement No. 145,  "Rescission  of
          FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
          and Technical Corrections."  This statement eliminates the requirement
          that gains and losses from the  extinguishment  of debt be  aggregated
          and, if material,  classified  as an  extraordinary  item,  net of the
          related income tax effect and eliminates an inconsistency  between the
          accounting   for   sale-leaseback   transactions   and  certain  lease
          modifications   that  have  economic   effects  that  are  similar  to
          sale-leaseback transactions. Generally, Statement No. 145 is effective
          for  transactions  occurring  after May 15, 2002.  The adoption of the
          standard is expected to have no impact to the Company.

          In July 2002,  the FASB  issued SFAS No.  146,  "Accounting  for Costs
          Associated with Exit or Disposal  Activities." The statement addresses
          financial  accounting and reporting for costs  associated with exit or
          disposal  activities and nullifies  Emerging  Issues Task Force (EITF)
          Issue  No.  94-3,   "Liability   Recognition   for  Certain   Employee
          Termination  Benefits  and Other Costs to Exit an Activity ( Including
          Certain Costs  Incurred in a  Restructuring)."  The provisions of SFAS
          No.  146 are  effective  for  exit or  disposal  activities  that  are
          initiated  after  December 31, 2002 . The adoption of this standard is
          expected to have no impact to the Company.

2.       Notes Payable:

         In  September  1996,  the Company  completed  the private  placement of
         $787,270  in  Convertible  Unsecured  Notes due in 2001.  During  2001,
         $650,262 of the outstanding notes were converted into 288,936 shares of
         common stock and $128,608  were repaid by the Company.  In February and
         March,  2002,  documentation  relating to  conversion  of the remaining
         $8,400 of the Variable  Notes was  completed and 4,000 shares of common
         stock were issued.

         On March 5, 2002, the Company signed a note for $30,000 with its bank,
         the  funds  of  which  are  collateralized  by  newly-purchased  office
         equipment.  The terms of the loan require sixty equal monthly

                                   Page 7

<PAGE>

          payments of principal plus 7% interest.

3.       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 June 30, 2002:

                Net operating loss carryforward                $3,900,000
                                                             -----------------

                Deferred tax asset                              3,900,000
                Valuation Allowance                            (3,900,000)
                                                             -----------------

                Net deferred tax asset                       $       -
                                                             =================

4.       Stockholders' Equity:

         Common Stock Warrants

         On February 10, 2002 warrants to purchase  3,000 shares of common stock
         at an exercise of price of $5.00 per share expired, unexercised.

         Common stock warrants outstanding at June 30, 2002 are as follows:


            Number                  Exercise Price          Expiration Date

             3000                        $5.00              October 23, 2002

         Stock Options:

          On February  15, 2002 the Company  granted  ten-year  incentive  stock
          options  under the 1994 Stock Option Plan to purchase  5,000 shares of
          Common Stock at an exercise  price of $4.00 per share to an officer of
          the company, in connection with a hiring package.The options vest at a
          rate of 20% per year.

         On March 19, 2002 the Company granted ten-year  incentive stock options
         under the 1994 Stock Option Plan to purchase 500 shares of common stock
         at an exercise  price of $4.00 per share to an employee of the company.
         The options vest at a rate of 20% per year.

         Also, on March 19, 2002 the Company  granted  ten-year  incentive stock
         options  under the 1994 Stock Option Plan to purchase  21,000 shares of
         common  stock at an exercise  price of $4.20 per share to  employees of
         the company. The options vest at a rate of 20% per year.

         Stock Compensation Plan

         At June 30, 2002 a total of 237,783  shares had been granted  under the
         stock compensation plan.  Compensation expense recognized in connection
         with such awards under the stock  compensation  plan for the six months
         ended June 30, 2002 was $103,386.  Total unearned  compensation related
         to stock  compensation  plan  awards was  $306,466 at June 30, 2002 and
         will be recognized as expense over future periods of service.

5.       Commitments:

         Lease

                                        Page 8

<PAGE>

         In April 2002, the Company signed a lease  modification to increase its
         rental  space to 12,221  square feet and  includes an  extension of its
         current term through  October 31, 2005.  Future  minimum  annual rental
         payments under this lease are approximately $173,000.

