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

                                FORM 10-QSB

                 Quarterly Report Under Section 13 or 15(d)
                 of the Securities and Exchange Act of 1934

For the Quarter Ended:                               Commission File Number
   June 30, 2001                                             0-27727

                              GENE-CELL, INC.
               (Name of small business issuer in its chapter)

     Nevada                                                 91-1766174
-------------------------------                  --------------------------
(State or other jurisdiction of                  (I.R.S. Employer I.D. No.)
incorporation or organization)

     1010 Hercules, Houston, Texas                                 77058
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)

     Issuer's telephone number, including area code     (281) 461-7996
                                                       ----------------

     Securities registered pursuant to section 12(b) of the Exchange Act:

          None

     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
report(s), and (2) has been subject to such filing requirements for the
past 90 days.  (1) Yes [X ]  No [  ]

     State the number of shares outstanding of each of the registrants
classes of common equity, as of the latest practicable date:

     As of August 16, 2001, issuer had 19,653,412 shares of its $.001 par
value common stock outstanding.




     This Form 10-QSB contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, which
act contains a safe harbor for forward looking statements.  The Company
believes that investors would be benefitted by the cautionary language
included in this paragraph.  For this purpose any statements contained in
this Form 10-QSB that are not statements of historical fact may be deemed
to be forward-looking statements.  Without limiting the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "estimate," or
"continue" or comparable terminology are intended to identify forward-
looking statements.  These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending
on a variety of factors, many of which are not within the Company's
control.  These factors include but are not limited to economic conditions
generally and in the industries in which the Company may participate;
competition within the Company's chosen industry, including competition
from much larger competitors; technological advances and failure by the
Company to successfully develop business relationships.

PART  I   FINANCIAL INFORMATION

Item 1         Financial Statements





                                     2







                              GENE-CELL, INC.
                  (A CORPORATION IN THE DEVELOPMENT STAGE)
                         --------------------------




                  UNAUDITED CONDENSED FINANCIAL STATEMENTS
                 as of June 30, 2001 and December 31, 2000
   and for the three months and six months ended June 30, 2001 and 2000,
           and for the period from inception, December 12, 1996,
                              to June 30, 2001
                                (Unaudited)

















                                    F-1



                                 GENE-CELL, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                                TABLE OF CONTENTS
                              ---------------------


                                                                        Page
                                                                       ------

Unaudited Condensed Financial Statements:

  Unaudited Condensed Balance Sheet as of
    June 30, 2001 and December 31, 2000                                   F-3

  Unaudited Condensed Statement of Operations
    for the three months and six months ended
    June 30, 2001 and 2000, and for the period
    from inception, December 12, 1996, to
    June 30, 2001                                                         F-4

  Unaudited Condensed Statement of Stockholders'
    Equity for the six months ended June 30,
    2001                                                                  F-5

  Unaudited Condensed Statement of Cash Flows
    for the six months ended June 30, 2001
    and 2000, and for the period from inception,
    December 12, 1996, to June 30, 2001                                   F-6

Notes to Unaudited Condensed Financial Statements                         F-7



















                                       F-2


                                 GENE-CELL, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                             CONDENSED BALANCE SHEET
                       June 30, 2001 and December 31, 2000
                             -----------------------
<Table>
<Caption>
                                                        June 30,    December 31,
                                                          2001          2000
                                                       (Unaudited)     (Note)
                                                      ------------  ------------
     ASSETS
     ------
<S>                                                  <C>           <C>
Current assets:
  Cash and cash equivalents                           $   148,584   $ 1,142,083
                                                      ------------  ------------
    Total current assets                                  148,584     1,142,083

Deposits                                                   13,289        14,985

Equipment under capital leases, net                       260,813       199,701
                                                      ------------  ------------
      Total assets                                    $   422,686   $ 1,356,769
                                                      ============  ============

     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------

Current liabilities:
  Note payable to a bank                              $         -   $    30,000
  Current portion of capital lease obligations             83,528        53,298
  Accounts payable and accrued liabilities                 40,215       167,858
                                                      ------------  ------------
    Total current liabilities                             123,743       251,156

Capital lease obligations, net of current
  portion                                                 117,855        70,300

      Total liabilities                                   241,598       321,456

Commitment and contingencies

Stockholders' equity:
  Common stock, $.001 par value, 100,000,000
    shares authorized, 19,653,412 shares issued
    and outstanding                                        19,653        19,653
  Additional paid-in capital                            4,381,634     4,381,634
  Losses accumulated during the development
    stage                                              (4,220,199)   (3,365,974)
                                                      ------------  ------------
    Total stockholders' equity                            181,088     1,035,313

