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

FORM 10-KSB
(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
ACT OF 1934 

For the fiscal year ended               December 31, 1997                

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

For the transition period from                  to                       

Commission file number                0-15888                            

IGENE Biotechnology, Inc.
(Exact name of small business issuer in its charter)

          Maryland          	                          52-1230461         
(State of other jurisdiction of	         (I.R.S. Employer Identification 
No.) incorporation or organization)

9110 Red Branch Road	
Columbia, Maryland                  21045                      
Address of principal executive offices		(Zip Code)

Issuer's telephone number, including area code:	(410) 997-2599 

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

Title of each class		Name of each exchange on which registered
      None         		        	       None                    

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock (par value $.01 per share)
(Title of each class)

Check whether the issuer (1) has 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.  [  ]  

The issuer's total revenues for its most recent fiscal year were $14,394.

As of March 1, 1998, there were 19,206,473 shares of the issuer's Common Stock 
and 217,092 shares of the issuer's 8% Cumulative Convertible Preferred Stock, 
Series A, outstanding.  The aggregate market value of the Common Stock and 
Preferred Stock held by non-affiliates was $1,303,224, based on the last bid 
quotation prices of the Common Stock as reported by the National Association of 
Securities Dealers pink sheets on such date and, with respect to the Preferred 
Stock for which no quotations were available, based on the conversion rate 
applicable to the Preferred Stock and the last bid price of the Common Stock as 
reported above.  (The officers and directors of the issuer are considered 
affiliates only for purposes of this calculation.)


Page 2

PART I

ITEM 1.	DESCRIPTION OF BUSINESS

General

IGENE Biotechnology, Inc. ("The Company") is engaged in the business of 
industrial microbiology and related biotechnologies.  The Company was formed on 
October 27, 1981 to develop, produce and market value-added specialty 
biochemical products derived from abundant, inexpensive and renewable 
agricultural residues and wastes through the use of state-of-the-art 
fermentation technology, physical and chemical separation technology, and 
related chemical and biochemical engineering technologies.

The Company has devoted its resources to the development of proprietary 
processes to convert selected agricultural raw materials or feedstocks into 
commercially useful and cost effective specialty biochemical products for the 
food, feed, flavor and agrichemical industries.  In developing these processes 
and products, the Company has relied on the expertise and skills of its 
in-house scientific staff and, for special projects, various consultants.

The Company has no manufacturing facilities other than its pilot plant facility 
in Columbia, Maryland.  To date, the Company has either licensed its products 
to third-party manufacturers or joint venture partners.

Government Regulation

The manufacturing and marketing of most of the products the Company has 
developed are and will likely continue to be subject to regulation by various 
governmental agencies in the United States, including the Food and Drug 
Administration ("FDA"), the Department of Agriculture ("USDA"), and the 
Environmental Protection Agency ("EPA"), and comparable agencies in other 
countries.  Substantially all of the food products developed by the Company to 
date have been reviewed by a panel of independent scientific experts (the 
"Product Review Panel") who are qualified by scientific training and experience 
to evaluate, among other things, the safety of ingredients intended to be used 
directly or indirectly in foods.  The Product Review Panel has advised the 
Company that it considers such products to be Generally Recognized As Safe 
("GRAS") under the regulations of the FDA.  The Company is not aware of any 
action by the FDA, the USDA or the EPA contesting these affirmations or of any 
basis for their doing so.  There can be no assurance, however, that the FDA, 
the USDA or the EPA will accept such independent expert evaluations and that 
the Company will not be required to obtain costly and time-consuming approvals 
from these agencies or comparable agencies in foreign countries.  The 
Company, as a matter of policy, requires that its products conform to 
current Good Manufacturing Practices  (as defined under the Federal Food, 
Drug and Cosmetic Act and the rules and regulations thereunder) and the Company
believes all of its products so conform.  The extent of any adverse 
governmental regulation that might arise from future administrative or 
legislative action, including current rules and regulations pertaining to the 
process of GRAS affirmations, cannot be predicted.

The Company does not anticipate any material environmental compliance costs due 
to the fact that production is taking place in Mexico and the Company's 
contract manufacturer has responsibility for environmental compliance.

Research and Development

As of December 31, 1997, the Company had expended approximately $ 10,722,000 on 
research and development since its inception on October 27, 1981 and has, as of 
December 31, 1997, received revenues from product sales of approximately $ 
1,795,000 from the proprietary processes resulting from such research and 
development, excluding one-time license fees received in 1982 and 1985.  The 
Company will continue to incur research and development costs in connection 
with improvements in its existing processes and products, but it does not 
anticipate development of new processes and products in 1998.

Page 3

	Research and development expenditures for each of the last two years are 
as follows:

1996    309,351
1997    521,669

The Company's research and development activities have resulted in the 
development of processes to produce the products hereinafter discussed.

Commercial Products

1.	AstaXin(r)

AstaXin(r) is the Company's tradename for its dried yeast product made from a 
proprietary microorganism developed by the Company.  AstaXin(r) is a natural 
source of astaxanthin, a pigment which imparts the characteristic red color to 
the flesh of salmon, trout, and prawns.  In the ocean, salmon and trout obtain 
astaxanthin from krill and other planktonic crustaceans in their diet.  A 
crustacean diet would be prohibitively expensive for farm raised salmonids; 
without the addition of astaxanthin, the flesh of such fish is a pale, 
off-white color which is less appealing to consumers expecting "salmon-colored"
fish.  Efficacy of AstaXin(r) has been demonstrated by fish feeding trials in 
Europe, Asia, and North and South America.  An estimated 700,000 metric tons of 
farm raised salmon are produced annually worldwide.

	Prior to 1995 the Company entered into a number of manufacturing and 
licensing agreements for commercial quantities of AstaXin(r).  In the initial 
trials the manufacturing process was successfully scaled-up to 50,000-gallon 
fermentors.  However, for a number of reasons, outside of the Company's 
control, none of these agreements were extended beyond the initial trial 
periods.

In 1995 the Company signed a nonexclusive licensing Agreement with Archer 
Daniels Midland Company for the manufacturing and sale of AstaXin(r).  The 
Agreement provided for an initial payment and royalties based on sales. On 
February 29, 1996 Archer Daniels Midland Company informed IGENE that it would 
no longer use IGENE's astaxanthin technology and terminated the licensing 
agreement.   ADM stated that its reason for termination of this agreement was 
that it could obtain better technology from another company.

During 1996, the Company began commercial fermentation trials with a potential 
manufacturer.  On July 3, 1997, the Company signed a non-exclusive toll 
manufacturing agreement with Fermic, S.A. de C.V., of Mexico City, Mexico, for 
the production of its natural astaxanthin pigment, AstaXin(r) in Fermic's 
manufacturing facility in Mexico. Commercial production began in January of 
1998, and the Company intends to sell AstaXin(r) worldwide through 
distributors, including Fermic, to meet an anticipated demand for the product.

The Fermic contract provides that the manufacturer has a non-exclusive right to 
produce AstaXin(r).  Fermic will provide equipment and facilities necessary to 
manufacture and store the product and will be responsible for purchasing raw 
materials.  The Company is responsible for sales efforts and for ensuring the 
quality of the pigment.  The Company will also have a role in ensuring that the 
manufacturing process works effectively.  The term of the contract has been 
extended to December 31, 1998 (see also Item 2. Description of Property)

Based on estimates of worldwide production of farm-bred salmon, the Company 
believes the market for AstaXin(r) exceeds $150,000,000 worldwide, which would 
be approximately 75 metric tons.  The expected production rate is approximately 
1 metric ton for 1998, which is equal to approximately 1.3% of the worldwide 
market.

	During 1997, the Company was sued by and has counter-sued Archer-Daniels 
Midland, Inc. (ADM) regarding its process for the marking of astaxanthin and 
its 1995 agreement with ADM (See Item 3. Legal Proceedings).

Page 4

2.	Crustacean Shell Products

ClandoSan(r) is the Company's registered trademark for its natural nematicide 
made from crab and crawfish exoskeletons and processed into pellets or granules 
by patented and patent pending technology developed by the Company. The product 
acts in soils as a biological control agent by stimulating the growth of normal 
soil microorganisms, which produce chitinase, and other enzymes that degrade 
chitin present in the cuticles and eggs of plant-pathogenic nematodes. It has 
secondary effects as a slow release organic fertilizer.  ClandoSan(r) does not 
have a direct adverse effect on plant-pathogenic nematodes either in vitro or 
in sterilized or irradiated soils and only acts indirectly to suppress nematode 
populations in soils.  The product generally is not water-soluble and, 
consequently, does not contribute to ground water contamination.

On March 17, 1988, ClandoSan(r) was registered by the EPA for use with all 
agricultural and horticultural crops in accordance with the Federal 
Insecticide, Fungicide, and Rodenticide Act ("FIFRA") section 3(c)(5).  
ClandoSan(r) is now registered in 49 states and is produced at one contract 
manufacturing facility in the United States. 

Patents and Trademarks

It is the Company's policy to protect its intellectual property rights by a 
variety of means, including applying for patents and trademarks in the United 
States and in other countries.  The Company also relies upon trade secrets and 
improvements, unpatented proprietary know-how and continuing technological 
innovation to develop and maintain its competitive position.  In this regard, 
the Company places restrictions in its agreements with third parties with 
respect to the use and disclosure of any of its proprietary technology.  The 
Company also has internal nondisclosure safeguards, including confidentiality 
agreements with employees and consultants.

During fiscal years 1996 and 1997, as part of the Company's stringent cost 
containment efforts, all patents and trademarks were carefully reviewed and 
those with no foreseeable commercial value have been abandoned to eliminate 
costly maintenance fees.  Patents (and applications) and/or trademarks on 
technology with recognized commercial value include those for AstaXin(r) and 
ClandoSan(r).  Extensive additional foreign applications for AstaXin(r) have 
been submitted.

Competition

Competitors in the biotechnology field in the United States and elsewhere are 
numerous and include major chemical, pharmaceutical and food companies, as well 
as specialized biotechnology companies.  Competition can be expected to 
increase as small biotechnology companies continue to be purchased by major 
multinational corporations with their huge resources.  Competition is also 
expected to increase with the introduction of more diverse products developed
by biotechnology firms, increasing research cooperation among academic 
institutions and large corporations, and continued government funding of 
research and development activities in the biotechnology field, both in the 
United States and overseas. Unlike the majority of biotechnology companies, 
which are developing products principally for the pharmaceutical industry, the 
Company has focused its own activities on the development of proprietary 
products for use in food, fermentation and agricultural industries.  In the 
future, however, competitors may offer products, which, by reason of price or 
efficacy or more adequate resources for technology advances, may be superior 
to the Company's existing or future products.

In addition, the aquaculture market into which the Company's product, 
AstaXin(r), will be sold is a highly competitive industry worldwide and certain 
large companies are presently known to be developing and marketing competitive 
products.

Employees

At December 31, 1997, the Company had 7 full time employees and 1 part time 
employee.  Three of the full time employees are in administration and 
marketing, while the remainder are engaged in process development and support 
of manufacturing activities.

Page 5

None of the Company's employees is represented by a labor union and the Company 
has experienced no work stoppages.  The Company believes its relations with its 
employees are satisfactory.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company leases 8,480 square feet of space in the Oakland Ridge Industrial 
Park located at 9110 Red Branch Road, Columbia, Maryland.  The Company occupies 
the space under a five-year lease expiring on January 31, 2001.  Approximate 
rental expense is $73,000 for each remaining year of the lease.