6.       Segment Data

         As a result of certain organizational  changes, the Company has divided
         its   business  into  two  core  units,   oxalate   control  and  stem
         cell/diabetes.  These  changes  result  in  the  identification  of two
         reportable  business  segments under the  requirements of SFAS No. 131,
         Disclosures  about Segments of an Enterprise  and Related  Information,
         commencing with the quarter ended March 31, 2002.

         Ixion's two core business units are

          o    Oxalate Control: therapies for Primary Hyperoxaluria (an "orphan"
               disease),  recurrent  kidney  stones,  and other  oxalate-related
               conditions,    based   on   our   proprietary   use   of   unique
               oxalate-degrading bacteria; and

          o    Stem  Cell  /  Diabetes:  somatic  cellular  therapies  to  treat
               diabetes,  based on selecting,  proliferating,  and directing the
               differentiation of adult stem cells into insulin-producing  islet
               preparations for transplantation.



         The following table sets forth selected  income  statement data for the
quarter  and six months  ended June 30, 2002 and 2001  (restated  to reflect the
revised segments) and selected asset items as of June 30, 2002 for each segment:

Six Months
<table>
<S>                    <C>                            <C>                           <C>                      <C>

                    Oxalate Control            Stem Cell/Diabetes                    G&A                      Total


                  2002           2001          2002            2001             2002       2001            2002            2001
                ----------- ------------   ------------  --------------    ------------  ------------   ---------  ----------------


Grant Revenues  $ 368,778       $ 93,038    $ 43,973       $   98,647     $     -         $     -      $    412,752       $ 191,685

Expenses          766,994        515,427     468,263          636,054        419,154        420,820       1,654,411       1,572,301

                 ----------------- --------------- -------------- -------------- -------------- -------------- ---------------- ----
Net Loss         $(398,215)    $(422,389)  $(424,290)     $  (537,407)   $  (440,245)     $(420,820)   $ (1,241,660)   $ (1,380,616)
                 ================= =============== ============== ============== ============== ============== ================ ====

Three Months

Grant Revenues     315,418        31,555      43,973           19,424   $      -          $     -           359,391          50,979

Expenses           528,075       271,802     199,084          332,446        221,347        239,134       1,552,754         824,173


Net Loss          (212,657)     (240,247)   (155,111)        (313,022)      (221,347)      (219,925)      (1,193,363)      (773,194)
Segment Assets  $  489,595               $   345,270                      $1,742,015                    $  2,576,880
at June 30, 2002
</table>

Segment  assets  include  specifically  identifiable  fixed assets,  capitalized
patent costs, and receivables. Segment asset information not available for 2001

                                      Page 9

<PAGE>


                  Special Note Regarding Forward-Looking Statements

         This quarterly report on Form 10-QSB of Ixion  Biotechnology,  Inc. for
the quarter and six months ended June 30, 2002 contains certain  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,
which are intended to be covered by the safe  harbors  created  thereby.  To the
extent  that such  statements  are not  recitations  of  historical  fact,  such
statements constitute forward-looking  statements which, by definition,  involve
risks and uncertainties.  In particular,  without  limitation,  statements under
Part I, Item 2,  Management's  Discussion  and  Analysis or Plan of  operations,
contain  forward-looking  statements.  Where, in any forward-looking  statement,
Ixion  expresses an expectation  or belief as to future results or events,  such
expectation or belief is expressed in good faith and believed to have reasonable
basis, but there can be no assurance that the statement of expectation or belief
will result or be achieved or accomplished.

         Statements regarding our research and development plans also constitute
forward-looking statements.  Actual research and development activities may vary
significantly from the current plans depending on numerous factors including

o changes in the costs of such activities from current estimates,  o the results
of the  programs,  o the results of clinical  studies  referred to above,  o the
timing of regulatory submissions, technological advances, o determinations as to
commercial potential, and o the status of competitive products.

         All of the above estimates are based on the current expectations of our
management  team,  which  may  change  in the  future  due to a large  number of
potential events, including unanticipated future developments.

         Factors that could cause actual results or events to differ  materially
from those  anticipated  include,  but are not  limited  to:  general  economic,
financial and business conditions; labor difficulties; competition for customers
in the biotechnology and  pharmaceutical  industries;  the costs of research and
development  of chemical  compounds and products;  and changes in and compliance
with governmental regulations.


