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, 2001

                                       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: 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 October 31, 2001 was 7,184,297.

<PAGE>
                           Ixion Biotechnology, Inc
                               Index to Form 10QSB


Part 1 - Financial Information                                             Page

Item 1.  Financial Statements (unaudited)

         Condensed Balance Sheet - September 30, 2001.........................2

         Condensed Statements of Operations - Three Months and Nine
         Months Ended September 30, 2001 and 2000.............................3

         Condensed Statements of Cash Flows - Nine Months Ended
         September 30, 2001...................................................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..........................9

Part II - Other Information

Item 2. Changes in Securities and Use of Proceeds............................16

Item 6.  Exhibits and Reports on Form 8-K....................................16

Signatures...................................................................17

Exhibit Index................................................................17


<PAGE>

Part I.  Financial Information
Item 1.  Financial Statements

                            Condensed Balance Sheet
                               September 30, 2001
                                   Unaudited

                                     Assets
Current  Assets:
   Cash and cash equivalents                              $           3,518,456
   Accounts receivable                                                   36,014
   Prepaid expenses                                                      41,226
   Other current assets                                                     500
                                                               ----------------
            Total current assets                                      3,596,196
                                                               ----------------
Property and Equipment, net                                             359,575
                                                               ----------------
Other Assets:
    Patents and patents pending, net                                    426,230
                                                               ----------------
                Total other assets                                      426,230
                                                               ----------------
             Total Assets                                   $         4,382,001
                                                               ================

                      Liabilities and Stockholder' Equity

Current Liabilities:
    Accounts payable                                          $          57,584
    Current portion of notes payable                                    176,679
    Accrued expenses                                                    272,454
                                                               ----------------
         Total current liabilities                                      506,505
                                                               ----------------
Long-Term Liabilities:
    Liability under research agreement                                   42,317
    Deferred rent, including accrued interest                            28,018
                                                               ----------------
                   Total long-term liabilities                           70,335
                                                               ----------------
                     Total liabilities                                  576,840
                                                               ----------------
Commitments (Note 4)

Stockholders' Equity:
   Common stock, $.01 par value; authorized 20,000,000, issued and
     outstanding 7,169,196 shares at September 30                        71,692
    Additional paid-in capital                                       11,745,657
    Accumulated deficit                                              (7,682,150)
    Less unearned compensation                                         (330,040)
                                                               ----------------
           Total stockholders' equity                                 3,805,161
                                                               ----------------
Total Liabilities and Stockholders' Equity                 $          4,382,001
                                                               ================

            See accompanying notes to condensed financial statements
                                      F-1
<PAGE>


Condensed Statements of Operations

                                                     Three Months Ended
                                                              September 30,
                                                  __2001__             __2000__
                                                             Unaudited
Revenues:
   Income from research grants             $      45,430          $     104,494
                                            ------------           ------------
       Total revenues                             45,430                104,494
                                            ------------           ------------
Expenses:
  Operating, general and administrative          267,593                216,428
  Research and development                       620,652                411,182
                                            ------------           ------------
                   Total expenses                888,245                627,610
                                            ------------           ------------
Other Income (Expense):
  Interest expense                               (19,723)               (18,827)
  Interest income                                 27,740                 40,396
                                            ------------           ------------
            Total other income (expense)           8,017                 21,569
                                            ------------           ------------
Net Loss.                                      (834,798)          $    (501,547)
                                            ============           ============
Basic and Diluted Net Loss per Share          $   (0.12)          $       (0.08)
                                            ============           ============
Weighted Average Common Shares                 6,887,711              6,270,051
                                            ============           ============











            See accompanying notes to condensed financial statements
                                   F-2

<PAGE>


                       Condensed Statements of Operations

                                                    Nine Months Ended
                                                        September,
                                                 2001                2000
                                                 -----               ----
                                                         Unaudited

Revenues:
  Income under research agreement           $       3,913       $        2,450
  Income from research grants                     233,202              231,632
                                            -------------         -------------
            Total revenues                        237,115              234,082
                                            -------------         -------------

Expenses:
  Operating, general and administrative           691,099              457,154
  Research and development                      1,772,133              790,892
                                            -------------         -------------
                   Total expenses               2,463,232            1,248,046
                                            -------------         -------------
Other Income (Expense):
  Interest expense                               (59,556)             (106,304)
  Interest income                                 70,258                44,027
                                            -------------         -------------
       Total other income (expense)               10,702               (62,277)
                                            -------------         -------------
Net Loss.                                $    (2,215,415)        $  (1,076,241)
                                          ==============          =============
Basic and Diluted Net Loss per Share     $        (0.32)         $       (0.23)
                                          ==============          =============
Weighted Average Common Shares                6,870,592              4,765,754
                                          ==============          =============