Approximately 2,000 square feet of the space occupied by the Company is used 
for executive and administrative offices and approximately 2,300 feet is used 
for research and development activities.  Approximately 4,000 square feet of 
space is used for the Company's intermediate-stage or scale-up pilot plant 
facility.

In addition, the Company has a 180 square-foot Biosafety Level 2 Laboratory 
suitable for manufacturing bacterial enzymes for in vitro diagnostic kits.

	During 1997 the Company loaned $500,000 to its contract manufacturer for 
the purchase of manufacturing equipment, which is being used for the production 
of AstaXin(r).  Under its agreement with this manufacturer, the Company will be 
repaid for this equipment over a two-year period beginning January 1998.  This 
equipment is owned by Fermic, with the Company retaining only a security 
interest.  The Company also purchased approximately $285,000 of manufacturing 
equipment for use in this manufacturing process in Mexico, in which the Company 
will retain title.

The Company owns all equipment necessary for its current operations and all 
equipment is in satisfactory condition and adequately insured.

ITEM 3.  LEGAL PROCEEDINGS

	On July 21, 1997 Archer Daniels Midland, Inc. (ADM) filed suit against the 
Company in the U.S. District Court in Greenbelt, Maryland alleging patent 
infringement and requesting a preliminary injunction against the Company to 
cease the use of its astaxanthin manufacturing process.  ADM's request for 
injunctive relief was denied.  On August 4, 1997, the Company filed a 
$300,450,000 contract and trade secrets lawsuit in U.S. District court in 
Baltimore, Maryland against ADM, contending that ADM stole the Company's 
formula for making its natural astaxanthin pigment, AstaXin(r). The Company is 
also claiming breach of contract, in regards to the licensing agreement entered
into by the Company and ADM in 1995.  The Company contends that it complied 
with all material terms of this agreement, including concentration levels of its
pigment.  The Company's claim was re-asserted as a counterclaim against ADM and
the two cases were joined in the District Court in Baltimore, Maryland on 
August 24, 1997.  On September 10, 1997 the District Court denied ADM's request
for a preliminary injunction on the basis that ADM could not demonstrate a 
likelihood of success on the merits of its case.  Management believes ADM's 
claims are meritless.  Managements basis for this is that ADM claims that the 
levels of pigment the Company said it could produce did not meet contract 
levels.  Management has copies of ADM's internal memos showing that the levels
of pigment met the contract specifications.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	At the annual meeting of Stockholders held on November 17, 1997, the 
following matters were submitted to stockholders' vote, and were approved by a 
majority of votes: (1) eight directors were elected: Michael G. Kimelman, 
Thomas L. Kempner, Ramin Abrishamian, Stephen F. Hiu, Patrick F. Monahan, Joseph
C. Abeles, John A. Cenerazzo, and Sidney R. Knafel; (2) an amendment to the 
articles of incorporation increasing the number of authorized shares to 
250,000,000 shares; (3) approval of the Company's 1997 Stock Option Plan, and 
(4) approval of the appointment of Berenson & Company LLP as the Company's 
independent auditors for 1997.

Page 6

Results of the voting were as follows:
<TABLE>
<CAPTION>
		                          Votes      	Votes        Votes	
	             	             For      	  Against     	Abstained    	 Unvoted
<S>	  <C>      	            <C>         <C>         	<C>           	<C>
(1) Election of Directors
	   Michael G. Kimelman	    15,994,725	 20,275	      ---	           ---
	Thomas L. Kempner	         15,996,050 	18,950      	---           	---
	Ramin Abrishamian	         15,996,050 	18,950      	---           	---
	Stephen F. Hiu            	15,996,050 	18,950      	---           	---
	Patrick F. Monahan        	15,996,050 	18,950      	---           	---
	Joseph C. Abeles	          15,996,050 	18,950      	---	           ---
	John A. Cenerazzo	         15,996,050 	18,950      	---           	---
	Sidney R. Knafel          	15,996,050  18,950      	---	           ---

(2)	Proposition #2	         15,771,137 	25,303     	3,450      	215,110
(3)	Proposition #3	         10,058,076	 74,302    	11,315    	5,871,307
(3) Proposition #4          16,011,804     850      2,350           ---
</TABLE>
	


Page 7

PART II

ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

Preferred Stock

There was no public market for the Preferred Stock during 1996 and 1997 and 
since January 25, 1988, no quotations for the Preferred Stock have been 
reported on NASDAQ.   The aggregate number of record holders of Preferred Stock 
as of March 1, 1998 was 14. 

Common Stock

Commencing on or about June 12, 1989, the Company's Common Stock began trading 
on the over-the-counter market on a limited basis and is quoted in the national 
bureau's "Pink Sheets".  The following table shows, by calendar quarter, the 
range of representative bid prices for the Common Stock for 1996 and 1997.
<TABLE>
<CAPTION>
Calendar Quarter				High	 		Low
<S>	<C>	<C>						   <C>  			<C>
1996:	First Quarter	$ .16			$ .03
Second Quarter				  $ .14			$ .04
Third Quarter				   $ .16			$ .11
Fourth Quarter				  $ .12			$ .07

1997:	First Quarter	$ .08			$ .06
Second Quarter				  $ .17			$ .09
Third Quarter				   $ .20			$ .11
Fourth Quarter				  $ .13			$ .08
</TABLE>

Management obtained the above information from the National Quotation Bureau.  
Such quotations are inter-dealer quotations without retail mark-up, mark-downs, 
or commissions, and may not represent actual transactions.  The above 
quotations do not reflect the "asking price" quotations of the stock.

The aggregate number of record holders of the Common Stock as of March 1, 1998 
was 246.  As of March 1, 1998, the high bid and low offer prices for the Common 
Stock, as shown in the "pink sheets" were $0.09 and $0.11, respectively.


Dividend Policy

When and if funds are legally available for such payment under statutory 
restrictions, the Company may pay annual cumulative dividends on the Preferred 
Stock of $.64 per share on a quarterly basis.  During 1988 the Company declared 
and paid a cash dividend of $.16 per share.  In December 1988, the Company 
suspended payment of the quarterly dividend of $.16 per share of Preferred 
Stock.  No dividends have been declared or paid since 1988.  Any resumption of 
dividend payments on Preferred Stock would require significant improvement in 
cash flow.  Preferred Stock dividends are payable when and if declared by the 
Company's board.  Unpaid dividends accumulate for future payment or addition to 
the liquidation preference and redemption price of the Preferred Stock.  As of 
December 31, 1997 the total amount of dividends in arrears with respect to the 
Company's Preferred Stock was $1,285,185. 

Dividends on Common Stock are currently prohibited because of the preferential 
rights of holders of Preferred Stock.  The Company has paid no cash dividends 
on its Common Stock in the past and does not intend to declare or pay any 
dividends on its Common Stock in the foreseeable future.

Page 8

ITEM 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results of Operations

Revenues for the year ended December 31, 1997 decreased from $66,573 in 1996 to 
$14,394 in 1997.  This decrease in overall revenue of 78% resulted from a 
decrease in domestic sales of ClandoSan(r) of $28,697, caused by reduced 
marketing efforts for this product during 1997; and one-time technology 
services fees of $23,482 which were earned only in 1996.  The Company hopes to
find a licensee and to make marketing arrangements with distributors for 
ClandoSan(r) in the future, but has continued to focus its efforts on its 
AstaXin(r) product during 1997.  No commercial quantities of AstaXin(r) were 
available during 1996 and 1997.  During 1997 the Company signed a contract with
a manufacturer to produce AstaXin(r) and began production in January 1998. The 
Company expects to have sales of AstaXin(r) by June 30, 1998, however, there 
can be no assurance that any such sales will occur or that they will be 
material.

Cost of product sales, which are entirely composed of cost of product sales of 
ClandoSan(r), increased as a percentage of product sales to 69%, or $9,963 in 
1997 from 54%, or $23,198 in 1996 and can be attributed to decreased production 
efficiency achieved with lower volume of sales.

Research, development and pilot plant expenses increased approximately 69%, 
from $309,351 to $521,669 for 1996 and 1997, respectively.  This increase 
reflects the pilot plant and trial production manufacturing efforts during 
1997 for AstaXin(r), in preparation for commercial production, which began in 
January 1998. 

Marketing and selling expenses increased 61% from $5,438 to $8,741 from 1996 to 
1997, and are related to the Company's increased marketing efforts for 
AstaXin(r) in preparation for commercial production and sales of the product. 
These expenses would be expected to continue to increase as marketing efforts 
for AstaXin(r) are continued.

General and administrative expenses increased 31% from $331,211 to $432,842 
from 1996 to 1997, and reflect greater administrative support efforts for the 
Company's activities preparatory to production and sales of AstaXin(r) and 
costs related to the Company's Rights Offering of February 11, 1998.  These 
costs would be expected to continue to increase somewhat until an adequate level
of support for continuing manufacturing operations for AstaXin(r) is achieved.

Litigation expenses of $658,185 represent the Company's expenses associated 
with its defense of the suit by Archer Daniels Midland, Inc. and the Company's 
counter-suit.  Management expects to recover legal expenses through damage 
awards, and preservation of the commercial rights associated with AstaXin(r), 
however, there can be no assurance that the Company will receive damage awards 
or that its rights to AstaXin(r) will be preserved.  The Company estimates that 
the cost of this litigation will be $1,000,000 per year.  At the present time,
a range of reasonably possible loss from the litigation cannot be estimated.

The Company reported other income of $51,204 from the renegotiations of certain 
disputed vendor liabilities during 1997.  This is expected to be a one-time 
occurrence.

Interest expense increased 91% from $171,112 to $326,565 from 1996 to 1997.  
This increase was caused by increased debt from the financing of the Company's 
continued operation with loans from shareholders.  This would be expected to 
decrease only if the Company achieves profitable operations and is able to 
repay its debt, or if shareholders convert the debt into common stock. There can
be no assurance that profitable operations will be achieved in the near future,
or that the shareholders will convert the debt.

As a result of the foregoing, the Company reported a net loss of $1,888,082, or 
$0.10 per common share during the year ended December 31, 1997, compared to a 
net loss of $776,873, or $0.04 per common share for the year ended December 31, 
1996.  The weighted average number of common shares outstanding increased to 
18,870,314 for 1997 from 18,604,171 for 1996.  This increase is caused by the 
issuance of 80,000 shares of common stock as payment of interest on a variable 
rate subordinated debenture, the issuance of 482,834 shares through the 
exercise of employee stock options, and the conversion of 6,250 shares of 
preferred stock into 12,500 shares of common stock during 1997.

Page 9

Financial Position

During 1997 and 1996, the following actions materially affected the Company's 
financial position:

* The Company loaned $500,000 in 1997 to its contract manufacturer of 
AstaXin(r) for the purchase of manufacturing equipment needed for the 
production of AstaXin(r), all of which remains due as of December 31, 1997.  
The loan is repayable over 23 months with interest at 10%.  $249,217 of the 
loan is classified as a current asset, and $250,783 is classified as a 
long-term asset as of December 31, 1997.

* The Company purchased $285,355 in manufacturing equipment in 1997 for use in 
the production of AstaXin(r).

* The Company issued $2,365,000 and $615,000, respectively during 1997 and 
1996, in promissory notes to directors, $2,000,000 of which is due and payable 
on March 31, 1998, and $1,082,500 of which mature March 31, 2003.  $153,594 
remains due from directors for these notes as of December 31, 1997, which the 
Company expects to receive by March 31, 1998.