      Total liabilities and stockholders'
        equity                                        $   422,686   $ 1,356,769
                                                      ============  ============
</Table>
Note:  The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
                             See accompanying notes.
                                       F-3

                                 GENE-CELL, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                   UNAUDITED CONDENSED STATEMENT OF OPERATIONS
      for the three months and six months ended June 30, 2001 and 2000 and
       for the period from inception, December 12, 1996, to June 30, 2001
                                   __________
<Table>
<Caption>

                               Three       Three        Six          Six
                              Months      Months       Months       Months
                               Ended       Ended       Ended        Ended      Inception
                               June         June         June         June       to June
                            30, 2001      30, 2000     30, 2001     30, 2000    30, 2001
                          ----------- ------------- ------------ ------------ ------------
<S>                      <C>          <C>           <C>          <C>          <C>

Operating, general and
  administrative
  expenses                $  129,405   $   30,081   $  250,860  $    74,152  $ 1,161,144
Research and development
  costs                      311,755      151,150      598,263      267,581    2,959,993
                         ------------ ------------ ------------ ------------ ------------
  Loss from operations      (441,160)    (181,231)    (849,123)    (341,733)  (4,121,137)

Interest income                2,026         3,720      10,119        4,978       42,342
Interest expense              (9,940)      (3,417)     (15,221)      (6,221)    (141,404)
                         ------------ ------------ ------------ ------------ ------------
Net loss                  $ (449,074) $  (180,928)  $ (854,225) $  (342,976) $(4,220,199)
                         ============ ============ ============ ============ ============

Weighted average
  shares
  outstanding             19,653,412   17,778,412   19,653,412   17,778,412
                         ============ ============ ============ ============
Net loss per
  common share           $     (0.02) $     (0.01) $     (0.04) $     (0.02)
                         ============ ============ ============ ============


</Table>


                          See accompanying notes.
                                    F-4

                              GENE-CELL, INC.
                  (A CORPORATION IN THE DEVELOPMENT STAGE)
           UNAUDITED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
                   for the six months ended June 30, 2001
                            --------------------

<Table>
<Caption>
                                                                 Losses
                                                               Accumulated
                            Common Stock          Additional   During the
                       -------------------------    Paid-In    Development
                            Shares      Amount      Capital       Stage        Total
                       ------------ ------------ ------------ ------------ ------------
<S>                   <C>           <C>          <C>          <C>          <C>


Balance at
December 31, 2000       19,653,412  $    19,653  $ 4,381,634  $(3,365,974) $ 1,035,313

Net loss                       -           -            -      (854,225)    (854,225)
                       ------------ ------------ ------------ ------------ ------------
Balance at
June 30, 2001           19,653,412  $    19,653  $ 4,381,634  $(4,220,199) $   181,088
                       ============ ============ ============ ============ ============


</Table>









                          See accompanying notes.
                                    F-5

                              GENE-CELL, INC.
                  (A CORPORATION IN THE DEVELOPMENT STAGE)
                UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
            for the six months ended June 30, 2001 and 2000, and
     for the period from inception, December 12, 1996, to June 30, 2001
                                 __________

<Table>
<Caption>


                                       Six Months   Six Months    Inception
                                          Ended        Ended         to
                                         June 30,     June 30,     June 30,
                                          2001         2000         2000
                                      ------------ ------------ ------------
<S>                                  <C>           <C>          <C>

Cash flows from operating activities:
  Net loss                            $  (854,225) $  (342,976) $(4,220,199)
  Adjustments to reconcile net loss
    to net cash used by operating
    activities                            (84,815)      15,233    1,050,064
                                      ------------ ------------ ------------
      Net cash used by operating
        activities                       (939,040)    (327,743)  (3,170,135)

Cash flows from financing activities:
  Proceeds from sale of common stock         -            -       2,062,800
  Proceeds from collection of
    subscription receivable                  -         500,000    1,500,000
  Payment of stock offering costs            -            -         (64,100)
  Proceeds from notes payable              13,764         -         344,651
  Payments on notes payable               (43,764)        -        (266,764)
  Payments on capital lease
   obligations                            (24,459)     (52,322)    (257,868)
                                      ------------ ------------ ------------
      Net cash provided (used) by
        financing activities              (54,459)     447,678    3,318,719
                                      ------------ ------------ ------------
Net increase (decrease) in cash and
  cash equivalents                       (993,499)     119,935      148,584