            See accompanying notes to condensed financial statements
                                      F-3
<PAGE>

                       Condensed Statements of Cash Flows

                                                                  Nine Months
<TABLE>
<CAPTION>
                                                               Ended September 30,
                                                            2001                    2000
                                                        -------------          -------------
                                                                    Unaudited
<S>                                                    <C>                      <C>

Cash Flows from Operating Activities:
  Net loss                                              $  (2,215,415)          $  (1,076,241)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation                                              71,305                 29,853
     Amortization                                               8,923                 14,726
     Amortization of debt discount                             38,107                 42,876
     Stock, options issued for consulting services              3,780                  4,340
     Stock compensation                                        50,476                109,839
     Decrease (increase) in prepaid expenses and
       other current assets                                     7,347                (73,902)
     Decrease (increase) in accounts receivable               (34,734)                27,465
     Increase (decrease) in deferred revenue                   (1,281)                34,885
     Increase in accounts payable and
        accrued expenses                                      125,039                  9,751
     Increase in deferred fees and salaries                         -                    726
     Increase in deferred rent                                  2,111                  1,264
     Decrease in interest payable                              (2,007)               (35,314)
                                                          ------------           ------------
         Net cash used in operating activities             (1,846,349)              (909,734)
                                                          ------------           ------------
Cash Flows from Investing Activities:
   Purchase of property and equipment                        (122,717)              (149,336)
   Transfer to restricted cash                                      -                (48,000)
   Payments for patents and patents pending                   (19,044)               (36,705)
                                                          ------------           ------------
        Net cash used in investing activities                (141,761)              (234,041)
                                                          ------------           ------------
Cash Flows from Financing Activities:
   Proceeds from (repayments of) loans from officers              -                 (312,399)
    Proceeds from issuanceof note payable                         -                   48,000
    Proceeds from issuance of common stock                        -                3,966,337
    Payments of loan costs                                        -                   (6,716)
    Principal reductions in notes payable                     (7,015)                 (1,180)
    Payment of deferred offering costs                            -                     (820)
    Proceeds from collection of note receivable
       from shareholder                                    3,353,303                     -
                                                          ------------           ------------
             Net cash provided by
               financing activities                        3,346,288               3,693,222
                                                          ------------           ------------
Net Increase In Cash and Cash Equivalents                  1,358,178               2,549,447

Cash and Cash Equivalents at Beginning of Period           2,160,278                  22,361
                                                          ------------           ------------
Cash and Equivalents at End of Period                   $  3,518,456            $  2,571,808
                                                         ===========             ===========
</TABLE>


            See accompanying notes to condensed financial statements
                                      F-4
<PAGE>

                    Notes to Condensed Financial Statements
              Nine Month Period Ended September 30, 2001 and 2000

1.   Basis Of Presentation:

          The accompanying unaudited condensed financial statements for the nine
     months ended September 30, 2001 and 2000, respectively 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, 2000 financial statements and
     related notes included in the Company's Annual Report on Form 10-KSB for
     the year ended December 31, 2000. In the opinion of the Company, the
     accompanying unaudited condensed financial statements contain all
     adjustments, consisting only of normal recurring accruals, for a fair
     statement 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 September 30, 2001 are not necessarily indicative of
     the results to be expected for the full year.

2.     Significant Accounting Policies

     Recent Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
     for Derivative Investments and Hedging Activities" which establishes
     accounting and reporting standards requiring that every derivative
     instrument be recorded in the balance sheet as either an asset or liability
     measured at its fair value. The statement also requires that changes in the
     derivative's fair value be recognized currently in earnings unless specific
     hedge accounting criteria are met. SFAS No. 133, as extended by SFAS No.
     137 and amended by SFAS No. 138, was effective for Ixion on January 1,
     2001. Historically, Ixion has not entered into derivatives contracts to
     hedge existing risks or for speculative purposes. Accordingly, adoption of
     SFAS No. 133 had no effect on its financial position or results of
     operations.

