10-K/A 1 ix10ksba2000.txt IXION 10KSBA 2000 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM 10-KSB/A (Amendment No. 1) (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 2000 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission file number 333-34765 IXION BIOTECHNOLOGY, INC. (Exact Name of Small Business Issuer in Its Charter) DELAWARE 59-3174033 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 13709 PROGRESS BLVD., BOX 13, Alachua, Florida 32615 ALACHUA, FL 32615 (Address of Principal Executive Offices) (Zip Code) 386-418-1428 (Issuer's Telephone Number, Including Area Code) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. _X__ - The issuer's revenue for the most recent fiscal year, ending December 31, 2000, was $403,782. The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of March 15, 2001, was approximately $ 4,200,000 based on the most recent sales of newly-issued common equity. There is no public market for the issuer's common stock. The number of shares of the issuers common stock, par value $.01 per share, outstanding as of March 15, 2001, was 6,861,791. DOCUMENTS INCORPORATED BY REFERENCE: DOCUMENT PART INTO WHICH INCORPORATED -------- ---------------------------- The Proxy Statement to be used in connection with Part III the annual meeting of stockholders to be held June 15, 2001 (the "Proxy Statement"), to be filed with the Commission prior to April 30, 2001, pursuant to Rule 14a-101, Schedule 14A of the Exchange Act. The undersigned registrant hereby amends Item 5 and Item 6 of its Form 10-KSB for the fiscal year ended December 31, 2000, as filed with the Securities and Exchange Commission on March 30, 2001, to clarify its disclosure regarding the sale of unregistered shares to Q-Med, AB (publ) and its U.S. subsidiary, Qvestor, LLC.. Part II Item 5. Market for Common Equity and Related Stockholder Matters. Unregistered Sales of Securities Set forth below is information as to securities sold by Ixion within the past three years that 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 are deemed to be restricted securities for the purposes of the Act. All certificates representing our issued and outstanding restricted securities have been properly legended and we have issued "stop transfer" instructions to our 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 Act or have been transferred pursuant to an appropriate exemption from the registration provisions of the Act. Restricted shares of common stock have been issued to members of the board of directors, members of the Scientific Advisory Board, and employees and consultants under our Stock Compensation Plan as follows: On July 1, 1998, 23,450 shares (1,000 shares to each of two directors, 5,000 shares to a newly-elected director, 1,000 shares to each of five members of the Scientific Advisory Board, 5,000 shares to a newly-appointed member of the Scientific Advisory Board, and 6,450 shares to employees and officers for services, in aggregate, valued at $234,500 (a portion of which is unearned compensation) or $10.00 per share; On July 12, 1999, 22,400 shares (1,000 shares to each of three directors, 5,000 shares to each of two newly-elected directors, 1,000 shares to each of six members of the Scientific Advisory Board, and 3,400 shares to employees and officers for services, in aggregate, valued at $89,600 (a portion of which is unearned compensation) or $4.00 per share; In January, March, June and December of 2000, an aggregate of 1,493 shares to our Associate Director of Research, Diabetes Division, for services, in the aggregate, valued at $5,972 (a portion of which is unearned compensation) or $4.00 per share; In August, 2000 25,000 shares (1,000 shares to each of five directors, 5,000 shares to a newly-elected director, 1,000 shares to each of seven members of the Scientific Advisory Board, and 8,000 shares to employees and officers for services, in aggregate, valued at $100,000 (a portion of which is unearned compensation) or $4.00 per share; From September to December of 2000, 20,940 shares to employees and officers for services, in aggregate, valued at $83,760 (a portion of which is unearned compensation) or $4.00 per share; On October 16, 2000, 5,000 shares to a newly-appointed member of the Scientific Advisory Board valued at $20,000 (a portion of which is unearned compensation) or $4.00 per share. We issued the above securities without registration in reliance upon the exemption provided by Section 4(2) of the Act as a transaction to a limited number of sophisticated investors which did not involve a public offering, general solicitation, or general advertisement and the exemption provided by Rule 701 promulgated under the Act. On April 16, 1999, we entered into an agreement in principle with Q-Med, AB (publ), a biotechnology company with headquarters and operations in Uppsala, Sweden. This agreement was amended on September 9, 1999. Pursuant to the agreement in principle, we issued a promissory note in the amount of $300,000, convertible into shares of common stock at a price of $2.00 per share. The promissory note was converted into 150,000 shares of restricted common stock on July 7, 1999. The agreement in principle granted Q-Med an option to purchase 37,500 shares of additional shares of common stock monthly as well as up to a total of 3,900,000 shares by July 15, 2000. Pursuant to the option in the agreement in principle we issued 412,500 additional shares of restricted common stock for $825,000, or $2.00 per share, as follows: September 7, 1999 37,500 shares at $2.00 per share September 10, 1999 37,500 shares at $2.00 per share October 18, 1999 37,500 shares at $2.00 per share November 18, 1999 37,500 shares at $2.00 per share December 10, 1999 37,500 shares at $2.00 per share January 12, 2000 37,500 shares at $2.00 per share February 10, 2000 37,500 shares at $2.00 per share March 14, 2000 37,500 shares at $2.00 per share April, 12, 2000 37,500 shares at $2.00 per share May 12, 2000 37,500 shares at $2.00 per share June 19, 2000 37,500 shares at $2.00 per share We issued the above securities without registration in reliance upon the exemption provided by Section 4(2) of the Act as a transaction to a single sophisticated corporate investor that did not involve a public offering, general solicitation, or general advertisement and in reliance on the exemption provided by the provisions of Regulation S. On July 14, 2000, we entered into a stock purchase agreement with Qvestor, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Q-Med AB (publ). Pursuant to the stock purchase agreement, we issued restricted common stock as follows: 3,337,500 shares to Qvestor, LLC, in exchange for cash of $6,675,000 and non-cash consideration described below. The Company obtained the right to receive a royalty-free license for certain Q-Med intellectual property in non-animal stabilized hyaluronic acid (NASHA). The Company also gave Q-Med a 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 The offered redemption price would be par, in the case of 10% notes, or at 1.5 times par for variable notes. Thereafter Q-Med would have the option, for any redeemed notes acquired, to convert variable notes at a price of $2.10 per share, and 10% notes at a price of $4.20 per share. Cash of $3,321,697 was paid at closing, and the balance of $3,353,303, is due on or before July 14, 2001.(See "The Q-Med Transaction " below) 257,192 shares of common stock to the chairman and chief executive officer, the president and chief financial officer, and an employee, in satisfaction of $1,028,768 in deferred fees and salaries, or $4.00 per share. We issued the above securities without registration in reliance upon the exemption provided by Section 4(2) of the Act as a transaction to a limited number of sophisticated investors that did not involve a public offering, general solicitation, or general advertisement. At various dates between November 6, 1995, to August 31, 2000, we issued warrants to purchase an aggregate of 20,672 shares of restricted common stock, at an exercise price of $2.00 per share, expiring August 31, 2000, to an accredited investor and to the University of Florida Research Foundation. Pursuant to the exercise of those warrants, we issued restricted common stock as follows: 20,672 shares (18,672 shares to The University of Florida Research Foundation and 2,000 shares to the individual accredited investor for total consideration of $41,440 or $2.00 per share. We issued the above securities without registration in reliance upon the exemption provided by Section 4(2) of the Act as a transaction to a limited number of sophisticated investors that did not involve a public offering, general solicitation, or general advertisement. Registered sales of securities: In December, 1997, we commenced the public offering of 400,000 units, for an aggregate of $4,000,000. Each unit consisted of one share of common stock and 0.25 charitable benefit warrant. Each whole charitable benefit warrant entitled someone to purchase one share of common stock at a price of $20.00 per share. On December 10, 1998, we extended the offering through December 10, 1999, and thereafter through March 31,2000. In early 1999, we temporarily suspended the offering, converted the securities offered from units to shares, retroactively reduced the offering price from $10.00 per unit to $4.00 per share, and withdrew 250,000 shares and all unsold charitable benefit warrants from registration. We also adjusted the exercise price for outstanding charitable benefit warrants from $20 per share to $8 per share and increased the number of shares purchasable upon exercise of those warrants from 8,605 shares to 21,513 shares. As a result, a total of 51,630 shares were issued to purchasers in the public offering for no additional consideration. There is no minimum number of shares to be sold in the Offering, and all funds received have gone immediately to the Company. The offering terminated on March 31, 2000. We sold the securities directly (except when sales were to Florida residents, in which case sales were made through Unified Management Corporation, a Florida-registered broker dealer). We received proceeds of $516,000 in connection with the public offering. Offering costs of $124,680 have been offset against the proceeds of the offering through December 31, 2000. As of March 23, 2000, we had sold a total of 129,000 shares and 21, 513 charitable benefits warrants at an aggregate price of $516,000. No payments were made to our directors or officers, or to their associates in connection with the offering. The net proceeds from the offering were used entirely to fund our operations during 1998, 1999, and 2000. Other: There is no public trading market for our securities. As of March 23, 2000, there were approximately 180 shareholders of record of our common stock. We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends on our common stock for the foreseeable future. Item 6. Management's Discussion and Analysis or Plan of Operations The following