Item 2.  Management's Discussion and Analysis or Plan of Operation

         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.  Our 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 Form 10-KSB and in other SEC filings.

Results of Operations

Three  Months Ended June 30, 2002 and 2001


        Summary of Operations - Three Months Ended June 30,

<table>
<CAPTION>

              <S>                              <C>              <C>              <C>
        ---------------------------------------------------------------- -------------
                                                                             Percent

                                               2002               2001        Change
        ------------------------------- -------------- ----------------- -------------
        Revenues:                            $359,391           $50,979       604.97%
        Operating Expenses:                 ($957,400)        ($819,839)       16.78%
        Other Income (Expense):                $8,893           ($4,335)     -305.15%
                                        -------------- ----------------- -------------
        Net Loss:                           ($589,116)        ($773,195)      -23.81%
        ------------------------------- -------------- ----------------- -------------
</table>

                                  Page 10
<PAGE>


         Total revenues increased $308,412  from $50,979 for the second quarter
of 2001 to  $359,391  for the second  quarter of 2002  mainly as a result of the
following:

               o    the commencement of funding under:

                    o    a  two-year  NIH  Phase  II Small  Business  Technology
                         Transfer ("STTR") grant entitled  "Enteric  Elimination
                         and Degradation of Oxalic Acid" (awarded in 2001) for a
                         total of approximately $500,000;  Total revenues in the
                         quarter   ended  June  30,   2002  were   approximately
                         $197,500.

                    o    a  two-year  NIH  Phase  II Small  Business  Innovative
                         Research  ("SBIR")  grant  entitled  "Digestion of Food
                         Oxalate" (awarded in 2001) for a total of approximately
                         $783,000;  Total revenues in the quarter ended June 30,
                         2002 were approximately $118,000.

                    o    a   six-month   NIH   Phase  I  SBIR   grant   entitled
                         "Differentiating   Bone   Marrow  Stem  Cells  To  Cure
                         Diabetes" for approximately  $99,000. Total revenues in
                         the  quarter  ended  June 30,  2002 were  approximately
                         $26,000.

                    o    a six-month NIH Phase 1 SBIR grant entitled "Converting
                         Liver  Stem  Cells  into  Insulin-producing  Cells" for
                         approximately  $99,000.  Total  revenues in the quarter
                         ended June 30, 2002 were approximately  $700.

     We expect  revenue to increase  further  during the rest of 2002 due to the
continued  funding  under the  above-listed  grants as well as the  approval  of
another NIH Phase II SBIR grant entitled "Oxalobacter  Formigenes Diagnostic Kit
Development" for a total of approximately $775,000.

         [GRAPHIC OMITTED][GRAPHIC OMITTED]
                 Comparison of G&A Expenses Q2 2002 vs. Q2 2001

                              2002                       2001
Personnel-related           101,781                    105,643
Capital Raising              27,118                     23,644
Professional                 28,310                     20,368
Office Supplies              21,005                     22,013
Other G&A                    52,027                     43,923

     General,  and  administrative  expenses  increased 7% from  $215,591 in the
second  quarter  of 2001 to  $230,241  in the  second  quarter  of  2002.  These
increased  expenses  reflect  mainly an  increase  in costs of  capital  raising
efforts,  professional fees and other administrative expenses offset somewhat by
a reduction in personnel-related costs of approximately $3,800.

     We expect our general and administrative expenses to continue to
increase in 2002 as a result of  increased activities  resulting in a
need for increased personnel.

         Research and development expenditures consist primarily of:

                                Page 11
<PAGE>

o        payroll-related expenses of  research and development personnel;
o        laboratory and animal maintenance and supplies;
o        laboratory rent and associated utilities;
o        depreciation on laboratory equipment;
o        development activities;
o        clinical and pre-clinical expenses;
o        payments made for sponsored research;
o        scientific advisors fees;
o        regulatory consultants fees;
o        interest on the purchase of laboratory equipment; and
o        amortization of capitalized patent costs.