* The Company issued 80,000 and 53,334 shares, respectively in 1997 and 1996 of 
common stock in payment of interest on a variable rate subordinated debenture 
with a principal balance of $1,500,000, recording interest expense and 
increasing common stock and paid-in capital for $180,000 and $120,000, 
respectively in 1997 and 1996.

* Employees exercised 482,834 stock options in 1997, providing additional 
capital of $24,142.

* The carrying value of redeemable preferred stock was increased and paid-in 
capital available to common shareholders was decreased for $21,938 and $22,939, 
respectively in 1997 and 1996, reflecting cumulative unpaid dividends on 
redeemable preferred stock.

* Holders of redeemable preferred stock converted 6,250 and 2,500 shares, 
respectively, in 1997 and 1996, of preferred stock into 12,500 and 5,000 
shares, respectively, of common stock, providing additional capital of 
$86,000 and $31,600, respectively in 1997 and 1996.

In December 1988, as part of an overall effort to contain costs and conserve 
working capital, the Company suspended payment of the quarterly dividend on its 
Preferred Stock.  Resumption of the dividend will require significant 
improvements in cash flow.  Unpaid dividends cumulate for future payment or 
addition to the liquidation preference or redemption value of the Preferred 
Stock.  As of December 31, 1997, total dividends in arrears on the Company's 
Preferred Stock was $1,285,185 of which $175,185 ($5.92 per share) was included 
in the carrying value of the redeemable Preferred Stock and $1,110,000 ($5.92 
per share) was included in the liquidation preference of the Preferred Stock. 


Liquidity and Capital Resources

Historically, the Company has been funded primarily by equity contributions, 
loans from stockholders and license fees.  As of December 31, 1997 the Company 
had a working capital deficit of $2,113,574, and cash and cash equivalents of 
$24,548.

Cash used by operating activities in 1997 and 1996 amounted to $1,484,353 and 
$610,842, respectively.

Cash used by investing activities increased by $784,400, from $955 in 1996 to 
$785,355 in 1997.  This is a result of capital expenditures of $285,355 for 
manufacturing equipment relating to production of AstaXin(r), and $500,000 
loaned to Fermic for the purchase of manufacturing equipment relating to 
production of AstaXin(r).

Page 10

Cash used by financing activities increased by $1,608,108, from $644,810 in 
1996 to $2,252,918 in 1997.  Financing activities are composed of net proceeds
of $2,228,776 and $644,810 from issuance of promissory notes to directors in 
1997 and 1996, respectively; and $24,142 from the issuance of 482,834 shares of 
common stock at $0.05 per share for the exercise of employee stock options in 
1997.

Over the next twelve months, the Company believes it will need between 
$1,000,000 and $2,000,000 in working capital.  The Company hopes to achieve 
this from profits from sales of AstaXin(r) production of which began in January
1998, proceeds of its Rights Offering of February 11, 1998, and additional 
financing.  The Company intends to spend approximately $350,000 on technology 
research over the next twelve months to research new strains of pigments.

The Company does not believe that inflation has had a significant impact on its 
operations during 1997 and 1996.

ITEM 7.	FINANCIAL STATEMENTS

The financial statements appear after Part IV of this Report.

ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE

None.

Page 11

	PART III


ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS, AND KEY 
EMPLOYEES


The Company's directors are elected annually by the shareholders of the 
Company.  The directors, executive officers and key employees of the Company 
are as follows:

<TABLE>
<CAPTION>
Name			              Age		Position with IGENE
<S>					             <C>	 <C>
Michael G. Kimelman  	59		Chairman of the Board of Directors

Thomas L. Kempner   		70		Vice Chairman of the Board of Directors

Stephen F. Hiu     	 	41		Director, President, Secretary, Acting 
							                   Treasurer,and Director of Research and 
										                Development

Ramin Abrishamian * 		44		Chief Executive Officer

Patrick F. Monahan  		47		Director, and Director of 
                          Manufacturing

Joseph C. Abeles    		83		Director

John A. Cenerazzo	   	74		Director

Sidney R. Knafel    		67		Director


*	Mr. Abrishamian was hired as CEO on July 1, 1997.

</TABLE>

MICHAEL G. KIMELMAN was elected a Director of the Company in February 1991 and 
Chairman of the Board of Directors in March 1991.  He is the Managing Partner 
of Kimelman & Baird, LLC.  He is a founder of Blue Chip Farms, a standardbred 
horse-breeding farm, and has been an officer of the same since its inception in 
1968.  Mr. Kimelman is currently a Director of the Harness Horse Breeders of 
New York State and serves on the Board of the Hambletonian Society.

THOMAS L. KEMPNER is Vice Chairman of the Board of Directors and has been a 
Director of the Company since its inception in October 1981.  He is and has 
been Chairman and Chief Executive Officer of Loeb Partners Corporation, 
investment bankers, New York, and its predecessors since February 1978.  He is 
currently a Director of Alcide Corporation, CCC Information Services Group, 
Inc., Energy Research Corp., Intermagnetics General Corp., Northwest Airlines,
Inc., and Roper Starch Worldwide, Inc.

STEPHEN F. HIU was appointed President and Treasurer in March 1991, Secretary 
in July 1990, and elected a Director in August 1990.  He has been Director of 
Research and Development since January 1989 and, prior thereto, was Senior 
Scientist since December 1985, when he joined the Company.  He was a post-
doctoral Research Associate at the Virginia Polytechnic Institute and State 
University, Blacksburg, Virginia, from January 1984 until December 1985.  Dr. 
Hiu holds a Ph.D. degree in microbiology from Oregon State University and a 
B.S. degree in biological sciences from the University of California, Irvine.


Page 12

RAMIN ABRISHAMIAN was appointed Chief Executive Officer in July 1997.  From 
April 1996 to July 1997, he was an independent consultant.  From February 1990 
to April 1996, he held various positions with Remediation Technologies, 
including president and general manager of a subsidiary.  For seven years prior 
thereto he held various positions with Arthur D. Little Co.  He received a 
Master of Science degree from M.I.T. and a Bachelor of Science degree from 
Strathclyde University, Scotland, both in chemical and process engineering.

PATRICK F. MONAHAN was appointed Director of Manufacturing and elected a 
Director of the Company in April 1991 and has managed the Company's fermen
tation pilot plant since 1982. Prior thereto, he was a technical specialist in 
the fermentation pilot plant of W.R. Grace and Co. from 1975 to 1982.  He 
received an Associate in Arts degree in biology from Allegheny Community College
and a B.S. degree in biology with a minor in Chemistry from Frostburg State 
College, Frostburg, Maryland.

JOSEPH C. ABELES, private investor, was elected Director of the Company on 
February 28, 1991.  Mr. Abeles serves as Director of Intermagnetics General 
Corporation, Bluegreen Corporation and Ultralife Batteries, Inc.

JOHN A. CENERAZZO was Chairman of the Board from November 1989 to April 1991.  
He served as President of the Company from August 1988 through September 1989 
and has been a Director since September 1987.  He is a Director Emeritus of 
National Penn Bank Shares, Inc. of Boyertown, Pennsylvania and a Director 
Emeritus of National Penn Bank, a Director of U.S. Axle Corporation, and a 
Chairman and a Director of InfoCore, Incorporated.

SIDNEY R. KNAFEL, a Director of the Company since 1982, has been Managing 
Partner of SRK Management Company, a private investment concern, New York, 
since 1981, Chairman of Insight Communications, Inc. since 1985, and of 
BioReliance Corporation since 1982.  Mr. Knafel is also currently a Director of 
Cellular Communications International, Inc., CoreComm Incorporated, General 
American Investors Company, Inc., and NTL Incorporated.

Compliance with Section 16(a) of the Exchange Act

	The Company believes that during 1996 and 1997 all of its officers, 
directors and holders of more than 10% of its Common Stock complied with all 
filing requirements under Section 16(a) of the Securities Exchange Act of 1934, 
except as follows.  In 1996 and 1997 directors of the Company made various 
loans to the Company.  The loans are evidenced by demand promissory notes 
convertible into Common Stock.  The directors also received warrants to purchase
shares of Common Stock.  In addition, in 1996, two directors of the Company 
(who are also officers) were granted stock options under the Company's 1986 
Plan.  None of the foregoing securities were reported on Forms 4 or Forms 5 
filed with the Securities and Exchange Commission.  In making this disclosure, 
the Company has relied solely on written representations of its directors, 
officers and more than 10% holders and on copies of reports that have been 
filed with the Securities and Exchange Commission.

ITEM 10.	EXECUTIVE COMPENSATION

During 1997 and 1996 no executive officers annual cash compensation exceeded 
$100,000.00.  The Chief Executive Officer, Mr. Ramin Abrishamian, received 
compensation as CEO of $50,000.   He also was paid $59,591 as a consultant 
prior to being appointed as CEO.

	Other than the 1986 and 1997 stock option plans and the Simple Retirement 
Plan described below, the Company has no profit sharing or incentive 
compensation plans.

Simple Retirement Plan

	Effective February 1, 1997 the Company adopted a Simple Retirement Plan 
under Internal Revenue Code Section 408(p).  The plan is a defined contribution 
plan, which covers all of the Company's employees who receive at least $5,000 
of compensation for the preceding year.  The plan permits elective employee 
contributions.  The Company makes a nonelective contribution of 2% of each 
eligible employee's compensation for each year.  The Company's contributions to 
the plan for 1997 were $5,483, which is expensed in the 1997 statement of 
operations.

Page 13

Stock Option Plan

The 1997 Stock Option Plan (the "Plan"), which was approved by the stockholders 
on November 17, 1997, and which succeeds the 1986 Stock Option Plan, provides 
for the issuance of options to acquire up to 20,000,000 shares of Common Stock 
of the Company. 

The Plan is administered by a committee of the Board of Directors.

The purpose of the Plan is to advance the interests of the Company by 
encouraging and enabling the acquisition of a larger personal proprietary 
interest in the Company by directors, key employees, consultants and inde
pendent contractors who are employed by, or perform services for, the Company 
and its subsidiaries and upon whose judgment and keen interest the Company is 
largely dependent for the successful conduct of its operations.  It is also 
expected that the opportunity to acquire such a proprietary interest will 
enable the Company and its subsidiaries to attract and retain desirable 
personnel, directors and other service providers.

Options are exercisable at such rates and times as may be fixed by the 
committee.  Options become exercisable in full upon (i) the holder's retirement 
on or after his 65th birthday, (ii) the disability or deal of the holder, (iii) 
or under special circumstances as determined by the Committee.  Options 
generally terminate on the tenth business day following cessation of service as 
an employee, director, consultant or independent contractor.

Options may be exercised by payment in full of the option price in cash or 
check, or by delivery of previously-owned shares of common stock having a total 
fair market value on the date of exercise equal to the option price, or by such 
other methods as permitted by the Committee.

The Plan contains anti-dilution provisions in the event of certain corporate 
transactions.

The Board of Directors may at any time withdraw from, or amend the Plan and any 
options not heretofore granted.  Stockholder approval is required to (i) 
increase the number of shares issuable under the plan, (ii) increase the number 
of options which may be granted to any individual during a year, (iii) or 
change the class of persons to whom options may be granted.  No options shall 
be granted under the Plan after September 19, 2007.

Options to acquire 2,260,584 shares of common stock have been granted under the 
1986 and 1997 Stock Option Plans and 1,670,750 options are outstanding under 
the Plans.   No options were granted during 1997.  