Cash and cash equivalents at
  beginning of period                   1,142,083       28,670         -
                                      ------------ ------------ ------------

Cash and cash equivalents at end of
  period                              $   148,584  $   148,605  $   148,584
                                      ============ ============ ============
</Table>



                          See accompanying notes.
                                    F-6


                              GENE-CELL, INC.
                  (A CORPORATION IN THE DEVELOPMENT STAGE)
             NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                            -------------------

1.   Organization
     ------------
     Gene-Cell, Inc. (the "Company") is a Nevada Corporation involved in
     biopharmaceutical research.  The Company's research is directed at
     developing gene-based therapies for treatment of a wide variety of
     genetic diseases and disorders using its proprietary technology for
     microinjecting DNA and proteins into living cells.  The Company was
     originally incorporated as Becniel and subsequently adopted name
     changes to Tzaar Corporation and, finally, to Gene-Cell, Inc.  The
     Company is considered a development stage enterprise because it has
     not yet generated revenue from sale of its products.  Since its
     inception, the Company has devoted substantially all of its efforts to
     research and development and the search for sources of capital to fund
     its efforts.

2.   Interim Financial Statements
     ----------------------------

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles
     for interim financial information and with the instructions to Form
     10-QSB and Article 10 of Regulation S-B.  Accordingly, they do not
     include all of the information and footnotes required by generally
     accepted accounting principles for complete financial statements.  In
     the opinion of management, all adjustments (consisting of normal
     recurring accruals) considered necessary for a fair presentation have
     been included.  Operating results for the six month and three month
     periods ended June 30, 2001 and 2000 are not necessarily indicative of
     the results that may be expected for the respective full years.


     A summary of the Company's significant accounting policies and other
     information necessary to understand these consolidated interim
     financial statements is presented in the Company's audited financial
     statements for the years ended December 31, 2000 and 1999.
     Accordingly, the Company's audited financial statements should be read
     in connection with these financial statements.










                                 Continued
                                    F-7


                              GENE-CELL, INC.
                  (A CORPORATION IN THE DEVELOPMENT STAGE)
        NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, Continued
                           ---------------------

3.   Comprehensive Income
     --------------------

     The Company has adopted Statement of Financial Accounting Standards
     ("SFAS") No. 130, Reporting Comprehensive Income, which requires a
     company to display an amount representing comprehensive income as part
     of the Company's basic financial statements.  Comprehensive income
     includes such items as unrealized gains or losses on certain
     investment securities and certain foreign currency translation
     adjustments.  The Company's financial statements include none of the
     additional elements that affect comprehensive income.  Accordingly,
     comprehensive income and net income are identical.


4.   Estimates
     ---------
     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates
     and assumptions that affect the reported amounts of assets and
     liabilities and disclosures of contingent assets or liabilities at the
     date of the financial statements and the reported amounts of revenues
     and expenses during the reporting period.  Actual results could differ
     from those estimates.


5.   Income Tax
     ----------

     The difference between the Federal statutory income tax rate and the
     Company's effective income tax rate is primarily attributable to
     increases in valuation allowances for deferred tax assets relating to
     net operating losses.


6.   Non-Cash Investing and Financing Activities
     -------------------------------------------

     During the six months ended June 30, 2001, the Company acquired
     property and equipment under capital lease obligations of $102,244.












                                    F-8


Item 2    Plan of Operation

     For a complete understanding, this Plan of Operations should be read
in conjunction with Part I- Item 1. Financial Statements to this Form 10-
QSB.

     Gene-Cell, Inc.(the "Company"), is a Nevada corporation involved in
biopharmaceutical research. The Company is considered a development stage
enterprise because it has not yet generated revenue from sale of its
products.  Since its inception, the Company has devoted substantially all
of its efforts to research and development and the search for sources of
capital to fund its efforts.

Business of the Company
-----------------------
     The Company operates in the biotechnology sector of the pharmaceutical
industry sometimes referred to as the biopharmaceutical or life science
industry.  The mission of the Company is to become a global leader in non-
embryonic stem cell gene therapy by using the Company's non-viral
technologies to repair and/or compensate for mutations in defective genes.
A change in the DNA sequence or code of a gene is called a mutation.  Often
mutations are harmless; however, some mutations lead to serious disease.
There are about 4,000 diseases that have been traced to gene disorders or
mutations including Sickle Cell Disease and Muscular Dystrophy.