discussion and analysis should be read in conjunction with the 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. Factors that might cause such a difference include, but are not limited to, those discussed in "Special Note Regarding Forward-Looking Statements." Overview Economic and Industry Outlook U.S. economic activity seemed to decline toward the end of 2000, with the first decline in real business equipment investment in several years. While GDP continued to increase throughout 2000, fourth-quarter growth was the lowest since 1995. Early indications are that the downward trend will continue at lease into 2001. Projections, though, are for a steady increase in total U.S. employment through 2008, with health services listed as one of the five fastest-growing industries. Research and testing services are projected to grow by 40% through 2008. In a highly volatile investment climate, biotechnology companies still managed to raise about $40 billion in 2000, in investments; more than the previous three years combined. Annual product approvals have been steadily increasing, with the largest increase experienced in the last two years. There is a substantial pipeline of products in clinical trials which may also benefit the industry. Funds available to biotechnology companies through the National Institutes of Health have increased $4 billion in the last two years. However, biopharmaceuticals have received only about 3% of total venture capital investment. Continued uncertainty in the public markets will most likely have a negative impact total biotechnology investment from all sources. The Company Since our founding in 1993 and until last year, we were principally involved in research and development, securing patent protection, and raising capital. In July 2000, with the Q-Med transaction, described below, we have been able to change our emphasis to product development, with less attention paid to capital raising. Through 1999 we operated as a development stage company, but in 2000 we commenced our principal operations, being the development and commercialization of biopharmaceuticals and medical devices. We have not received any material revenues, however, from the sale of products. We do not expect any of our drug or device product candidates (which require regulatory approval) to be commercially available for at least several years. We expect to continue to incur substantial research and development costs resulting from o ongoing development programs, o expansion of current and new research and development programs, and o manufacturing of products for use in clinical trials and preclinical and clinical testing of our products. We also expect that operating, general and administrative costs, including o costs of additional administrative personnel, o legal and regulatory costs necessary to support preclinical development and clinical trials, and o costs associated with the creation of a marketing and sales organization, if warranted, will increase in the future, assuming we can finance the increased requirements. Accordingly, we expect to incur operating losses for the foreseeable future. Our operating expenses will depend on several factors, including the pace of research and development. Research and development expenses will depend on the progress and results of our product development efforts, which we cannot predict. We may sometimes be able to control the timing of development expenses in part by accelerating or decelerating preclinical testing and clinical trial activities. As a result of these factors, we believe that period-to-period comparisons in the future may not necessarily be meaningful. Results of Operations Years Ended December 31, 2000 and 1999 Percent 2000 1999 Change ____________ ____________ _________ Revenues: $ 403,782 $ 99,486 305.87% Expenses: 1,851,129 1,225,276 51.08% ____________ ____________ _________ NET LOSS $(1,477,347) $(1,125,790) 28.57%

Graphics omitted Total revenues increased by 306% from $99,486 for the year ended December 31, 1999 to $403,782 for the year ended December 31, 2000 mainly as a result of the following: o Two active NIH research contracts: o "Enteric Elimination of Oxalic Acid", o "Islets from Islet Progenitor/Stem Cells for Implantation", and o Three new NIH research grants, all beginning on September 1, 2000: o "M3 Receptor: Diagnostic Marker for Sjogren's Syndrome", o "Oxalobacter Formigenes Diagnostic Kit Development", o "Coating of Urinary Protheses to Prevent Encrustation". We expect revenue to continue to increase in 2001 because of: o the renewal of the "Islets from Islet Progenitor/Stem Cells for Implantation" NIH grant for an additional $100,000 which began on September 1, 2000, o NIH grant, entitled "M3 Receptor: Diagnostic Marker for Sjogren's Syndrome," with payments which began on September 1, 2000, for $100,000, o NIH grant entitled "Oxalobacter Formigenes Diagnostic Kit Development" with payments which began on September 1, 2000, for $99,958, o NIH grant entitled "Coating of Urinary Protheses to Prevent Encrustation" with payments which began on September 1, 2000, for $99,958, Comparison of G&A Expenses - 2000 vs. 1999 Percent 2000 1999 Change ---------------- ----------------- -------------- Personnel-Related 286,422 212,888 34.5414% Professional 69,263 44,606 55.2779% Rent &Utilities 21,654 14,150 53.0343% Advertising 20,297 4,896 314.5543% Consultants 37,309 61,253 -39.0900% Other G&A 163,385 109,608 49.0631%