The following table sets forth information as to all incentive and non-
statutory stock options that have been granted to the executive officers of the 
Company.  10,000 in options were exercised by officers in 1997.  The following 
table provides information regarding the number of shares covered by both 
exercisable and unexercisable stock options for executive officers as of 
December 31, 1997 and the values of "in-the-money" options as of that date.  An
option is "in-the-money" if the per share fair market value of the underlying 
stock exceeds the option exercise price per share.

<TABLE>
<CAPTION>
	Aggregate Fiscal Year End Option Values

                                 	  Number of		     	   Dollar Value of
              Number	               Unexercised Options	In-The-Money Options
              of Shares	  Dollar At End of Fiscal Year	 At End of FiscalYear1
              Acquired on Value	    Exercisable/	       Exercisable/
Name      	   Exercise    Realized  Unexercisable		     Unexercisable
<S>			        <C>		       <C>		     <C>				             <C>
Stephen F. Hiu	 ------  	 -------  	955,000/None 	      $57,300/None
Patrick F. 
   Monahan	 	   10,000	      $500	  632,500/None		      $37,950/None
                                              
1. The value of unexercised in-the-money options at December 31, 1997 is based 
on the difference between $.11 per share and the per share option exercise 
price, multiplied by the number of shares of common stock underlying such 
option.

</TABLE>

Page 14

Compensation of Directors

During 1996 and 1997, Directors were not compensated for their Board or 
Committee activities.

Page 15

ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of March 1, 1998 with respect to 
beneficial ownership of shares of the Company's outstanding Common Stock and 
Preferred Stock by (i) each person known to the Company to own more than five 
percent of its Common Stock or Preferred Stock, (ii) each Director, and (iii) 
all Directors and Officers as a group.

<TABLE>
<CAPTION>
                                 Common Stock       		Preferred Stock    
                                 Number of     		   		Number
Name and Address			              Shares       Percent*		  Shares  	Percent  
<S>						                        <C>		        <C>			      <C>		    <C>
Joseph C. Abeles		              	23,105,8581	 57.48        -----	   	-----
  c/o Abel Associates
  220 E. 42nd Street
  New York, NY  10017

John A. Cenerazzo		               2,945,1822	 13.47	      	-----   		-----
  Stokesay Castle Lane
  Reading, PA  19606

Stephen F. Hiu				                1,471,4703 	 7.12	      	-----   		-----
  9110 Red Branch Road
  Columbia, MD  21045

Thomas L. Kempner		             	38,359,3504 	69.54      		-----   		-----
  c/o Loeb Partners Corporation
  61 Broadway
  New York, NY  10006

Michael G. Kimelman			            4,696,4725 	20.43      		-----   		-----
  c/o Kimelman & Baird, LLC
  100 Park Avenue, Suite 1105
  New York, NY  10017

Sidney R. Knafel		              	35,486,4426 	67.40      		-----	   	-----
  c/o SRK Management
  126 East 56th Street
  New York, NY  10022

Patrick F. Monahan			               992,5307 	 4.92	      	-----   		-----
  9110 Red Branch Road
  Columbia, MD  21045
						
All Directors and Officers      107,057,3048 	90.35      		-----   		-----
  as a Group (7 persons)

Others

Dow Chemical Company		          	 1,360,3349 	 6.78     	187,500	   100.00
Anthony Low-Beer		              	 1,021,91310	 5.08      		-----   		----- 
Fraydun Manocherian	             15,400,00011	44.50       	-----	   	-----

All Shareholders		              141,950,76312	100.0    		187,500	   100.00


<NOTES>
* Under the rules of the Securities and Exchange Commission, the calculation of 
the percentage assumes for each person that only that person's rights, 
warrants, options or convertible notes or preferred stock are exercised or 
converted, and that no other person exercises or converts outstanding rights, 
warrants, options or convertible notes or preferred stock.  Accordingly, these 
percentages are not on a fully-diluted basis.



Page 16

1	Includes the following: 2,109,404 shares, 2,250 shares issuable upon 
conversion of Series A Preferred Stock, $216,000 of short-term notes 
convertible into 2,160,000 shares, $311,663 in long-term notes convertible into
3,782,083 shares, warrants to purchase 6,933,427 shares, and warrants to 
purchase 8,093,069 shares subject to the exercise of rights expiring March 31, 
1998.  Also includes 4,140 shares, 12,500 shares issuable upon conversion of 
Series A Preferred Stock, and warrants to purchase 8,986 shares subject to the 
exercise or rights expiring March 31, 1998 held by Mr. Abeles' wife. 

2 Includes 283,458 shares, $24,000 of short-term notes convertible into 240,000 
shares, $40,622 in long-term notes convertible into 492,321 shares, warrants to 
purchase 863,513 shares, 32,750 shares subject to options currently exercisable 
or exercisable within 60 days and warrants to purchase 1,032,503 shares subject 
to the exercise of rights expiring March 31, 1998.  Also includes 414 shares 
and warrants to purchase 224 shares subject to the exercise of rights expiring 
March 31, 1998 held by Mr. Cenerazzo's wife.

3 Includes 500 shares, 955,000 shares subject to options currently exercisable 
within sixty days, and warrants to purchase 515,970 shares subject to the 
exercise or rights expiring March 31, 1998.

4 Includes 386,972 shares, $23,100 of long-term notes convertible into 256,667 
shares, warrants to purchase 469,627 shares, and warrants to purchase 601,164 
shares subject to the exercise of rights expiring March 31, 1998 held by Mr. 
Kempner; 94,000 shares, $140,873 in long-term notes convertible into 1,616,065 
shares, $315,000 in short-term notes convertible into 3,150,000 shares, 
warrants to purchase 5,231,937 shares, and warrants to purchase 5,449,681 shares
subject to the exercise of rights expiring March 31, 1998 held by a trust under
which Mr. Kempner is one of two trustees and the sole beneficiary; 1,482,987 
shares, $56,100 of long-term notes convertible into 891,003 shares, warrants to 
purchase 891,003 shares, and warrants to purchase 1,763,096 shares subject to 
the exercise or rights expiring March 31, 1998 held by a trust under which Mr. 
Kempner is one of two trustees and a one-third beneficiary; 182,526 shares and 
warrants to purchase 98,564 shares subject to the exercise of rights expiring 
March 31, 1998 held by Mr. Kempner's wife; 54,000 shares, $140,872 in long-term 
notes convertible into 1,616,065 shares, $315,000 in short-term notes 
convertible into 3,150,000 shares, warrants to purchase 5,231,937 shares, and 
warrants to purchase 5,428,081 shares subject to the exercise or rights 
expiring March 31, 1998 held by a trust under which Mr. Kempner is one of two 
trustees and one of his brothers is the beneficiary; and 203,880 shares and 
warrants to purchase 110,095 shares subject to the exercise or rights expiring 
March 31, 1998 held by another trust under which Mr. Kempner is one of two 
trustees one of his brothers is the beneficiary.

5 Includes 919,417 shares, $63,070 in long-term notes convertible into 804,568 
shares, warrants to purchase 1,325,672 shares, and warrants to purchase 
1,646,815 shares which are subject to the exercise of rights expiring March 31, 
1998.

6	Includes 2,044,716 shares, $306,200 in long-term notes convertible into 
3,715,706 shares,  $630,000 in short-term notes convertible into 6,300,000 
shares, warrants to purchase 10,982,722 shares, and warrants to purchase 
12,443,298 shares which are subject to the exercise of rights expiring March 
31, 1998.

7	Includes 12,000 shares, 632,500 shares which are subject to options 
currently exercisable or exercisable within 60 days, and warrants to purchase 
348,030 shares which are subject to the exercise of rights expiring March 31, 
1998.

8 Includes 7,778,414 shares outstanding as of March 1, 1998, and shares which 
are subject to rights of acquisition as follows:  1,620,250 shares which are 
subject to options currently exercisable or exercisable within 60 days; 
unexpired warrants to purchase 31,929,838 shares; 14,750 shares subject to the 
redemption of 7,375 shares of redeemable preferred stock, $1,082,500 in long-
term notes convertible into 13,174,478 shares, $1,500,000 in short-term notes 
convertible into 15,000,000 shares, and warrants to purchase 37,539,574 shares 
which are subject to the exercise of rights expiring March 31, 1998.

Page 17

9 Includes 508,334 shares of common stock which represents shares issued in 
lieu of interest on the interest on the $1,500,000 debenture held by Dow 
Chemical Co., 375,000 shares of common stock subject to the conversion of the 
$1,500,000 debenture and warrants to purchase 447,000 shares which are subject 
to the exercise or rights expiring March 31, 1998.  Dow Chemical Co. also holds 
187,500 shares of preferred stock as to which certain redemption rights have 
been waived and which are not redeemable at Dow's option and which carry no 
voting rights prior to redemption.

10 Includes 128,540 shares, warrants to purchase 535,040 shares, and warrants 
to purchase 358,333 shares, which are subject to the exercise or rights 
expiring March 31, 1998.

11 Includes $500,000 in short-term notes convertible into 5,000,000 shares, 
warrants to purchase 5,000,000 shares, and warrants to purchase 5,400,000 
shares which are subject to the exercise or rights expiring March 31, 1998.

12 Includes 19,206,473 shares outstanding as of March 1, 1998, and shares which 
are subject to rights of acquisition as follows: 1,670,750 shares which are 
subject to options currently exercisable or exercisable within 60 days; 
unexpired warrants to purchase 37,464,878 shares; 59,184 shares subject to the 
redemption of 29,592 shares of redeemable preferred stock, 375,000 shares 
subject to the conversion of the $1,500,000 subordinated debenture, $1,082,500 
in long-term notes convertible into 13,174,478 shares, $2,000,000 in short-term 
notes convertible into 20,000,000 shares, and warrants to purchase 50,000,000 
shares which are subject to the exercise of rights expiring March 31, 1998.

</NOTES>
</TABLE>


ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 14, 1995 the shareholders of the Company approved cancellation of 
promissory notes and warrants issued to certain directors of the Company 
between August 25, 1993 and March 7, 1995 and the conversion of these notes to 
common stock of the Company at $.125 per share and warrants to purchase an equa 
amount of common stock of the Company at $.125 per share, which was the fair 
market value of the common stock as quoted on April 3, 1995.  Such warrants 
expire on April 3, 1998.


Beginning November 16, 1995 and continuing through May 8, 1997, the Company 
issued promissory notes to certain directors for aggregate consideration of 
$1,082,500.  These notes specify that at any time prior to repayment the holder 
has the right to convert the notes to common stock of the Company at prices 
ranging from $0.05 per share to $0.135 per share, based on the market price of 
common shares at the issue date.  In connection with such issuance, the holders 
also received warrants for an equivalent number of shares at the equivalent 
price per share. The warrants expire ten years from the issue of the notes.  
These notes are due on March 31, 2003.  The notes bear interest at the prime 
rate. 