     The Company's approach differs from conventional medical treatment of
genetic diseases.  Rather than treating the symptoms, the gene therapy
proposed by the Company focuses on the cause of disease at the origin, the
DNA. To further the Company's efforts in gene therapy research it currently
employs a delivery technique called microinjection.  Microinjection
involves injecting cells with minute amounts of material using very small
glass needles.  To utilize this technique the Company developed new needles
because commercially available needles were too large and would cause
physical damage to the cell being injected.

     In addition to the development of a smaller needle, the system
developed by the Company requires that a cell be immobilized (attached to a
plastic dish or surface) to perform microinjection.  The Company has made
major advances in this area by developing a novel proprietary method for
immobilizing cells without losing cell function.   The development of this
immobilization technology was critical to the success of the Company and it
has filed for a patent on this technology.




                                     11


     A unique aspect of the Company's non-viral process is that it is
performed on a patient's stem cells outside the body or ex vivo, thus the
patient does not need to be present for the gene modification.  Stem cells
are special cells in the body that are basic or building block cells.
These cells have the ability to continually create large numbers of more
specialized cells.  The Company is applying its technology to non-embryonic
stem cells.  These are special types of stem cells that can be found in
adult tissues such as bone marrow, as well as in blood derived from the
umbilical cord after birth.  The Company's technology allows for attaching
or immobilizing human stem cells.  These cells can then be microinjected
with properly encoded, healthy DNA.  Following this process, the DNA
treated stem cells can be reintroduced into the patient's body where they
can re-populate.  It is anticipated that these DNA treated and/or corrected
cells will produce millions of cell offspring transmitting the desired
effects. The Company has selected to initially focus on blood stem cells
for gene therapy.   Blood stem cells are referred to as "mother" blood
cells and are also found in bone marrow and umbilical cord blood.  These
"mother" blood cells have the capacity to give rise to all the cells that
make up the blood, including white and red blood cells.  Through
microinjection of blood stem cells, the probability of delivering DNA to
cells that will create cell offspring with the desired effect may be
enhanced.


     The Company's technology may also be beneficial to the pharmaceutical
industry for studying the function(s) of individual genes and the possible
contribution of these genes to various diseases.

     In March of 2001, the Company entered an agreement with Technobotics,
Inc. ("TI"), a Texas corporation, in which it will combine efforts with TI
to research and develop an Automated Microinjection Workstation ("AMW") for
clinical applications.  The Company will share both costs and benefits of
such research and development efforts.  In addition, TI has been granted
75,000 stock options at $1.00 share.  TI brings expertise in automation and
computer vision processing that are vital to the successful development of
an AMW.

     The Board of Director's Compensation Committee, during the first and
second quarters of 2001, has deliberated and approved the specific issuance
of additional key employee and director stock options per the 1996 Stock
Option Plan.   This was to bring the Gene-Cell option award schedule into
alignment with normative standards within the biotechnology industry.
These options, will be issued during the third quarter of this year.

     The Company employs acceptable scientific methods of research, and
their technology has been verified through test results and review both at
the Company and at the University of Texas Medical Branch.  This work has
been presented in university lectures, at gene therapy conferences, and was
recently published in Blood (Blood 95: 437-444, 2000), the Journal of the
American Society of Hematology.  In order to protect its technology, the
Company has filed initial patent applications on the related technology and
has filed continuation-in-part patent applications during the first quarter
of fiscal 2001.


                                     12


Source of Funds
---------------
     The Company believes it has secured sufficient funding through
September, 2001, from private investors.  The Company is actively seeking
bridge financing and additional funding.  It is customary for biotech
companies at a certain stage of research to actively pursue partnerships
and/or licensing agreements with large biopharmaceutical companies.  The
Company is currently seeking similar relationships with two companies and
has entered a collaborative agreement with Athersys, a Delaware
corporation.  The two relationships referred to are in the early stages of
development and there can be no assurance that any relationship will ever
fully develop with either company.  Future partnership(s)/investment(s)
with a pharmaceutical/large biotechnology company may be centered on one
particular disease or a group of related diseases in which said company has
clinical and financial interests.  Such an arrangement would provide the
Company with revenue to further develop the technology required for a
particular program, additional scientific and legal expertise, and
assistance and guidance through the regulatory processes required prior to
beginning clinical trials.

     In addition, licensing agreements and/or partnerships with various
pharmaceutical firms relating to gene function studies would result in
revenues over the next few years.  When possible, royalties could be
generated from the sale of pharmaceuticals developed using information
gained from the Company's gene modified cells.

Results of Operations
---------------------

     During the period from inception, December 12, 1996, to June 30, 2001,
the Company has not generated any revenue from sales of clinical products
and does not expect to generate any material revenue from sales of clinical
products for at least two to three years because during such time period
management will use substantially all Company resources for further
development of its technology, including microinjection tools.