[GRAHICS OMITTED] Operating, general, and administrative expenses increased 34% from $447,400 for the year ended December 31, 1999 to $598,330 for the year ended December 31, 2000. These increased expenses reflect: o increased personnel and related payroll taxes, o increased rental space and associated utilities usage, o increased professional fees, o increase in other miscellaneous G&A expenses, and o support of increased research activities, offset somewhat by a reduction in consulting and travel-related expenses. Although, our policy is to keep administrative costs as low as possible, we expect our operating, general and administrative expenses to continue to increase in 2001 as a result of increased research activities resulting in a need for increased administrative personnel. Comparison of R&D Expenses - 2000 vs. 1999 2000 1999 ------------------ ------------------ Personnel-related 399,803 237,150 Consultants 356,771 112,834 Supplies and animal costs 172,333 64,852 Rent & Utilities 100,413 77,287 Deprec & Amort 63,946 29,951 Other misc R&D 116,431.19 103,254.81

[GRAHICS OMITTED] 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 payments for sponsored research, o scientific advisors, o regulatory consultants fees, o interest on research and development equipment, o amortization of capitalized patent costs. Research and development expenses increased 93% from $625,329 for the year ended December 31, 1999 to $1,209,698 for the year ended December 31, 2000. These increased expenses reflect: o increased laboratory personnel, o increased consultant's fees, including new project and quality management, o increased laboratory space and associated utilities, o interest charges on the purchase of lab equipment and on deferred fees and salaries, and o increased laboratory-related supplies and miscellaneous research and development expenses. 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 Q-Med transaction, described below, and the receipt of the research grants referred to above. Comparison of Interest Income and Expense 2000 vs. 1999 2000 1999 ---------------- ----------------- Interest Income 83,919 2,121 Interest Expense 127,096 155,697

[GRAHICS OMITTED] Interest expense decreased 18% from $155,697 for the year ended December 31, 1999 to $127,096 for the year ended December 31, 2000 due primarily to the re-payment of bridge loans to officers in July and the conversion of deferred administrative fees and salaries, including deferred interest, payable to related parties, into restricted common shares, also in July, 2000. Interest Income increased 3,857% from $2,121 for the year ended December 31, 1999 to $83,919 for the year ended December 31, 2000 due to the investment of the cash in excess of operating needs provided by the Q-Med transaction described below. Liquidity and Capital Resources A total of 129,000 shares were sold and $516,000 raised in the public offering, which commenced in December, 1997 and terminated on March 31, 2000. These shares are included in the outstanding shares at December 31, 2000. A summarization of the grants received from the National Institutes of Health for the year 2000 follows o On June 5, 1999, we were awarded a $100,000 Phase I grant under the Small Business Technology Transfer Program for research in our oxalate technology entitled "Enteric Elimination of Oxalic Acid". We began drawing on these funds in July, 1999. We subcontracted a large portion of the grant to the University of California, Irvine but drew down approximately $14,000 of the remaining funds in 2000. The grant period ended in June 2000. o In September 1999 we also 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, but have utilized approximately $130,000 through December 31, 2000, leaving $70,000 available to support diabetes research through August 31, 2001, when the grant period expires. o In February 2000 we were awarded another $100,000 NIH Phase I grant under the SBIR program for research in our oxalate technology entitled "Digestion of Food Oxalate". We began drawing on these funds in February, 2000. We subcontracted approximately $30,000 to Wake Forest University, and have received all of the funds available under this grant in the year 2000. 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 additionally drew on approximately $30,000 of the funds available in 2000, leaving $25,000 to support research through February, 2001. o Also in September, 2000, we received notice that we had been awarded another NIH SBIR grant, for $99,958 and entitled "Coating of Urinary Protheses to Prevent Encrustation". We subcontracted $25,000 to the University of Florida, and received another $23,000, leaving approximately $50,000 to support research through August of 2001. o Also in September, 2000, we received notice that we had been awarded another NIH SBIR grant, for $99,958 and entitled "Oxalobactor Formigenes Diagnostic Kit Development". We received approximately $17,000 in grant revenues for 2000, leaving approximately $78,000 to support research through August of 2001. o We have other grant applications pending. Operations during 2000 were funded primarily from $3,771,697 in the form of equity investments by Q-Med in connection with the Q-Med transaction described below, as well as funds from NIH grants. Bridge loans and accrued interest on bridge loans totaling approximately $443,000 were paid in July, 2000 as part of the Q-Med transaction. We do not have any bank financing arrangements, other than business credit cards. In connection with the Q-Med transaction, a total of $1,028,768 in deferred fees and salaries payable to related individuals were satisfied through the issuance of 257,192 shares of restricted common stock reducing our long-term indebtedness. Q-Med has an option to offer to purchase from any holder electing not to convert, our unsecured convertible notes, which mature on August 31, 2001. Should no holders convert, and should Q-Med not offer to acquire and convert unsecured notes, we could be required to redeem up to $787,270 of our unsecured notes. At December 31, 2000, we had $2,160,278 in cash and cash equivalents. 