Page 18

The notes are detailed, by issue date, and by conversion and warrant price, as 
follows:

<TABLE>
<CAPTION>

		                                                    Conversion/
                                    	Note	            Warrant
     Issue Date          	           Amount	          Price/Share
<S>	                                 <C>	             <C>
November 16, 1995	                   $   40,000	      $   0.050
December 22, 1995	                       60,000          	0.050

Total issued in 1995	                   100,000	

February 14, 1996	                       70,000          	0.100
March 11, 1996                          	70,000          	0.090
April 23, 1996                          	36,000          	0.060
May 9, 1996                             	71,000          	0.060
June 7, 1996                            	70,000          	0.050
July 24, 1996                           	90,000          	0.115
September 24, 1996                      	70,000          	0.125
November 15, 1996                       	70,000	          0.090
December 11, 1996	                       70,000	          0.090

Total issued in 1996	                   617,000	

January 14, 1997                        	70,000          	0.070
February 24, 1997                      	100,000          	0.110
March 31, 1997	                          75,000	          0.100
April 3, 1997	                           24,500          	0.100
May 8, 1997                             	80,000          	0.135
May 8, 1997	                             16,000	          0.135

Total issued in 1997	                   365,500	

TOTAL                               	$1,082,500

</TABLE>

	Beginning June 5, 1997 and continuing through December 5, 1997, the 
Company issued promissory notes to certain directors and another investor for 
aggregate consideration of $2,000,000.  These notes specify that at any time 
prior to repayment the holder has the right to convert the notes to common 
stock of the Company at $.10 per share.  In connection with such issuance, the 
holders also received warrants for an equivalent number of shares at $0.10 per 
share. The warrants expire ten years from the issue of the notes.  These notes 
bear interest at 8%.  These notes are due on March 31, 1998.  The Company plans
to repay these notes with proceeds from the Rights Offering, as described below.
 
At the option of each investor, all indebtedness under these note will be 
repaid and canceled through use of proceeds from the Rights Offering or will be 
converted into Common Stock of the company at $0.10 per share.

	The Company distributed, to holders of record on February 13, 1998,  
transferable rights to subscribe for and purchase 0.54 of a Unit for each share 
of common share or equivalent owned by such holder.  Each Unit will entitle the 
holder to receive $0.10 principal amount of 8% Notes due March 31, 2003 and 
warrants to purchase one share of common stock at an exercise price of $0.10 
per share.  Common shares or equivalents include: Common Stock, Preferred 
Stock, unexpired warrants, options exercisable, and convertible notes out
standing.  The Company would raise up to $5,000,000 through this Rights 
Offering, if fully subscribed.  If the Company does not raise at least 
$2,000,000 in the Rights Offering, certain directors and another investor, who 
are the holders of $2,000,000 in promissory notes as described above, have 
agreed to purchase Units equal to the difference between $2,000,000 and the 
proceeds from the Rights Offering; however, concurrently therewith the Company 
will have to repay $2,000,000 in promissory notes so that, in that event the 
Company will not have any proceeds after repayment of those notes.  The Rights 
Offering expires March 31, 1998.  In consideration of the investors agreeing 
to subscribe to Units such that the Company receives at least $2,000,000, the 
Company will issue additional warrants to these investors to purchase 10 shares 
of Common Stock for each $1 of loans made by each investor, exercisable at $0.10
per share and expiring ten years after issue.  

Page 19

	As of March 31, 1998, the Company's stockholders have purchased a total of 
50,000,000 Units, including additional Units available to fully subscribing 
shareholders as a result of unexercised rights of other shareholders, under the 
terms of the Rights Offering.  The Rights Offering period expired March 31, 
1998 and has not been extended.  The Company's gross proceeds from the Rights 
Offering are $5,000,000, of which $1,875,000 will be used to repay outstanding 
promissory notes due on March 31, 1998; and $475,000 will be used to repay 
demand promissory notes issued from January 1, 1998 through March 31, 1998 as 
described above.  The Company incurred transfer agent fees of $35,000 in 
relation to the Rights Offering, resulting in net proceeds after fees and debt 
repayment of $2,615,000.  The Company will record $5,000,000 in principal of 
new notes issued to holders of subscribed units, which are payable five years 
from date of issue and bear interest at 8%.  In connection with the Rights 
Offering, the holders of subscriber Units will also receive warrants to 
purchase 50,000,000 shares of common stock expiring ten years from date of issue
and exercisable at $.10 per share.

	On January 13, and February 2 and 23, and March 10 and 20, 1998 the 
Company issued non-convertible demand promissory notes to certain directors for 
an aggregate consideration of $950,000.  These loans bear interest at the prime 
rate.
			

Page 20

PART IV

ITEM 13.	EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

A.1.	The following financial statements relating to 1997 and 1996 are filed as 
a part of this Report:

Independent Auditors' Report.
Balance Sheet as of December 31, 1997.
Statements of Operations for the years ended December 31, 1997 and December 31, 
1996.
Statements of Stockholders' Deficit for the years ended December 31, 1997 and 
December 31, 1996.
Statements of Cash Flows for the years ended December 31, 1997 and December 31, 
1996.
Notes to Financial Statements.

A.2.	Exhibits filed herewith or incorporated by reference herein are set forth 
in the following table prepared in accordance with Item 601 of Regulations S-K.

3.1	Articles of Incorporation of the Registrant as amended to date, 
constituting Exhibit 3.1 to Registration Statement No. 333-41581 on Form SB-1.

3.2 By-Laws, constituting Exhibit 3.2 to the Registrant's Registration Statement
No. 33-5441 on Form S-1, are hereby incorporated herein by reference.

	4.1	Form of Variable Rate Convertible Subordinated Debenture Due 2002 
(Class A), constituting Exhibit 4.4 to Registration Statement No. 33-5441 on 
Form S-1, is hereby incorporated herein by reference.

10.1 Form of Conversion and Exchange Agreement used in May 1988 in connection 
with the conversion and exchange by certain holders of shares of Preferred 
Stock for Common Stock and Warrants, constituting Exhibit 10.19 to Registration 
Statement No. 33-5441 on Form S-1, is hereby incorporated herein by reference.

10.2	Exchange Agreement made as of July 1, 1988 between the Registrant and 
Essex Industrial Chemicals, Inc. with respect to the exchange of 187,500 shares 
of Preferred Stock for a Debenture, constituting Exhibit 10.21 to Registration 
Statement No. 33-5441 on Form S-1, is hereby incorporated herein by reference.

10.3	Preferred Stockholders' Waiver Agreement dated May 5, 1988, incorporated 
by reference to the identically numbered exhibit in Form S-1 Registration 
Statement No. 33-23266.

10.4	Form of Agreement between the Registrant and Certain Investors in 
Preferred Stock dated September 30, 1987, incorporated by reference to the 
identically numbered exhibit in Amendment No. 1 to Form S-1 Registration 
Statement No. 33-23266.

10.5 Letter Agreement executed May 11, 1995 between Archer Daniels Midland and  
IGENE Biotechnology, Inc., along with November 11, 1995 Amendment, constituting 
Exhibit 10.11 to the Registrant's Report on Form 10-KSB for the year ended 
December 31, 1995 is incorporated herein by reference.

10.6 Agreement of Lease effected December 15, 1995 between Columbia Warehouse 
Limited Partnership and IGENE Biotechnology, Inc. constituting Exhibit 10.13 to 
the registrant's report on Form 10-KSB for the year ended December 31, 1995 is 
incorporated herein by reference.

10.7 Toll  Agreement effective as of June 24, 1997 between Igene Biotechnology, 
Inc. and Fermic, S.A. de C.V., is incorporated herein by reference.  (Portions 
of this exhibit have been omitted pursuant to a request for confidential 
treatment.)

Page 21

 (b)	No reports on Form 8-K were filed during the Fourth Quarter of 1997.


Page 22

<TABLE>
IGENE Biotechnology, Inc.
Statement of Operations Data

<CAPTION>
                            		     Years Ended December 31,		
               	    1997    	   1996   	  1995  	   1994   	  1993     
<S>                	<C>	        <C>	      <C>	      <C>	      <C>
Sales	                  14,394   	43,091   	25,563  	113,166  	 68,516  
Total Revenues	         14,394   	66,573  	274,978  	363,249  	 69,089  
Cost of Sales	           9,963   	23,198   	16,878   	36,945  	 32,137  
Research, Development and
  Pilot Plant Expenses	521,669  	309,351  	348,139  	391,912  	329,030  
Other Expenses	      1,422,050  	512,504  	447,335  	474,752  	416,489  
Net Loss	           (1,888,082)	(776,873)	(503,156)	(540,260)	(708,567)
Net Loss 
  Per Common Share(1)	    (.10)    	(.04)    	(.04)    	(.04)    	(.06)
Coverage Deficiency of
  Fixed Charges(2)	  2,030,021  	921,572  	647,695  	684,959  	853,266  

</TABLE>

<TABLE>

Igene Biotechnology, Inc.
Balance Sheet Data
<CAPTION>
	                                      Years Ended December 31,  		
             	    1997     	   1996     	  1995   	   1994   	     1993    
<S> 	             <C> 	        <C>	        <C>  	     <C>	         <C>
Cash and 
  Cash Equivalents	   24,548     	41,339      	8,326     	19,529      	65,897  
Working Capital 
  (Deficit)	      (2,113,574)	  (983,816)	  (336,992)	  (645,815)   	(286,881)
Total Assets	      1,004,952  	  109,054    	104,255     	77,556     	258,417  
Long-Term Debt	    2,582,500  	1,500,000  	1,500,000  	1,500,000   	1,500,000  
Total Liabilities	 5,142,637  	2,562,799  	1,901,127  	2,177,572   	1,938,173  
Redeemable 
  Preferred Stock   	411,920    	475,982    	484,643    	463,104     	438,405  
Stockholders' 
  Deficit	        (4,549,605)	(2,929,727)	(2,281,515)	(2,563,119) 	(2,118,161)
Common Shares 
  Outstanding	    19,206,473 	18,631,139 	18,572,805  13,028,571  	12,975,237  
Preferred Shares
  Outstanding       	217,092    	223,342    	225,842    	226,092     	226,092  
		

<NOTES>

1 Net loss per common share for the year ended December 31, 1993 is based on 
12,769,011 shares. Net loss per common share for each of the years in the four-
year period ended December 31, 1997 is based on 13,002,050, 13,694,343, 
18,604,171 and 18,870,315 weighted average shares, respectively. For purposes 
of computing net loss per common share, the amount of net loss has been 
increased by dividends declared and cumulative undeclared dividends in arrears
on preferred stock.

2	 Earnings are not adequate to cover fixed charges. The "coverage 
deficiency  of fixed charges" for each year is equal to the net loss for the 
year plus  dividends on preferred stock.

</NOTES>
</TABLE>
Page 23

	INDEPENDENT AUDITORS' REPORT









Board of Directors
IGENE Biotechnology, Inc.
Columbia, MD


We have audited the financial statements of IGENE Biotechnology, Inc. as listed 
in response to A.1. of Item 13.   These financial statements are the 
responsibility of the Company's management.  Our responsibility is to express 
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free of 
material misstatement. An audit includes examining, on a test basis, evidence 
supporting the amounts and disclosures in the financial statements. An audit 
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement 
presentation.  We believe that our audits provide a reasonable basis for our 
opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of IGENE Biotechnology, Inc. as 
of December 31, 1997 and the results of its operations and its cash flows for 
the years ended December 31, 1997 and 1996 in conformity with generally 
accepted accounting principles.

The accompanying financial statements have been prepared assuming that IGENE 
Biotechnology, Inc. will continue as a going concern.  As discussed in note 14 
to the financial statements, the Company's recurring losses and limited 
capitalization raise substantial doubt about the Company's ability to continue 
as a going concern. Management's plans in regard to these matters are described 
in note 14.  The financial statements do not include any adjustments that might 
result from the outcome of this uncertainty.