     In June 2001 the FASB issued SFAS No. 141 "Business Combinations" and SFAS
     No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires
     business combinations initiated after June 30, 2001 to be accounted for
     using the purchase method of accounting, and broadens the criteria for
     recording intangible assets separate from goodwill. Recorded goodwill and
     intangibles will be evaluated against this new criteria and may result in
     certain intangibles being subsumed into goodwill, or alternatively, amounts
     initially recorded as goodwill may be separately identified and recognized
     apart from goodwill. 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 each statement which apply
     to goodwill and intangible assets acquired prior to June 30, 2001 will be
     adopted by the Company on January 1, 2002. The Company does not expect the
     adoption of these statements to have material effect on its financial
     statements.

     In August 2001 the Financial  Accounting Standards Board (FASB) issued SFAS
     No. 144 "Accounting  for the Impairment or Disposal of Long-Lived  Assets".
     SFAS No. 144 addresses  accounting  and reporting  for the  impairment  and
     disposal of long-lived assets disposed of after December 15, 2001. SFAS No.
     144 supersedes SFAS No. 121 and the accounting and reporting  provisions of
     Accounting  Principals  Board (APB)  Opinion No. 30, and amends  Accounting
     Research  Bulletin (ARB) No. 51 to eliminate the exception to consolidation
     for a subsidiary.  SFAS No. 144 establishes a single  accounting  model for
     long-lived  assets to be disposed of by sale.  The Company  does not expect
     the adoption of this  statement to have  material  effect on its  financial
     statements.

                                      F-5
<PAGE>

3.   Stockholders' Equity

     Stock Options

     On January 3, 2001, the Company granted ten-year incentive stock options
     under the 1994 Stock Option Plan to purchase 40,000 shares of Common Stock
     at an exercise price of $4.00 per share to an officer of the company, in
     connection with his hiring package. The options vest at a rate of 20% per
     year.

     On April 1, 2001 the Company granted ten-year stock options under the 1994
     Stock Option Plan, to purchase 17,500 shares of Common Stock at an exercise
     price of $4.00 per share to members of the Company's Scientific Advisory
     Board. The options vest at a rate of 25% per quarter. The fair value of
     these options, based on a Black-Scholes option-pricing model, are included
     in unearned compensation, to be expensed as they vest.

     On July 14, 2001, under the Stock Option Plan, the Audit and Benefits
     Committee awarded options to purchase 65,350 shares at an exercise price of
     $4.00 per share to officers, employees and members of the board of
     directors.

     Stock Compensation Plan

     On July 14, 2001, under the Stock Compensation Plan, the Audit and Benefits
     Committee awarded 10,000 shares of restricted common stock to members of
     the board of directors, 18,000 shares to members of the Company's
     Scientific Advisory Board, and 1,600 shares to officers and employees. In
     connection with these stock grants, the Company recognized stock
     compensation expense of $13,600 through September 30, 2001 and has unearned
     compensation of $104,800 to be recognized as expense over future periods of
     service.

     The Q-Med Transaction

     On July 11, 2001, the Company received the final payment of $3,353,303 due
     from Q-Med, under the July 2000 stock purchase agreement.

4.   Commitments:
     Lease
     In April 2001, the Company increased its rental space to approximately
     11,500 square feet., which increases the minimum expected payments for 2001
     to approximately $167,000. The lease amendment expires October 31, 2002 and
     minimum expected payments for 2002, through October 31, 2002 are
     approximately $150,000.

5.   Notes Payable:

     The Company's $787,270 in convertible unsecured notes scheduled to mature
     on August 31, 2001 were extended through September 28, 2001, at which time
     $610,370 in unpaid principal had been converted into 277,175 shares of
     common stock based on their original conversion terms. Of the remaining
     balance of $176,900 not converted into common stock at September 30, 2001,
     the Company expects to repay $150,100 in October 2001, .with the remaining
     $26,800 to be assumed by the Company's majority shareholder and other
     qualified purchasers.

                                      F-6
<PAGE>

Special Note Regarding Forward-Looking Statements

     We intend that the forward-looking statements contained in this report be
covered by the safe-harbor provisions of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Act of 1934. 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, statements under Part I, Item 2, Management's
Discussion and Analysis, contain forward-looking statements. Where, in any
forward-looking statement, Ixion expresses an expectation or belief as to future
results or events, our 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

0        changes in the costs of such activities from current estimates;
o        the results of our research and development programs;
o        the results of clinical studies;
o        the timing of regulatory submissions;
o        technological advances;
o        determinations as to commercial potential; and
o        the status of competitive products.