                           [GRAPHIC OMITTED][GRAPHIC OMITTED]

                 Comparison of R&D Expenses Q2 2002 vs. Q2 2001

                                     2002                  2001
Personnel-related                  276,372               152,324
Consultants & Subs                 206,774               146,543
Supplies & Animal Costs            114,449               153,776
Rent & Utilities                    57,083                38,310
Scientific Advisors                 18,833                27,533
Other Misc. R&D                     53,648                85,762

           Research and development  expenses  increased  approximately 20% from
$604,248  in the second  quarter of 2001 to  $727,159  in the second  quarter of
2002.  These increased  expenses reflect an increase in the scale of operations,
including

o    increased  laboratory  personnel and related payroll expenses;
o    increased fees to consultants and subcontractors;
o    increased product and process development activities;
o    increased laboratory rental space and associated utilities;
o    increased amortization of allowed patents;
o    increased  depreciation  due  to  the  purchase  of  additional  laboratory
     equipment;
o    increased overall R&D activities;

offset somewhat by a reduction of approximately  $80,000 in laboratory supplies,
animal maintenance costs and reduced fees to scientific advisors.

     Our research and development  expenses are expected to continue to increase
in 2002 due to an

                                    Page 12

<PAGE>

increase in the scale of operations and clinical trial activities.

         [GRAPHIC OMITTED][GRAPHIC OMITTED]

          Comparison of Interst Expense and Income Q2 2002 vs. Q2 2001

                           2002                 2001
Interest Expense           714                 19,865
Interest Income           9,607                15,530

          Interest  expense  decreased 96% from $19,865 in the second quarter of
2001 to $714 in the second  quarter of 2002 due  primarily  to the  maturity  of
$787,720 of our convertible  unsecured notes in September 2001. Interest expense
should increase in future  quarters of fiscal 2002 under financing  arrangements
entered  into  during the first  quarter of 2002 for the  purchase of office and
laboratory equipment.

     Interest income decreased 38% from $15,530 in the second quarter of 2001 to
$9,607 in the second  quarter of 2002,  due to a decreased  cash  balance and an
overall reduction in short-term interest rates.  Interest income should continue
to decrease in 2002 as we utilize our cash resources.

Six Months Ended June 30, 2002 and 2001


                Summary of Operations - Six Months Ended June 30,
<table>
                     <S>                           <C>             <C>            <C>

                -------------------------------------------------------------- ---------------
                                                   2002            2001        Percent Change
                ----------------------------- --------------- ---------------- ---------------
                Revenues:                           $412,751         $191,685         115.33%
                Operating Expenses:              ($1,675,502)     ($1,574,986)          6.38%
                Other Income (Expense):              $21,091           $2,685         685.60%
                                              --------------- ---------------- ---------------
                Net Loss:                        ($1,241,660)     ($1,380,616)        -10.06%
                ----------------------------- --------------- ---------------- ---------------
</table>


         Total revenues increased  approximately 115% from $191,685 in the first
half of 2001 to  $412,751  in the first  half of 2002  mainly as a result of the
following:

o        four active NIH research contracts:

                                      Page 13

<PAGE>

                    o    a  two-year  NIH  Phase  II Small  Business  Technology
                         Transfer ("STTR") grant entitled  "Enteric  Elimination
                         and Degradation of Oxalic Acid" (awarded in 2001) for a
                         total of approximately  $500,000;Total  revenues in the
                         six  months  ended  June 30,  2002  were  approximately
                         $212,000.


                    o    a  two-year  NIH  Phase  II Small  Business  Innovative
                         Research  ("SBIR")  grant  entitled  "Digestion of Food
                         Oxalate" (awarded in 2001) for a total of approximately
                         $783,000;  Total  revenue in the six months  ended June
                         30, 2002 were approximately $156,000.

                    o    a   six-month   NIH   Phase  I  SBIR   grant   entitled
                         "Differentiating   Bone   Marrow  Stem  Cells  To  Cure
                         Diabetes" for approximately  $99,000; Total revenues in
                         the six months  ended June 30, 2002 were  approximately
                         $26,000.

                    o    a six-month NIH Phase I SBIR grant entitled "Converting
                         liver  stem  cells  into  insulin-producing  cells" for
                         approximately $99,000. Total revenues in the six months
                         ended June 30, 2002 were approximately $700.