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. In connection with a sponsored research agreement with Genetics Institute, Inc. that was concluded during 1997, some patent-related expenses were reimbursed by Genetics Institute. We may be contractually obligated to repay these reimbursed expenses in installments over a 36 month period upon a notice to or by Genetics Institute to the effect that their option to negotiate for a license to our technology, contained in the sponsored research agreement has expired. We have not given nor received such notice, and, accordingly, reimbursement has not commenced. We have accrued $42,317 as a long-term liability pending final notice under the agreement. Annual expenses during 2000 for our current three-year lease (with two one-year renewal options), were approximately $112,000, compared to $95,800 for 1999. Additionally, repayment of funds provided by lessor for tenant improvements and an emergency generator, were approximately $10,200 in each year. We expect that annual lease expenses will increase to around $128,000 for 2001 as a result of additions to our rented facilities. We will continue to have a need to purchase additional laboratory equipment. We estimate that we will need to purchase at least $500,000 of capital laboratory equipment and improvements in 2001. We incurred negative cash flows from operations in 1999 of approximately $550,000 and approximately 1,125,000 in 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 receipt of the balance of the payment from the Q-Med transaction described below, o the successful commercialization of Ox-Control(TM) (our nutritional supplement) the XEntrIx (TM) Oxalobacter formigenes Monitor (our diagnostic test), and IxC1-62/47 (our lead therapeutic compound), o the successful commercialization of our islet replacement therapy products, 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, and o the development of strategic alliances for the development and marketing of our products The Q-Med Transaction On April 16, 1999, we entered into an agreement in principle with Q-Med AB (publ), a biotechnology company based in Uppsala, Sweden. This agreement was amended on September 9, 1999. Pursuant to the agreement in principle, from April 1999 through June 19, 2000, we received $1,125,000 in cash in exchange for 562,500 shares of restricted common stock, at a cash price of $2.00 per share. On July 14, 2000, Qvestor, LLC ("Qvestor"), a Delaware subsidiary of Q-Med AB exercised the option granted in September 1999 and entered into a stock purchase agreement pursuant to which,, o We issued 3,337,500 shares to Qvestor in exchange for cash of $6,675,000 and non-cash consideration described below. Cash of $3,321,697 was paid at closing, and the balance of $3,353,303, is due on or before July 14, 2001. o The Company obtained the right to a royalty-free license to Q-Med's intellectual property in non-animal, stabilized hyaluronic acid (NASHA) on the following terms: o the license will be exclusive and worldwide for the use of NASHA for the encapsulation of insulin-producing cells, without right of sublicense; o any improvements (to which we will also have rights) will belong exclusively to Q-Med; and o we will not have the right to manufacture NASHA o The Company gave Q-Med a 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. The offered redemption price would be par, in the case of 10% notes, or at 1.5 times par for variable notes. Thereafter Q-Med would have the option, for any redeemed notes acquired, to convert variable notes at a price of $2.10 per share, and 10% notes at a price of $4.20 per share. Q-Med, a growing, profitable Swedish company, develops, manufactures, and sells natural, specialized medical implants. Q-Med's shares are listed on the Stockholm stock exchange, and it is not related to or affiliated in any way with Q-Med, Inc., a Delaware corporation whose shares are listed on the Nasdaq small cap market. All of Q-Med's products are constructed using a proprietary form of non-animal, stabilized hyaluronic acid. Hyaluronic acid is a natural polysaccharide, first isolated in 1934. Its main function in the body is to lubricate moveable parts like joints and muscles and to transport substances to and within cells. The majority of Q-Med's revenues are accounted for by Restylane(R) for the filling out of lips, facial wrinkles, and facial folds. By virtue of its stock ownership and that of its subsidiary, Qvestor LLC, Q-Med may be deemed to be the parent of the Company. 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 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. Signatures In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this amendmentt to be signed on its behalf by the undersigned, thereunto duly authorized. Ixion Biotechnology, Inc. By: /S/ Weaver H. Gaines Dated: August 13, 2001 -------------------------- Weaver H. Gaines, Chairman and Chief Executive Officer

IXION BIOTECHNOLOGY INC 10-K/A