     The estimates in our research and development plan are based on the current
expectations of our management team. Expectations may change due to a large
number of potential events, including unanticipated future developments.

     The following factors, which could cause actual results or events to differ
materially from those anticipated, include, but are not limited to: general
economic, financial and business conditions; 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.

     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 forms
10-KSB and in other SEC filings.

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 unaudited Condensed Financial Statements and the related Notes thereto
included elsewhere in this report.

Results of Operations

Three Months Ended September 30, 2001 and 2000



<PAGE>

      -----------------------------------------------------------------
      Summary of Operations - Three Months Ended September 30,
      ------------------------------------------------------------------
                                      2001             2000     % change
      ------------------------------------------------------------------
       Revenues                      $45,430         $104,494       -57%
       Operating Expenses:          $888,245         $627,610        42%
       Other Expense (Income)        ($8,017)        ($21,569)      -63%
                                   -----------------------------------------
       Loss:                       ($834,798)       ($501,547)        66%
       ------------------------------------------------------------------


     Total revenues decreased $59,064 from the third quarter of 2000 to the
third quarter of 2001 mainly as a result of the expiration of funding under
three National Institutes of Health ("NIH") Phase I research contracts:
     o "Islets from Islet Progenitor/Stem Cells for Implantation";
     o "Oxalobacter Formigenes Diagnostic Kit Development"; and
     o  Coating of Urinary Protheses to Prevent Encrustation";

     We expect revenue to increase slightly for the rest of 2001 because of the
commencement of funding in October, 2001 under:
     o A two-year NIH Phase II Small Business Technology Transfer ("STTR")
       grant entitled "Enteric Elimination and Degradation of Oxalic Acid'
       for a total of approximately $500,000;
     o A two-year NIH Phase II Small Business Innovative Research ("SBIR")
       grant entitled "Digestion of Food Oxalate" for a total of approximately
       $783,000.

     -----------------------------------------------------------------
     G&A Expenses - 3rd Qtr 2001 vs. 3rd Qtr 2000
     -----------------------------------------------------------------
                       QTD 2001       QTD 2000   Percent Change
     -----------------------------------------------------------------
    Personnel-related            141,794     132,518        7.00%
    Professional fees             40,474      25,122       61.11%
    Capital raising               22,508         125    17978.68%
    Directors fees                14,132       7,640       84.97%
    Other G&A                     48,687      51,024       -4.58%
                                -------------------------------------
    Total G&A                    267,594     216,428       23.64%
    -----------------------------------------------------------------

     Operating, general, and administrative expenses increased almost 24% from
$216,428 in the third quarter of 2000 to $267,593 in the third quarter of 2001.
These increased expenses reflect an increase in the scale of operations,
including:

    o     increased personnel and related expenses;
    o     increased professional fees, including accounting and legal expenses;
    o     slightly increased director's fees;
    o     increased capital-raising activities; and

<PAGE>

    o     support of increased research activities;

offset somewhat by a reduction in other miscellaneous operating expenses.

     We expect our operating, general and administrative expenses to continue to
increase for the rest of 2001 as a result of increased research activities
resulting in a need for increased personnel and other administrative support.

         Research and development expenditures consist primarily of:

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

     -----------------------------------------------------------------
    Comparison of R&D Expenses - 3nrd Quarter 2001 vs. 3rd Quarter 2000
     -----------------------------------------------------------------
                       QTD 2001       QTD 2000        Percent Change
     -----------------------------------------------------------------
    Personnel-related            180,185     141,565       27.28%
    Lab & Animal                 149,161      46,065      223.80%
    Consultants & Subcontracts   101,983     113,497      -10.14%
    Clinical/Pre-clinical         28,166           0          -
    Rent & Utilities              44,090      32,057       37.54%
    Regulatory & quality          37,087           0          -
    Scientific Advisors           31,200      40,350      -22.68%
    Other R&D                     48,780      37,648       29.57%
                               ---------------------------------------
      Total R&D                  620,652     411,182       50.94%
     -----------------------------------------------------------------

     Research and development expenses increased 51% from $411,182 for the third
quarter of 2000 to $620,652 for the third quarter of 2001. These increased
expenses reflect an increase in the scale of operations, including:

     o   increased laboratory personnel and related payroll expenses;
     o   increased laboratory-related supplies and expenses;
     o   increased clinical and pre-clinical activities;
     o   increased fees to regulatory consultants; and
     o   an increase in other miscellaneous expenses related to research and
         development;
<PAGE>

offset somewhat by a decrease in fees to outside consultants, subcontractors and
scientific advisors.