BERENSON & COMPANY LLP



March 19, 1998, except for note 17 as to which the date is March 31, 1998
New York, NY
              


Page 24

<TABLE>

IGENE Biotechnology, Inc.
Balance Sheet

<CAPTION>
                                                             December 31,
ASSETS	                                                      1997	

CURRENT ASSETS
<S>	                                                        <C>
  Cash and cash equivalents	                                $   24,548  	
  Accounts receivable                                          	14,494  	
  Supplies	                                                      4,710  	
  Due from stockholders and investors (note 7)                	153,594  	
  Loan Receivable (note 3)	                                    249,217  
     TOTAL CURRENT ASSETS	                                     446,563  	


OTHER ASSETS
  Property and equipment, net (note 4)                        	297,006  
  Loan receivable, net of current portion (note 3)            	250,783  
  Security deposits	                                            10,600  
     TOTAL ASSETS                                          	$1,004,952  

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable and accrued expenses (note 5)           	$  515,137  
  Debenture interest payable (note 6)	                          45,000  
  Promissory notes payable (note 7)	                         2,000,000  
     TOTAL CURRENT LIABILITIES`                            	 2,560,137  

LONG-TERM DEBT
  Promissory notes payable (note 7)	                         1,082,500  
  Variable rate subordinated debenture (note 6)            	 1,500,000  
     TOTAL LIABILITIES	                                      5,142,637  

COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)	

REDEEMABLE PREFERRED STOCK
  Carrying amount of redeemable preferred stock, 8% cumulative, 
  convertible, voting, series A, $.01 par value per share.
  Stated value $13.92 per share.   Authorized 1,312,500 shares;
  issued 29,592 shares.  Redemption amount $411,920 
  (notes 6, 8 and 9)                                       	   411,920  

STOCKHOLDERS' DEFICIT (notes 7, 8 and 9)
  Preferred stock -- $.01 par value per share.  8% cumulative,
     convertible, voting, series A.  Authorized and issued
     187,500 shares (aggregate involuntary liquidation value
     of $2,610,000)                                             	1,875  
  Common stock -- $.01 par value per share.  Authorized
     250,000,000 shares; issued 19,206,473 shares	192,065  
  Additional paid-in capital                               	18,233,670  
  Deficit	                                                 (22,977,215)

     TOTAL STOCKHOLDERS' DEFICIT                          	( 4,549,605)
     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT          	 $1,004,952  

The accompanying notes are an integral part of the financial statements.     

</TABLE>

Page 25

<TABLE>

IGENE Biotechnology, Inc.
Statements of Operations

<CAPTION>
                                                 Years ended December 31,  
                                              	     1997  	      1996  
<S>                                                	<C>	         <C>
Sales                                              	14,394       	43,091  
Cost of sales	                                       9,963  	     23,198  

    Gross profit	                                    4,431       	19,893  

Technology services income                    	        ---  	     23,482  

    Total revenue                                   	4,431       	43,375  

Selling, general and administrative expenses:

    Marketing and selling	                           8,741        	5,438  
    Research, development and pilot plant         	521,669      	309,351  
    General and administrative                    	432,842      	331,211  
    Litigation expenses (note 12)	                 658,185  	        ---  

    Total selling, general and 
    administrative expenses	                     1,621,437  	    646,000  

    Operating loss	                             (1,617,006)	    (602,625)

Other income (expenses):

    Income from renegotiated liabilities	           51,204          	---  
    Investment income	                                   2        	1,607  
    Other income (expense)                          	4,283       	(4,743)
    Interest expense	                             (326,565) 	   (171,112)

Net Loss                                       	(1,888,082)    	(776,873)

Deficit at beginning of year                  	(21,089,133) 	(20,312,260)

Deficit at end of year                     	  $(22,977,215) $(21,089,133)

Net loss per common share (note 10)          	$      (0.10)	$      (0.04)



The accompanying notes are an integral part of the financial statements.

</TABLE>

Page 26

<TABLE>

IGENE Biotechnology, Inc.
Statement of Stockholders' Deficit

<CAPTION>
                     	Redeemable	
	                     Preferred 	      Preferred         	Common
	                     Stock	           Stock	             Stock
	                     # shares/amount 	#shares/amount	    # shares/amount
<S>	                  <C>	             <C>               	<C>
Balance at December 
  31, 1995	           38,342/$484,643 	187,500/$1,875	18,572,805/$185,728
Issuance of 53,334 shares of
  common stock as payment of
  interest on variable rate
  subordinated debenture 
  (note 6)                       	---            	---    	53,334/$533

Cumulative undeclared dividends
  on redeemable preferred 
  stock                     	$ 22,939            	---            	---

Conversion of redeemable 
  preferred stock into 
  common stock	      (2,500)/$(31,600)	           ---      	5,000/$50

Net loss for 1996	                ---            	---	            ---

Balance at December 
  31, 1996	            35,842/$475,982 187,500/$1,875	18,631,139/$186,311

Issuance of 80,000 shares of
  common stock as payment of
  interest on variable rate
  subordinated debenture 
  (note 6)	                        ---          	---        	80,000/$800

Issuance of common stock through
  exercise of employee stock 
  options                         	---          	---      	482,834/$4,829

Cumulative undeclared dividends on
  redeemable preferred stock  	$ 21,938         	---                	---

Conversion of redeemable 
  preferred stock 
  into common stock	    (6,250/$(86,000)        	---        	12,500/$125

Net loss for 1997	                  ---  	       ---	                ---

Balance at December 
  31, 1997	             29,592/$411,920 187,500/$1,875	19,206,473/$192,065

The accompanying notes are an integral part of the financial statements.
</TABLE>

Page 27

<TABLE>

IGENE Biotechnology, Inc.
Statement of Stockholders' Deficit
(Continued)

<CAPTION>
                            	Additional	                  	Total
                            	Paid-In 	                    	Stockholder's
	                            Capital	      Deficit	        Deficit
<S>                         	<C>	         <C>	           <C>
Balance at December 
  31, 1995                  	$17,843,142  	$(20,312,260) 	$(2,281,515)

Issuance of 53,334 shares of
  common stock as payment of
  interest on variable rate
  subordinated debenture (note 6)	119,467          	---      	120,000  

Cumulative undeclared dividends
  on redeemable preferred stock 	 (22,939)         	---      	(22,939)

Conversion of redeemable 
  preferred stock into 
  common stock	                    31,550          	---       	31,600  

Net loss for 1996	                    ---   	  (776,873)	    (776,873)

Balance at December 31, 1996 	$17,971,220 	$(21,089,133) 	$(2,929,727) 

Issuance of 80,000 shares of
  common stock as payment of
  interest on variable rate
  subordinated debenture (note 6)	179,200          	---      	180,000  

Issuance of common stock through
  exercise of employee 
  stock options	                   19,313          	---       	24,142  

Cumulative undeclared dividends on
  redeemable preferred stock     	(21,938)         	---      	(21,938)

Conversion of redeemable preferred
  stock into common stock	         85,875          	---	       86,000  

Net loss for 1997	                    --- 	  (1,888,082)	  (1,888,082)

Balance at December 31, 1997	 $18,233,670 	$(22,977,215)	 $(4,549,605)


The accompanying notes are an integral part of the financial statements.
</TABLE>

Page 28

<TABLE>

IGENE Biotechnology, Inc.
Statements of Cash Flows

<CAPTION>	
                                                  Years ended December 31,    
                                            	       1997    	        1996    
<S>	                                              <C>	          <C>
Cash flows from operating activities:
Net loss	                                          $(1,888,082)	($776,873)
Adjustments to reconcile net loss to net
    cash used by operating activities:
    Depreciation                                        	7,821  	   6,261  
    Loss on sale of assets                              	  ---    	 4,743  
    Interest on debenture paid in shares of
        common stock                                  	180,000   	120,000  
    Decrease (increase) in:
        Accounts receivable                           	 (4,498)  	  1,133  
        Prepaid expenses and supplies                 	  6,068   	(10,778)
    Increase (decrease) in:
          Accounts payable and other 
          accrued expenses	                            214,338     44,672  
Net cash used in operating activities           	   (1,484,353)  (610,842)

Cash flows from investing activities:
Capital expenditures	                                 (285,356)      (955) 
Loan to contract manufacturer                   	     (500,000)	      ---  
Net cash used in investing activities 	               (785,356)      (955)

Cash flows from financing activities:
Proceeds from issuance of common stock                 	24,142       	---  
Issuance of promissory notes	                        2,228,776    644,810  
Net cash provided by financing activities	           2,252,918    644,810  

Net increase (decrease) in cash
  and cash equivalents                         	       (16,791)    33,013  

Cash and cash equivalents - beginning of the year	      41,339     	8,326  
Cash and cash equivalents - end of the year	        $   24,548 $   41,339  

Supplementary disclosure and cash flow information:
  Cash paid during the year for interest           	$     --- 	$     ---  
  Cash paid during the year for income taxes	             ---       	---  

<NOTES>

Non-cash investing and financing activities:

During 1997 and 1996, the Company issued 80,000 and 53,334 shares of common 
stock, respectively, in each year in payment of interest on the variable rate 
subordinated debenture.  If paid in cash, the interest would have been payable 
at 12% and 8%, respectively, during 1997 and 1996, or $180,000 and $120,000, 
respectively, per year.  Shares may be issued in lieu of cash under the 
debenture agreement at the higher of $2.25 per share or market price per 
share.  The stock was issued and related interest was paid in 1997 and 1996 at
$2.25 per share, or $180,000 and $120,000, respectively, in each year.  (See 
also note 6)

During 1997 and 1996 the Company recorded dividends in arrears on 8% redeemable 
preferred stock at $.64 per share aggregating $21,938 and $22,939, respectively 
in each year which has been removed from paid-in capital and included in the 
carrying value of the redeemable preferred stock.  (See also note 8)

Page 29

IGENE Biotechnology, Inc.
Statements of Cash Flows
(continued)


Non-cash investing and financing activities: (continued)

During 1997 the Company issued promissory notes to certain directors of the 
Company in the face amount of $2,365,500.  As of December 31, 1997 $2,226,186 
had been received in cash proceeds by the Company.  $139,314 remained due from 
certain directors of the Company as of December 31, 1997. (See also note 7)

During 1996 the Company issued promissory notes to certain directors of the 
Company in the face amount of $617,000. As of December 31, 1996 $600,130 had 
been received in cash proceeds by the Company.  $16,870 remained due from 
certain directors of the Company on December 31, 1996, of which $2,590 was 
received during 1997. (See also note 7)

The accompanying notes are an integral part of the financial statements.
</NOTES>
</TABLE>

Page 30

IGENE Biotechnology, Inc.
Notes to Financial Statements


(1) Nature of Business

The Company was incorporated under the laws of the State of Maryland on October 
27, 1981 as "Industrial Genetics, Inc."  The Company changed its name to "IGI 
Biotechnology, Inc." on August 17, 1983 and to "IGENE Biotechnology, Inc." on 
April 14, 1986.  The Company is located in Columbia, Maryland and is engaged in 
the business of industrial microbiology and related biotechnologies.

(2)	Summary of Significant Accounting Policies

Cash and cash equivalents

For purposes of the financial statements, cash equivalents have been combined 
with cash.  The Company considers cash equivalents to be short-term, highly 
liquid investments that have maturities of less than three months.  These 
include interest bearing money market accounts.

Research and development costs

For financial reporting purposes, research, development and pilot plant scale-
up costs are charged to expense when incurred.

Depreciation

Depreciation of property and equipment is provided under the straight-line 
method over the useful lives of the respective assets which average 7 years for 
all equipment.

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 disclosure of 
contingent assets and 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.

	Fair value of financial instruments

The carrying amounts of cash and cash equivalents approximate fair value 
because of the short maturity of those instruments.  The carrying amount of 
long-term debt approximates fair value because of similar current rates at 
which the Company could borrow funds with consistent remaining maturities.