          We expect revenue to increase further in 2002 because of

                    o    the   continuation   of  funding   under  the  "Enteric
                         Elimination  and  Degradation  of Oxalic Acid"  through
                         September 2003;

                    o    the   continuation  of  funding  under  the  NIH  grant
                         entitled  "Digestion of Food Oxalate" through September
                         2003;

                    o    the approval,  of a grant under the NIH grant  entitled
                         "Oxalobacter Formigens Diagnostic Kit Development,"
                         with funding expected to begin in the fourth quarter of
                         2002.

                           [GRAPHIC OMITTED][GRAPHIC OMITTED]
                          Comparison of G & A Expenses
                        1st half 2002 vs. 1st half 2001


Personnel-related                  228,933                  268,804
Capital Raising                     54,443                   25,916
Professional                        45,946                   36,665
Depreciation                         6,210                    4,852
Office & Supplies                   35,797                   31,589
Other G & A                         68,916                   55,679

         General, and administrative expenses increased only slightly
from  $423,505  in the first half of 2001 to $440,245 in the first half of 2002.
These  increased  expenses  reflect  an  increase  in the  scale of  operations,
offset somewhat by a reduction in  administrative  personnel-related
expenses of approximately $40,000.

     We expect our general and administrative expenses to continue to
increase  in 2002 as a result  of an  increase  in the scale of  operations.
<PAGE>

         Research and development expenditures consist primarily of:

o        payroll-related expenses of  research and development personnel;
o        laboratory and animal maintenance and supplies;
o        laboratory rent and associated utilities;
o        depreciation on laboratory equipment;
o        development activities;
o        clinical and pre-clinical expenses;
o        payments made for sponsored research;
o        scientific advisors fees;
o        regulatory consultants fees;
o        interest on the purchase of laboratory equipment; and
o        amortization of capitalized patent costs.

                  [GRAPHIC OMITTED][GRAPHIC OMITTED]
                          Comparison of R & D Expenses
                        1st half 2002 vs. 1st half 2001

                                  2002                     2001
Personnel-related               499,032                  310,297
Consultants & Subs              246,911                  283,064
Depr. & Amort.                   51,392                   46,162
Supplies & Animal Costs         181,826                  294,860
Rent & Utilities                109,382                   69,200
Scientific Advisors              52,367                   40,366
Quality & Regulations            38,621                        0
Other Miscellaneous              55,726                  107,532

           Research and development  expenses  increased  approximately  7% from
$1,151,481  in the first half of 2001 to  $1,235,257  in the first half of 2002.
These increased expenses reflect an increase in the overall scale of operations,
including

          o    increased laboratory personnel and related payroll expenses;
          o    increased fees to regulatory consultants;
          o    incresed product and process development activities;
          o    increased laboratory rental space and associated utilities;
          o    increased   depreciation   due  to  the  purchase  of  additional
               laboratory equipment ;
          o    increased amortization of allowed patents;
          o    increased fees to scientific advisors;
          o    increased overall research and development costs;

offset somewhat by a reduction of  approximately  $200,000 in  Consultant's  and
Subcontractor's  fees,  supplies,  animal  maintenance  costs and other  related
research and development costs.

Our research and  development  expenses will continue to increase in 2002 due to
an  increase  in the  scale of
operations as a result of the receipt of the research  grants referred to above,
and clinical trial activities.

         Interest expense decreased almost 58% from $39,832 in the first half of
2001 to $897 in the  first  half of  2002,  due  primarily  to the  maturity  of
$787,720 of our convertible  unsecured notes in September 2001. Interest expense
should increase in future  quarters of fiscal 2002 under financing  arrangements
made during the first quarter of 2002 for the purchase of office and  laboratory
equipment.

                               Page 14

<PAGE>

         Interest income decreased  approximately  48% from $42,517 in the first
half of 2001 to $21,988 in the first half of 2002,  due to a decrease in overall
interest  rates and a  decreased  cash  balance  in excess of  operating  needs.
Interest  income  should  continue  to  decrease  in 2002 as we utilize our cash
resources.

                           [GRAPHIC OMITTED][GRAPHIC OMITTED]
                   Comparison of Interest Expense and Income
                         1st half 2002 vs 1st half 2001

                                 2002                    2001
Interest Expense                  897                   39,832
Interest Income                 21,988                  42,517

Liquidity and Capital Resources

                  For the first  half of 2002,  we had  deficit  cash flows from
operations  of  $1,091,305  compared to deficit cash flows of  $1,024,757 in the
first half of 2001. The increased use of cash relates to the increased  scale of
operations.