Our research and development expenses will continue to increase in 2001 due to
an increase in the scale of operations as a result of the receipt of the
research grants referred to above, and as a result of preparations for an
Innovative New Drug Application (IND) meeting with the Food and Drug
Administration ("FDA") scheduled for November 2001.

     -----------------------------------------------------------------
     Interest Income & Expense - 3rd Qtr 2001 vs. 3rd Qtr 2000
     -----------------------------------------------------------------
                          QTD 2001       QTD 2000        Percent Change
     -----------------------------------------------------------------
     Interest Income        27,741       40,396          -31.33%
     Interest Expense       19,724       18,827            4.77%
     -----------------------------------------------------------------

     Interest expense increased only slightly from $18,827 in the third quarter
of 2000 to $19,723 in the third quarter of 2001. Interest expense should decline
further in the last quarter of 2001 as a result of the maturity of our
convertible unsecured notes in September 2001.

     Interest income decreased 31% from $40,396 in the third quarter of 2000 to
$27,740 in the third quarter of 2001, due to a greatly decreased interest rate
for the investment of cash flow in excess of operating needs. Interest income
should continue to decrease slightly in 2001 primarily due to expected further
reductions in interest rates before the end of the year.

Nine Months Ended September 30, 2001 and 2000

  ----------------------------------------------------------------------------
  Summary of Operations - Nine Months Ended September 30,
  -----------------------------------------------------------------------------
                                          2001            2000         % change
  -----------------------------------------------------------------------------
  Revenues                              $237,115         $234,082            1%
  Operating Expenses:                 $2,463,232       $1,248,046           97%
  Other Expense (Income)                ($10,702)         $62,277         -117%
                              -------------------------------------------------
  Net Loss:                            2,215,415)     ($1,076,241)         106%
  -----------------------------------------------------------------------------

     Total revenues increased slightly from $234,082 for the first nine months
of 2000 to $237,115 for the first nine months of 2001 mainly as a result of the
following:

     o    Four active NIH research contracts:
     0    "Islets from Islet Progenitor/Stem Cells for Implantation", and
     o    "M3 Receptor: Diagnostic Marker for Sjogren's Syndrome"
          "Oxalobacter Formigenes Diagnostic Kit Development"
     0    "Coating of Urinary Protheses to Prevent Encrustation"

     We expect revenue to increase slightly during the fourth quarter of 2001
because of 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"
        for a total of approximately $500,000;
     o   A two-year NIH Phase II Small Business Innovative Research ("SBIR")
         grant entitled "Digestion of Food Oxalate" for a total of
         approximately $783,000.

------------------------------------------------------------------------------
            G&A Expenses - nine months 2001 vs. 1st nine months 2000
------------------------------------------------------------------------------
                                     2001             2000       Percent Change
------------------------------------------------------------------------------
Personnel-related                     395,092         246,800        60.09%
Professional fees                      80,000          51,461        55.46%
Office & supplies                      38,968          27,495        41.73%
Rent & utilities                       21,213          13,937        52.21%
Capital-raising                        48,424             935      5076.71%
Other G&A                             107,402         116,526        -7.83%
                                   --------------------------------------------
 Total G&A                            691,099         457,154        51.17%
------------------------------------------------------------------------------

     Operating, general, and administrative expenses increased 51% from $457,154
for the nine months ended September 30, 2000 to $691,099 for the nine months
ended September 30, 2001. These increased expenses reflect an increase in the
scale of operations, including:

     o   increased personnel and related payroll expenses;
     o   increased professional fees, including legal and accounting;
     o   increased supplies;
     o   increased rent and utilities usage as a result of additional
         office space;
<PAGE>

     o   increased capital-raising activities;
     o   support of increased research activities;

offset somewhat by a decrease in other miscellaneous administrative expenses.

     We expect our operating, general and administrative expenses to continue to
increase throughout the rest of 2001 as a result of increased research
activities resulting in a need for increased administrative activities.