Sales Returns

The Company records sales returns in the period in which the product is 
returned, rather than estimating future returns of current sales, since they 
are expected to be immaterial in amount.

Page 31


IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)


Interest on Variable Rate Subordinated Debenture

The Company records interest on its variable rate subordinated debenture (see 
also note 6) at a level rate of 8% through October 1, 1996 and at 12% 
thereafter; rather than at the fair-market value of shares which have been 
issued in lieu of cash payments of interest.  This is an estimated average rate 
based on the Company's plan to continue (as it has since October 1, 1989) to 
pay interest on the debenture by issuing shares of common stock at the higher 
of $2.25 per share or the current market value of the Company's shares, as 
allowed under the terms of the debenture.  If the market value of the Company's 
stock remains below $2.25 per share (during the period from October 1989 
through December 1997 its highest price was $1.25) the Company can continue to
issue stock in lieu of cash payments at $2.25 per share.  

	Accounting for stock based compensation

The Company applies APB Opinion 25 in accounting for employee stock option 
plans (note 9).  Accordingly, no compensation cost has been recognized in 1997 
or 1996.  Had compensation cost been determined on the basis of FASB Statement 
123, the following changes would have resulted:

<TABLE>
<CAPTION>
                             			  1997   	      1996   
	<S>	                             <C>           <C>
	Net loss:
		As reported                    	$  (1,888,082)	$  (776,873)
		Pro forma	                         (1,888,082)   	(781,189)

	Net loss per common share:
		As reported                      	$      (.10)	$      (.04)
		Pro forma                               	(.10)	       (.04)

</TABLE>

The fair value of compensation was computed using an option-pricing model, 
which took into account the following factors as of the grant date:

- The exercise price and expected life of the option.
- The current price of the stock and its expected volatility.
- Expected dividends, if any.
- The risk-free interest rate for the expected term of the option using 
Treasury Note rates with a remaining term equal to the expected life of the 
options.

(3)	Loan Receivable

	During 1997, the Company loaned $500,000 to its contract manufacturer of 
AstaXin(r) for the purchase of manufacturing equipment needed for the 
production of AstaXin(r), all of which remains due as of December 31, 1997. The
loan is payable over 23 months with interest at 10%.  As of December 31, 1997, 
$249,217 of the loan is classified as a current asset, and $250,783 is 
classified as a long-term asset.

Page 32

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)

(4)	Property and Equipment

Property and equipment are stated at cost and are summarized as follows:
<TABLE>
<S>	                                		<C>
Laboratory equipment and fixtures		   $  103,007  
Pilot plant equipment and fixtures        	8,201  
Machinery and equipment  		               73,716  
Manufacturing equipment	    	            186,421  
Idle equipment                   	       	50,250  	
Office furniture and fixtures  		         33,526  
                                       		455,121  
Less accumulated depreciation 		        (158,115)
                                    		$  297,006  
</TABLE>

Idle equipment represents manufacturing equipment which is not presently needed 
for production of AstaXin(r).  The Company plans to retain the equipment for 
use when needed due to increased production volume.  This equipment is not 
being depreciated and its cost approximates fair value.

(5)	Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

<TABLE>
<S>				                             <C>
Accounts payable, trade           		$  219,024  
Audit fees                            		15,000  
Legal fees                            		68,784  
Equipment                             		29,633  
Other accrued expenses                   		444  
Accrued interest, promissory notes		   182,252  
	 			                              $   515,137  
</TABLE>

(6)	Variable Rate Subordinated Debenture
        
In July 1988, the Company and a principal holder of the Company's redeemable 
preferred stock agreed to exchange 187,500 shares of the Company's 8% cumula
tive convertible preferred stock, Series A for a $1,500,000 variable rate 
convertible subordinated debenture due 2002, Class A.

The debenture bears interest at a rate of 8% per annum through September 30, 
1996 and thereafter at a rate of 12% per annum.  Interest was payable in cash 
through October 1, 1989.  Thereafter, the debenture agreement provides that at 
the option and at the discretion of the Company, interest may be paid in shares 
of the Company's common stock at the greater of $2.25 per share or the average 
market value per share.  During 1997 and 1996, the Company issued 80,000 and 
53,334 shares, respectively of its common stock as payment of interest on the 
debenture. The debenture is convertible into common stock of the Company at any 
time at the option of the holder at an initial rate of $4 per share of common 
stock.  The debenture is redeemable at the option of the Company at any 
interest payment date at par value plus accrued interest.  Upon maturity of
the debenture, the Company, at its option, may repay the remaining principal 
in shares of 8% cumulative convertible preferred stock, at a rate of $8 per 
preferred share.  $45,000 

Page 33

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)


of accrued interest through December 31, 1997 is recorded in these financial 
statements.

(7)	Promissory Notes Payable

Beginning November 16, 1995 and continuing through May 8, 1997, the Company 
issued promissory notes to certain directors for aggregate consideration of 
$1,082,500.  These notes specify that at any time prior to repayment the holder 
has the right to convert the notes to common stock of the Company at prices 
ranging from $0.05 per share to $0.135 per share, based on the market price of 
common shares at the issue date. In connection with such issuance, the holders 
also received warrants for an equivalent number of shares at the equivalent 
price per share. The warrants expire ten years from the issue of the notes.  
These notes are due on March 31, 2003 and bear interest at the prime rate. 

The notes are detailed, by issue date, and by conversion and warrant price, as 
follows:

<TABLE>
<CAPTION>
                                                       		Conversion
                                            	Note	       Warrant
 Issue Date                           	      Amount	     Price/Share
<S>	                                        <C>	         <C>
	November 16, 1995	                         $   40,000	  $   0.050
	December 22, 1995	                             60,000	      0.050

	Total issued in 1995	                         100,000	

	February 14, 1996                             	70,000      	0.100
	March 11, 1996                                	70,000      	0.090
	April 23, 1996                                	36,000	      0.060
	May 9, 1996                                   	71,000	      0.060
	June 7, 1996                                  	70,000      	0.050
	July 24, 1996	                                 90,000      	0.115
	September 24, 1996	                            70,000	      0.125
	November 15, 1996	                             70,000      	0.090
	December 11, 1996                       	      70,000      	0.090

	Total issued in 1996	                         617,000	

	January 14, 1997                              	70,000      	0.070
	February 24, 1997                            	100,000	      0.110
	March 31, 1997	                                75,000	      0.100
	April 3, 1997	                                 24,500      	0.100
	May 8, 1997                                   	80,000      	0.135
	May 8, 1997	                                   16,000	      0.135

	Total issued in 1997	                         365,500	

	TOTAL	                                   $  1,082,500
</TABLE>

Page 34

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)


Beginning June 5, 1997 and continuing through December 5, 1997, the Company 
issued promissory notes to certain directors and investors for aggregate 
consideration of $2,000,000. These notes specify that at any time prior to 
repayment the holder has the right to convert the notes to common stock of the 
Company at $.10 per share.  In connection with such issuance, the holders also 
received warrants for an equivalent number of shares at $0.10 per share. The 
warrants expire ten years from the issue of the notes.  These notes bear 
interest at 8%.  These notes are due on March 31, 1998. The company plans to 
repay these notes with proceeds from the Rights Offering, as described below.
At the option of each investor, all indebtedness under these note will be 
repaid and canceled through use of proceeds from the Rights Offering or will 
be converted into Common Stock of the company at $0.10 per share.

As of December 31, 1997 the unpaid portion of these Promissory Notes was 
$153,594, which the Company expects to receive by March 31, 1998.

(8)	Redeemable Preferred Stock

Each share of redeemable preferred stock is entitled to vote on all matters 
requiring shareholder approval as one class with holders of common stock, 
except that each share of redeemable preferred stock is entitled to two votes 
and each share of common stock is entitled to one vote.

Redeemable preferred stock is convertible at the option of the holder at any 
time, unless previously redeemed, into shares of the Company's common stock at 
the rate of two shares of common stock for each share of preferred stock 
(equivalent to a conversion price of $4.00 per common share), subject to 
adjustment under certain conditions.

Shares of redeemable preferred stock are redeemable for cash in whole or in 
part at the option of the Company at any time at the stated value plus accrued 
and unpaid dividends to the redemption date.  Dividends are cumulative and 
payable quarterly on January 1, April 1, July 1 and October 1, since January 1,
1988.  See note 6 relating to exchange of redeemable preferred stock and note 9 
relating to conversion of redeemable preferred stock and waiver of redemption 
privileges. Mandatory redemption is required by October 2002.  As of December 
31, 1997, cumulative dividends in arrears totaled $175,185 ($5.92 per share) 
and were included in carrying value of redeemable preferred stock

(9)	Stockholders' Equity

In November of 1997 the stockholders approved the 1997 Stock Option Plan which 
succeeds the Company's 1986 Stock Option Plan, as amended.  All outstanding, 
unexercised options granted under the 1986 Plan have been cancelled and 
reissued with unchanged terms under the 1997 Plan.  The number of shares 
issuable under the 1997 Plan is 20,000,000.

Page 35

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)


On January 11, 1996 options to purchase 1,418,502 shares of common stock of the 
Company at $0.05 per share were granted to the CEO of the Company, and options 
to purchase 800,000 shares of common stock at $0.05 per share were granted to 
two officers of the Company.  One-third of these options were exercisable 
immediately, and an additional one-third were to become exercisable on each 
anniversary of the grant.  The Compensation Committee also approved, on April 
17, 1996, the decrease in the exercise price of outstanding, previously granted 
employee stock options issued through March 9, 1995 to $0.05 per share, which 
was the then current fair market value. On August 16, 1996 the Compensation 
Committee approved the amendment of the prior vesting schedules for the options 
of certain current employees, so that all of their outstanding stock options 
became immediately exercisable. The CEO of the Company and a director who is a 
former employee were not included in this amendment to vesting schedule of 
options.  No employee stock options were exercised during 1996.

During 1997, the former CEO, who was terminated in January of 1997, exercised 
options to purchase 472,834 shares at $0.05 per share.  An officer also 
exercised options to purchase 10,000 shares at $0.05 per share.  No employee 
stock options were granted in 1997.

On December 14, 1995, the Company issued 4,290,400 shares of common stock in 
lieu of retired Promissory Notes and Warrants issued to certain directors of 
the Company from August 25, 1993 through March 7, 1995.  Issued along with the 
common stock were warrants to purchase an equal amount of common stock of the 
Company at $.125 per share, which was the fair market value of the common stock 
as quoted on April 3, 1995 by the National Quotation Bureau, which warrants 
shall expire on April 3, 1998.

The following table summarizes options and warrants issued, outstanding and 
exercisable:

<TABLE>
<CAPTION>
       			                              As of December 31,          
			                                     1997    	  1996    
	<S>	                                   <C>	       <C>
	Issued	                                39,725,462	16,110,259
	Outstanding                           	39,135,628	16,003,259
	Exercisable                           	39,135,628	16,003,259

</TABLE>

At December 31, 1997, 37,464,878 shares of authorized but unissued common stock 
were reserved for exercise of outstanding warrants, 20,000,000 shares of 
authorized but unissued common stock were reserved for exercise pursuant to the 
1997 Stock Option Plan, 434,184 shares of authorized but unissued common stock 
were reserved for issuance upon conversion of the Company's outstanding 
preferred stock, 400,000 shares of authorized but unissued common stock were 
reserved for issuance in lieu of payment of interest on the variable rate 
subordinated debenture, 375,000 shares of authorized but unissued common stock 
were reserved for issuance upon conversion of the variable rate subordinated 
debenture and 33,174,477 shares of authorized but unissued stock were reserved 
for issuance upon conversion of outstanding convertible notes. 