         We expect annual lease expense to increase to a minimum of $173,000 for
2002 as a result of additions to our rented facilities and an increase in rental
rates.

         During the first half of 2002, we entered into  financing  arrangements
for the  purchase  of office  equipment  with  aggregate  principal  amounts  of
$30,000.  These  obligations  will be repaid in sixty equal monthly  payments of
principal plus a 7% interest rate.

         At June 30,  2002,  we had  $354,484 in cash and cash  equivalents  and
$1,131,254 in  short-term  investments,  for a total of  $1,485,738  compared to
$1,047,976 in cash and short-term  investments at June 30, 2001.  Until required
for  operations,  our  policy is to invest  any  excess  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

                               Page 15

<PAGE>

A summary of grant funds received from the National  Institutes of Health during
the first half of 2002 follows

          o    In September, 2001 NIH awarded us a two-year Phase II STTR grant,
               for $500,000  entitled  "Enteric  Elimination  and Degradation of
               Oxalic  Acid".  Approximately  $212,000 in revenues were earned
               under this grant in the first half of 2002;

          o    Also, in September,  2001 NIH awarded us a two-year Phase II SBIR
               grant  entitled  "Digestion  of  Food  Oxalate"  for a  total  of
               approximately  $783,000.  Approximately $156,000 in revenues were
               earned under this grant in the first half of 2002;

          o    In March 2002, the NIH awarded us a six-month  Phase I SBIR grant
               for $99,510 entitled  "Differentiating  Bone Marrow Stem Cells to
               Cure Diabetes."  Approximately  $26,000 in revenues were earned
               under this grant in the first half of 2002;

          o    In May 2002,  the NIH awarded us a  six-month  Phase I SBIR grant
               for   $99,510   entitled   "Converting   liver  stem  cells  into
               insulin-producing  cells".  Approximately  $700 in revenues  were
               earned under this grant in the first half of 2002;

          o    We have other grant applications pending.

     The Company  incurred a net loss of $1,241,660  for the half ended June 30,
2002,  and as of June 30, 2002, had a total  accumulated  deficit of $9,695,894.
The Company had deficit cash from  operations of $1,091,305  and  $1,024,757 for
the first half of 2002 and 2001, respectively.

     The  approximately  $3,353,000  received from Qvestor in July 2001 is being
used to fund continuing operations and the expansion of the Company. The
Company expects to incur additional  operating losses for the next several years
and  will  require   additional   financing  to  continue  its  development  and
commercialization of products. These circumstances raise substantial doubt about
the Company's  ability to continue as a going  concern.  Management is currently
seeking   significant   additional  equity  investment  from  institutional  and
strategic  investors.  If  additional  financing  is not  available,  management
believes  that  the  cash on hand  and  cash  flows  from  operations  including
additional  NIH grants,  during  2002,  should be  sufficient  to meet its cash
requirements  in 2002. If the funds  available to the Company are not
sufficient,  management  believes  that  it can  take  certain  actions  such as
undertaking  certain expense reduction actions to mitigate the impact.  Although
management  continues  to pursue these  plans,  there is no  assurance  that the
Company will be  successful  in obtaining  financing on terms  acceptable to the
Company or at all. The financial  statements do not include any adjustments that
might result from the outcome of this uncertainty.

                              Page 16
<page>
Recent Accounting Pronouncements

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 142,  "Goodwill  and
Other Intangible  Assets".  SFAS No. 142 requires the use of a  non-amortization
approach to account for  purchased  goodwill  and certain  intangibles.  Under a
non-amortization  approach,   goodwill  and  certain  intangibles  will  not  be
amortized  into  results  of  operations,  but  instead  would be  reviewed  for
impairment  and written  down and charged to results of  operations  only in the
periods in which the recorded value of goodwill and certain  intangibles is more
than its fair  value.  The  provisions  of SFAS No. 142 were  effective  for the
Company  beginning  on January 1, 2002 and  implementation  had no effect on its
results of  operations  or  financial  position.  Intangible  assets  subject to
amortization  consist of  patents  and  patents  pending.  As of June 30,  2002,
accumulate  amortization on patents was $32,983.  For the quarter and six months
ended June 30,  2002,  amortization  expense  for patents was $2,094 and $3,441,
respectively. The estimated
<PAGE>
     annual  amortization  expense  related to these  intangible  assets for the
current and next five fiscal  years is  expected  to  approximate  a minimium of
$41,000.