         Research and development expenditures consist primarily of:

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

------------------------------------------------------------------------------
R&D Expenses - Nine Months ended 9/30/01 9/30/00
------------------------------------------------------------------------------
                                   YTD 2001         YTD 2000    Percent Change
------------------------------------------------------------------------------
Personnel-related                   491,4 21         258,488        90.11%
Lab & animal                        444,021         100,484       341.88%
Consultants & subcontracts          385,047         230,669        66.93%
Clinical/pre-clincical               99,684               0       #DIV/0!
Rent & utilities                    113,290          71,958        57.44%
Regulatory & quality                 37,087               0       #DIV/0!
Deprec & amort                       73,090          43,947        66.31%
Scientific advisors                  71,567          52,350        36.71%
Other R&D                            56,927          32,996        72.53%
                                  ---------------------------------------------
  Total R&D                       1,772,133         790,892       124.07%
------------------------------------------------------------------------------

     Research and development expenses increased 124% from $790,892 for the nine
months ended September 30, 2000 to $1,772,133 for the nine months ended
September 30, 2001. These increased expenses reflect an increase in the scale of
operations, including

     o  increased laboratory personnel and related payroll expenses;
     o  increased laboratory-related supplies and animal expenses;
     o  increased regulatory consultant's fees due to scale-up of operations;
     o  increased pre-clinical and clinical activities;
     o  increased laboratory rent and associated utilities due to increased
        space;


<PAGE>

     o  increased amortization of patents;
     o  increased depreciation on laboratory equipment;
     o  increased scientific advisors fees; and
     o  an increase in other miscellaneous research and development activities.

     Our research and development expenses will continue to increase throughout
the fourth quarter of 2001 due to an increase in the scale of operations as we
prepare for our pre-IND meeting with the FDA.

------------------------------------------------------------------------------
Interest Income & Expense - Nine months ended 9/30/01 vs. 9/30/00
------------------------------------------------------------------------------
                                YTD 2001         YTD 2000     Percent Change
Interest Income                   70,258          44,027        59.58%
Interest Expense                  59,556         106,304       -43.98%
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     Interest expense decreased 44% from $106,304 for the nine months ended
September 30, 2000 to $59,556 for the nine months ended September 30, 2001 due
primarily to the re-payment of the officer's bridge loans and the conversion of
deferred administrative fees and salaries in mid-2001. Interest expense should
decline further in 2001 as a result of the maturity of unsecured subordinated
notes in September 2001.

     Interest income increased almost 60% from $44,027 for the nine months ended
September 30, 2000 to $70,258 for the nine months ended September 30, 2001.
Interest income should continue to decrease slightly in 2001 primarily due to
expected further reductions in interest rates before the end of the year.

Liquidity and Capital Resources

     Operations during the first nine months of 2001 have been funded primarily
from the funds provided from the equity investments by Q-Med, AB ("Q-Med"), our
majority shareholder, and funds from NIH grants. We do not have any material
bank financing arrangements.

     On July 11, 2001, we received the remaining $3,353,303 which was called for
in our agreement with Q-Med, for the prior issuance of stock. This agreement
also gave Q-Med the right of first refusal to offer to redeem, at the maturity
date on August 31, 2001, from all holders electing not to convert, up to
$787,270 in face amount of our convertible unsecured notes.

     In September 1996, the Company completed the private placement of $787,270
in convertible unsecured notes due August 2001. The due date for conversion was
extended through September 28, 2001 at which time, $610,370 had been converted
into 277,175 shares of common stock. Q-Med and other interested parties have
committed to purchasing $26,800 of these notes, leaving $150,100 to be paid by
the Company.
<PAGE>

     A summarization of the grant funds received from NIH under which we
received payments during the first nine months of 2001, and pending NIH grants
follows:

    o  In September 1999 we received an award of  $200,000 (covering a 23-month
       period) from the NIH to support our diabetes research entitled "Islets
       from Islet Progenitor/Stem Cells for Implantation". We subcontracted
       $25,000 under this grant, and have utilized the entire remaining balance
       of approximately $43,000 in 2001.

    o  In September 2000 we were awarded another NIH SBIR award for research
       entitled "M3 Receptor: Diagnostic Marker for Sjogren's Syndrome".  We
       subcontracted about $45,000 to the University of Florida and drew on the
       rest of the funds available through the expiration of the grant in the
       first quarter of 2001.

     o  Also in September, 2000, we awarded another NIH SBIR grant for $99,958
        and entitled "Coating of Urinary Protheses to Prevent Encrustation".
        We drew on the remaining funds available through September of 2001.

     o  Also in September, 2000, we were awarded another NIH SBIR grant, for
        $99,958 and entitled  "Oxalobactor Formigenes Diagnostic Kit
        Development".  We drew on the remaining funds available through
        September of 2001.

     o  In September, 2001 NIH awarded us a Phase II STTR grant, for $500,000
        and entitled "Enteric Elimination and Degradation of Oxalic Acid".
        We will begin drawing on these funds in November, 2001.