Page 36

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)

 
Preferred Stock

In May 1988, the Company and a holder of its redeemable preferred stock entered 
into an agreement under which the mandatory redemption rights referred to in 
note 6 were waived as to 187,500 shares of the preferred stock. These shares 
are subject to redemption at the option of the Company under provisions 
governing the preferred stock which permit the Company to redeem such stock at 
any time.  Under these arrangements, the amounts attributable to shares of the 
preferred stock as to which mandatory redemption rights were waived are recorded
and combined in total with the stockholders' equity accounts.

During 1996 and 1997, holders of redeemable preferred stock converted 2,500 and 
6,250 shares, respectively, of preferred stock into 5,000 and 12,500 shares, 
respectively, of common stock of the Company.

At December 31, 1997, cumulative dividends in arrears totaled $1,110,000 ($5.92 
per share) and were included in the aggregate involuntary liquidation value of 
the preferred stock.

At December 31, 1997, 187,500 shares of authorized but unissued preferred stock 
were reserved for issuance upon maturity of the variable rate subordinated 
debenture.

(10)	Net Loss Per Common Share

Net loss per common share for 1997 and 1996 is based on 18,870,314 and 
18,604,171 weighted average shares, respectively.  For purposes of computing 
net loss per common share, the amount of net loss has been increased by 
dividends declared and cumulative undeclared dividends in arrears on preferred 
stock.

Common Stock equivalents, including: options, warrants, convertible debt, 
convertible preferred stock, and exercisable rights have not been included in 
the computation of earnings per share in 1997 and 1996 because to do so would 
have been anti-dilutive.  However, these common stock equivalents could have 
potentially dilutive effects in the future (see also notes 6, 7, 8 and 9).

(11)	Commitments

The Company is obligated for office and laboratory facilities and other rentals 
under separate operating lease agreements, which expire in 2001. The basic 
annual rentals are expected to be approximately $73,000 under such leases. 
Annual rent expense relating to the leases for the years ended December 31, 
1997 and 1996 approximated $67,000 and $68,000, respectively.


Page 37

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)


(12)	Contingencies

In May 1995, the Company signed a non-exclusive licensing agreement with Archer 
Daniels Midland Company ("ADM") for the manufacture and sale of AstaXin(r). On 
February 29, 1996 ADM informed the Company that it had decided not to utilize 
the Technology and requested that IGENE return approximately $250,000 in 
payments under the License Agreement.  IGENE maintains that ADM is not entitled 
to the payments and that additional monies are owed to IGENE.  On July 21, 
1997, ADM filed suit against the Company in the U.S. District Court in 
Greenbelt, Maryland alleging patent infringement and requesting a preliminary 
injunction against the Company to cease the use of its astaxanthin manufacturing
process.  ADM's request for injunctive relief was denied.  On August 4, 1997, 
the Company filed a $300,450,000 contract and trade secrets lawsuit in U.S. 
District Court in Baltimore, Maryland against ADM, contending that ADM stole the
Company's formula for making its natural astaxanthin pigment, AstaXin(r).  The 
Company is also claiming breach of contract, in regards to the licensing 
agreement entered into by the Company and ADM in 1995.  The Company contends 
that it complied with all material terms of this agreement, including concen
tration levels of its pigment. The Company's claim was re-asserted as a counter-
claim against ADM and the two cases were joined in the District Court in 
Baltimore, Maryland on August 24, 1997.  On September 10, 1997 the District 
Court denied ADM's request for preliminary injunction on the basis that ADM 
could not demonstrate a likelihood of success on the merits of its case.  
Management believes ADM's claims are meritless. Managements basis for this is 
that ADM claims that the levels of pigment the Company said it could produce 
did not meet contract levels. Management has copies of ADM's internal memos 
showing that the levels of pigment met the contract specifications. It is 
management's contention that it is not probable that this dispute will result 
in an unfavorable outcome. Accordingly, no liability has been reflected in the
accompanying balance sheet.  The Company had expenses of $658,185 in 1997 
relating to this litigation.

(13)	Income Taxes

At December 31, 1997, the Company has federal and state net operating loss 
carry-forwards of approximately $21,200,000 that expire at various dates from 
1998 through 2011.  The recorded deferred tax asset, representing the expected 
benefit from the future realization of the net operating losses, net of the 
valuation allowance, was $-0- for both years.

The sources of the deferred tax asset is approximately as follows:       
<TABLE>
<CAPTION>      	
                                      		     1997    	 
	<S>	                                   <C>
	Net operating loss 
	     Carry-forward benefit            	$ 8,480,000  	
	Valuation allowance 	                   (8,480,000) 		
	Deferred tax asset                    	$       ---  	 
</TABLE>

Page 38

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)

(14)	Uncertainty

The Company has incurred net losses in each year of its existence, aggregating 
approximately $23,000,000 from inception to December 31, 1997 and its 
liabilities and redeemable preferred stock exceeded its assets by approximately 
$4,600,000 at that date.  These factors indicate that the Company will not be 
able to continue in existence unless it is able to raise additional capital and 
attain profitable operations.

Management has instituted a program of significant cost reductions, deferred 
all except immediately necessary capital expenditures, and suspended payment of 
dividends on the Company's preferred stock.  The implementation of these 
measures to conserve working capital together with the successful marketing and 
licensing of the Company's products, which management hopes to achieve, may 
permit the Company to attract additional capital and enable it to continue.

The Company has contracted with a manufacturer of its AstaXin(r) technology. 
The Company believes this technology to be highly marketable.

To increase working capital, the Company issued a rights offering in February 
1998 (see note 17). The Company will also encourage the holders of convertible 
promissory notes to convert them into common stock.  To meet short-term cash 
needs the Company issued additional promissory notes to officers and directors. 
(see also note 17)

(15)	Technology Licensing Income

On May 11, 1995 the Company and Archer-Daniels-Midland Company signed a non-
exclusive licensing agreement for AstaXin(r).  The Agreement provided for an 
initial payment of $200,000 and royalties based on sales.  In addition, the 
Company received $23,482 in 1996 for technology services pertaining to the 
Agreement. On February 29, 1996 Archer-Daniels-Midland Company terminated its 
Licensing Agreement with the Company (See Note 12).

(16) Simple Retirement Plan

Effective January 1, 1997, the Company adopted a Simple Retirement Plan under 
Internal Revenue Code Section 408(p).  The Plan is a defined contribution plan, 
which covers all of the Company's employees who receive at least $5,000 of 
compensation for the preceding year. The Plan permits elective employee 
contributions.  The Company makes a nonelective contribution of 2% of each 
eligible employee's compensation for each year. 
The Company's contributions to the Plan for 1997 were $5,483, which is expensed 
in the 1997 statement of operations.

(17)	Subsequent Events

During 1996 the Company began commercial fermentation trials with another 
potential manufacturer. On July 3, 1997, the Company signed a non-exclusive 
toll manufacturing agreement with Fermic, S.A. de C.V., of Mexico City, Mexico, 
for the production of its natural astaxanthin pigment, AstaXin(r) in Fermic's 
manufacturing facility in Mexico.  Commercial production began in 

Page 39

IGENE Biotechnology, Inc.
Notes to Financial Statements
(continued)


January of 1998, and the Company intends to sell AstaXin(r) worldwide through 
distributors, including Fermic, to meet an anticipated demand for the product.

The Company distributed to holders of record on February 13, 1998, transferable 
rights to subscribe for and purchase 0.54 of a Unit for each share of common 
share equivalent owned by such holder.  Each Unit will entitle the holder to 
receive $0.10 principal amount of 8% Notes due March 31, 2003 and warrants to 
purchase one share of common stock at an exercise price of $0.10 per share. 
Common shares or equivalents include: Common Stock, Preferred Stock, unexpired 
warrant, options exercisable, and convertible notes outstanding.  The Company 
would raise up to $5,000,000 through this Rights Offering, if fully subscribed.
If the Company does not raise at least $2,000,000 in the Rights Offering, 
certain investors, who are the holders of $2,000,000 in promissory notes as 
described above, have agreed to purchase Units equal to the difference between 
$2,000,000 and the proceeds from the Rights Offering; however, concurrently 
therewith the Company will have to repay $2,000,000 in promissory notes so 
that, in that event the Company will not have any proceeds after repayment of 
those notes.  The Rights Offering expires March 31, 1998.  In consideration of 
the investors agreeing to subscribe to Units such that the Company receives at 
least $2,000,000, the Company will issue additional warrants to these investors 
to purchase 10 shares of Common Stock for each $1 of loans made by each 
investor, exercisable at $0.10 per share and expiring ten years after issue.

On January 13, February 2, February 23, March 10, and March 20, 1998 the 
Company issued non-convertible demand notes to certain directors for an 
aggregate consideration of $950,000.  These loans bear interest at the prime 
rate.

As of March 31, 1998, the Company's stockholders have purchased a total of 
50,000,000 Units, including additional Units available to fully subscribing 
shareholders as a result of unexercised rights of other shareholders, under the 
terms of the Rights Offering.  The Rights Offering period expired March 31, 
1998 and has not been extended.  The Company's gross proceeds from the Rights 
Offering are $5,000,000, of which $1,875,000 will be used to repay outstanding 
promissory notes due on March 31, 1998; and $475,000 will be used to repay 
demand promissory notes issued from January 1, 1998 through March 31, 1998 as 
described above.  The Company incurred transfer agent fees of $35,000 in 
relation to the Rights Offering, resulting in net proceeds after fees and debt 
repayment of $2,615,000.  The Company will record $5,000,000 in principal of 
new notes issued to holders of subscribed units, which are payable five years 
from date of issue and bear interest at 8%.  In connection with the Rights 
Offering, the holders of subscriber Units will also receive warrants to 
purchase 50,000,000 shares of common stock expiring ten years from date of issue
and exercisable at $.10 per share.


Page 40

	SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange 
Act of 1934, the Registrant has duly caused this Report to be signed on its 
behalf by the undersigned, thereunto duly authorized, in Columbia, Howard 
County, State of Maryland on April 15, 1998.


IGENE Biotechnology, Inc.


Date:	April 15, 1998			By:	  /S/ Stephen F. Hiu, President    



Pursuant to the requirements of the Securities Act of 1933, this report is to 
be signed below by the following persons in the capacities indicated.

<TABLE>
<CAPTION>
Signature					                    Title				                		Date
<S>		                         				<C>				                   	<C>
  /s/  Joseph C. Abeles        	 	Director	          				April 15, 1998
      (Joseph C. Abeles)

 /s/ Ramin Abrishamian	         		Director, 	        				April 15, 1998
     (Ramin Abrishamian)        		Chief Executive Officer

  /s/  John A. Cenerazzo         	Director	          				April 15, 1998
      (John A. Cenerazzo)

  /s/  Stephen F. Hiu            	Director, President, 		April 15, 1998
      (Stephen F. Hiu)		         	Secretary, and Treasurer		
	                            					Chief Financial Officer,
				                            		Chief Accounting Officer

  /s/  Thomas L. Kempner         	Vice Chairman of Board		April 15, 1998
      (Thomas L. Kempner)

  /s/  Michael G. Kimelman       	Chairman of the Board 		April 15, 1998
      (Michael G. Kimelman)     		of Directors

  /s/  Sidney R. Knafel          	Director			           		April 15, 1998
      (Sidney R. Knafel)

  /s/  Patrick F. Monahan        	Director		           			April 15, 1998
      (Patrick F. Monahan)
</TABLE>
/DOCUMENT>