     As of June 30, 2001, the Company had an accumulated deficit of
($4,220,199) funded by paid-in capital.  During the quarter ended June 30,
2001, the Company had losses from operations of ($449,084) compared to
losses in the same quarter of 2000 of ($180,928).  The increase is do to
increased research and development efforts such as the hiring of additional
employees. The Company does not expect to make any major capital
expenditures in the foreseeable future, but expects that operating losses
will continue until such time as product sales generate sufficient revenues
to fund its continuing operations, as to which there can be no assurance.

     The Company has financed its operations mainly through the sale of its
common stock and has been entirely dependent on outside sources of
financing for continuation of operations.  In October 2000, the Company
received $1,500,000 through sale of units comprised of common stock and
warrants.

     For the remainder of fiscal 2001, the Company expects monthly
expenditures to decrease  slightly to approximately $150,000. The Company
does not plan to hire additional personnel during fiscal year 2001 unless
new collaborations with cash or additional investment requires and allows
for additional employees.   The Company will be required to raise
additional funding sometime in the third quarter in order to continue
operations. There is no assurance that the Company will be successful in
obtaining additional funding on attractive terms or at all.

                                     13

     The Company's capital requirements will depend on numerous factors,
including the progress of its research and development programs; the time
and cost involved in obtaining regulatory approvals; the cost of filing,
prosecuting, defending and enforcing any patent claims and other
intellectual property rights; the economic impact of competing
technologies; developments and changes arising from the Company's
continuing research; and the terms of any new collaborative, licensing and
other arrangements that the Company may establish.

     The Company's ability to achieve profitability will depend, in part,
on its ability to successfully develop clinical applications and obtain
regulatory approvals for its products and to develop the capacity to
manufacture and market such products on a wide scale.  There is no
assurance that the Company will be able to successfully make the transition
from research and development to manufacturing and selling commercial
microinjection therapy products on a broad basis.  While attempting to make
this transition, the Company will be subject to all risks inherent in a
growing venture, including the need to produce reliable and effective
products and to develop marketing expertise and an effective sales force.

     Further, the Company's success may depend, in part, on revenues
derived from the sale of the microinjection therapy products in the health
care market.  In the event a market for the products the Company intends to
produce does not develop as anticipated, the Company's business, financial
condition and results of operations will be adversely affected.
Additionally, cost containment measures instituted by health care providers
as a result of regulatory reform or otherwise could result in greater
selectivity in the allocation of capital funds, and such, selectivity could
have a material adverse effect on the Company's ability to sell its
microinjection therapy and services.

     The report from the Company's independent accountants includes an
explanatory paragraph that describes substantial doubt concerning the
ability of the Company to continue as a going concern, without continuing
additional contributions to capital.  The Company may incur losses for the
foreseeable future due to the significant costs associated with research
and development activities which will be necessary for further development
of applications for the Company's microinjection therapy.  See "Financial
Statements - Report of Independent Accountants".

PART II   OTHER INFORMATION

Item 1         Legal Proceedings
          None.

Item 2         Changes in Securities



Recent Sales of unregistered securities.

     No instruments defining the rights of the holders of any class of
registered securities have been materially modified, limited or qualified.

     The following securities, which were not registered under the
Securities Act of 1933 were issued during the last three fiscal years:


                                     14

     Stock Option Grants
     -------------------
     Each Stock Option Grant listed below vests immediately at the grant
date.  All options listed below are exercisable at a price of $1.00 for a
period of seven years beginning at the grant date.

     Technonobitcs, Inc., a Texas corporation, received options to purchase
up to 75,000 shares of common stock on March 12, 2001.


Item 3         Defaults Upon Senior Securities
          None.

Item 4         Submission of Matters to a Vote of Security Holders
          None.

Item 5         Other Information
           None.

Item 6         Exhibits and Reports on Form 8-k

     (a) Exhibits - None.

     (b) Reports on Form 8-k - No reports on Form 8-k were filed during the
quarter.








                                     15


                                 Signatures

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


                                   Gene-Cell, Inc.

Date: August 20, 2001              By: /s/ Brian R. Davis
                                   --------------------------
                                   President


Date: August 20, 2001              By: /s/ David Brown
                                   ----------------------------
                                   Secretary














                                     16

                                 Signatures

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

                                   Gene-Cell, Inc.

Date: August 20, 2001              By:
                                   ------------------------------
                                   President


Date: August 20, 2001              By:
                                   ------------------------------
                                   Secretary










                                     16