     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.  We will begin drawing on these funds in November, 2001.

     o   We also have other grant applications pending.

     At September 30, 2001 we have $3,158,456 in cash and cash equivalents,
compared with $2,571,808 at September 30, 2000. 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.

     We expect annual lease expenses to be approximately $167,000 for 2001. We
will continue to have a need to purchase additional laboratory equipment and
estimate that we will need to purchase at least $100,000 of capital laboratory
equipment during the remainder of 2001.

     We had negative cash flows from operations in the first nine months of 2001
of $1,846,349 as compared to $909,734 in the first nine months of 2000. Cash
increased, in total for the first nine months of 2001 by $1,358,178 due
primarily to collection of amounts owed on prior stock issuances, while we had
an increase in cash of $2,549,447 during the nine months ended September 2000.
We have spent and expect to continue to spend substantial funds to complete our
planned product development efforts, commence clinical trials, and diversify our
technology. Our future capital requirements and the adequacy of available funds
will depend on numerous factors, including

     o   the successful commercialization of oxalate products;
     o   the successful commercialization of our islet replacement therapy
         products;
<PAGE>
     o   progress in our product development efforts;
     o   the magnitude and scope of development efforts;
     o   progress with preclinical studies and clinical trials;
     o   the cost of contract manufacturing and research organizations;
     o   cost of filing, prosecuting, defending, and enforcing patent claims
         and other intellectual property rights;
     o   competing technological and market developments;
     o   the state of the United States economy; and
     o   the development of strategic alliances for the development and
         marketing of our  products.

     We will continue to be required to obtain additional funds through equity
or debt financing, strategic alliances with corporate partners and others,
mergers or the sale of substantially all of our assets, or through other sources
in order to bring our drug and device products through regulatory approval to
commercialization. We do not have any material committed sources of additional
financing. We cannot assure you that additional funding, consolidation, or
alliance, if necessary, will be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to delay, scale-back, or
eliminate certain aspects of our operations or attempt to obtain funds through
arrangements with collaborative partners or others that may require us to
relinquish rights to certain of our technologies, product candidates, products,
or potential markets. If adequate funds are not available, our business,
financial condition, and results of operations will be materially and adversely
affected.

     We expect that our existing funds and research grants will be sufficient to
fund our operations through 2002. We have the ability to scale-back operations,
as necessary, in order to extend the use of operating cash. There can be no
assurance that any additional financing required in the future will be available
on acceptable terms, if at all.


Part II - Other Information

Item 2.  Changes in Securities and Use of Proceeds

     Set forth below is information as to securities sold by Ixion during the
quarter ended September 30, 2001 which were not registered under the Securities
Act of 1933 (the "Act"). No underwriters were involved in any of the sales, so
there were no underwriting discounts or commissions. All outstanding securities
resulting from the following sales are deemed to be restricted securities for
the purposes of the Act. All certificates representing such issued and
outstanding restricted securities of the Company have been properly legended and
the Company has issued "stop transfer" instructions to it's transfer agent with
respect to such securities, which legends and stop transfer instructions are
presently in effect unless such securities have been registered under the
Securities Act or have been transferred pursuant to an appropriate exemption
from the registration provisions of the Securities Act.

Item 5.  Other Information

None
<PAGE>
Item 6.  Exhibits and Reports on Form 8-K

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.

(a)     Exhibits

Exhibit           Description                                             Page

(2)         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

(23)        Consents of Experts and Counsel                                None

(24)        Power of Attorney                                              None

(99)        Additional Exhibits                                            None


   *Filed herewith

         (b)     Reports on Form 8-K

                                                     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 5 2001              By: /s/ Weaver H. Gaines
                                        ---------------------
                                        Weaver H. Gaines
                                        Chairman and Chief  Executive Officer
                                        Chief Financial Officer

Dated: November 5, 2001             By: /s/ Kimberly A. Ramsey
                                        ----------------------
                                         Kimberly A. Ramsey
                                         Vice President and Controller
                                        (Principal Accounting Officer)

<PAGE>


         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)         Additional Exhibits                                           None



   *Filed herewith