     In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations".  The statement  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and teh
associated  asset  retirement  costs.  The  provisions  of SFAS No.  143 will be
effective for the Company beginning January 1, 2003 and  implementation  will
not have a material  effect on the Company's  results of operations or financial
position.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long Lived Assets".  SFAS No. 144 supersedes  SFAS No.
121  "Accountinf  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed  of",  and the  accounting  and  reporting  provisions  of
Accounting  Principles  Board ("APB") Opinion No. 30,  "Reporting the Results of
Operations - Reporting  the Effects of Disposal of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions". The
provisions of SFAS No. 144 were effective for the Company  beginning  January 1,
2002 and  implementation  did not  have a  material  effect  on its  results  of
operations or financial position.

     On April 30, 2002 the FASB issued  Statement No. 145,  "Rescission  of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections."  This statement  eliminates the requirement  that gains and losses
from the extinguishment of debt be aggregated and, if material, classified as an
extraordinary  item,  net of the  related  income tax effect and  eliminates  an
inconsistency between the accounting for sale-leaseback transactions and certain
lease   modifications   that  have   economic   effects   that  are  similar  to
sale-leaseback  transactions.  Generally,  Statement  No. 145 is  effective  for
transactions  occurring  after May 15, 2002. The adoption of the standard is not
expected to have an impact to the Company.

                                Page 17

<page>

     In July  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal Activities".  The statement addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and  nullifies  Emerging  Issues Task Force (EITF)  Issue No.  94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity ( Including Certain Costs Incurred in a Restructuring)." The provisions
of SFAS No. 146 are effective for exit or disposal activities that are initiated
after  December 31, 2002 . The adoption of this standard is not expected to have
an impact on the Company.

Contractual Obligations and Commercial Commitments

         As  of  June  30,  2002,  the  Company's  contractual  obligations  and
commercial commitments are limited to:

               o    An operating lease agreement with minimum annual future rent
                    of  approximately  $173,000  that runs  through  October 31,
                    2005;  and

               o    A debt  obligation  on  purchased  equipment of $30,000 with
                    payments that extend through March 5, 2007.

Part II. Other Information.

Exhibits  marked by  asterisk(s)  are included with this Report;  other exhibits
have been incorporated by reference to other documents filed by us with the SEC.

                                   Page 18

<PAGE>

         (a)     Exhibits
<table>
  <S>                <C>                                                                <C>

Exhibit           Description                                                           Page

     (2)          Plan of Acquisition, Reorganization, Arrangement,
                  Liquidation or Succession                                             None
     (3)          Articles of Incorporation                                             None

     (4)          Instruments defining the Rights of Security Holders                   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

     (23)         Consents of Experts and Counsel                                       None

     (24)         Power of Attorney                                                     None

     (99-1)       KCA Engagement Letter                                                  20*

     (99.2)       Certification of CEO                                                   21*

     (99.3)       Certification of CFO                                                   22*
</table>

   *Filed herewith

                                        Page 18

<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: August 13, 2002               By: /s/ Weaver H. Gaines
                                        --------------------
                                          Weaver H. Gaines
                                          Chairman and Chief Executive Officer
                                          Chief Financial Officer

Dated: August 13, 2002              By: /s/ Kimberly A. Ramsey
                                        ----------------------
                                         Kimberly A. Ramsey

                                         Vice President and Controller
                                         (Principal Accounting Officer)

<table>
<S>                     <C>                                                            <C>

         Exhibit Index

Exhibit           Description                                                           Page

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

    (3)           Articles of Incorporation                                             None

    (4)           Instruments defining the Rights of Security Holders                   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

    (23)           Consents of Experts and Counsel                                       None

    (24)           Power of Attorney                                                     None

    (99-1)         KCA Engagement Letter                                                   20*

    (99-2)         Certification of CEO                                                    21*

    (99-3)         Certification of CFO                                                    22*
</table>


   *Filed herewith

                                     Page 19
<page>