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 [FEE REQUIRED]
For the fiscal year ended       December 31, 1996                              

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES 
EXCHANGE ACT OF  934 [NO FEE REQUIRED]
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 
$66,573.
As of March 1, 1997, there were 18,631,139 shares of the issuer's 
Common Stock 
and 223,342 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 $4,055,760, 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.)

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.

Research and Development

As of December 31, 1996, the Company had expended approximately 
$10,200,000 on 
research and development since its inception on October 27, 1981 
and has, as of 
December 31, 1996, received revenues from product sales of 
approximately 
$1,781,000 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 1997.

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 285,000 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.   

In 1996, the Company began commercial fermentation trials with 
another potential 
manufacturing partner. However, a formal Manufacturing Agreement 
has not been 
executed. The Company is continuing to contact other potential 
manufacturers for 
the product.

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. 

3.	Whey-Based Products

(a)	MacroMin(r) and MinraLac(r)

MacroMin(r) and MinraLac(r) are the Company's registered trade 
names for 
coproducts it developed for converting low economic value cheese 
whey into 
economically and biologically useful products for the food 
industry.  In spite 
of extensive sales efforts throughout 1989, the Company was not 
able to develop 
a market for these products and they were phased out in 1990.  

(b)	Weyco-Serv(r)

Weyco-Serv(r) (or NaturServ(r)) is the Company's trade name for a 
fermented 
whey-based product containing calcium propionate and calcium 
acetate that can be 
used as a food preservative and mold inhibitor in the baked goods 
industry, in 
condiments, and in other foods and beverages.  The product is 
produced by 
fermenting modified cheese whey residues using a patented 
microbial co-culture 
and fermentation process developed by the Company.

A license to manufacture and sell Weyco-Serv(r) was granted by 
the Company to 
Hercules Incorporated ("Hercules"), Wilmington, Delaware, in 
exchange for an 
initial license fee of $500,000, pursuant to a license agreement 
dated as of 
September 16, 1985.  Hercules had not produced commercially any 
quantities of 
Weyco-Serv(r) and by an agreement dated October 15, 1987, the 
Company and 
Hercules terminated the license agreement.

The termination arrangement provided that the Company pay 
Hercules $25,000 for 
termination of the license.  If 
the Company commercializes Weyco-Serv(r), the Company will pay 
Hercules up to an 
additional $600,000 from revenues 
from the sale or licensing of the product.

The Company continues to be interested in licensing the Weyco-
Serv(r) 
technology.

4.	Diagnostic Reagents

The Company has developed a number of enzymes that are suitable 
as reagents for 
clinical diagnostic applications. 
Two such microorganisms and fermentation processes yield high 
concentrations of 
stabilized enzymes that can be used for 
the isolation of strain-specific cell wall components in rapid 
diagnostic tests 
for streptococcal diseases.  The Company has 
been granted a patent for industrial production of a lytic enzyme 
specific for 
Group A Streptococcus.  To date, the Company 
has produced only small commercial quantities of these enzymes 
and continues to 
be interested in manufacturing and 
marketing these enzymes for use in diagnostic test kits.

5.	Flavors and Fragrances

The Company has developed natural flavor and fragrance chemicals 
by fermentation 
of whey and other carbohydrates.  Patent applications on the 
proprietary 
microorganisms developed by the Company have been submitted in 
Europe and in the 
United States.

The fermentation processes yield a range of water-soluble low 
molecular weight 
organic (carboxylic) acids which 
can be converted with naturally occurring alcohols into esters 
which are 
commercially useful both as food flavors and as 
fragrances in cosmetic and toiletry products.

The Company has also developed a fermentation process for the 
production of 
Poly-LevuLan(tm), its trademark for a high molecular weight 
fructose polymer, 
which can be used as a flavor carrier or as a foam stabilizer and 
thickener in 
food and cosmetic applications. 

The Company is continuing to seek opportunities to commercialize 
its 
flavors/fragrances technology.

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 1994, 1995, and 1996, 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), ClandoSan(r), Weyco-Serv(r), and 
streptococcus 
lytic enzyme.  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, 1996, the Company had 8 employees, three of who 
are in 
administration and marketing, while the remainder is engaged in 
process 
development and support of manufacturing activities.

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 lease, which expiring on January 31, 1996 with 
an approximate 
rental expense of $68,000 for 1996.  In late 1995 the Company 
signed a five-year 
lease expiring on January 31, 2001.  Approximate rental expense 
is $73,000 for 
each remaining year of the lease expiring on January 31, 2001.

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 bacterialenzymes for in vitro 
diagnostic kits.

The Company owns all equipment necessary for its current 
operations and all 
equipment is in satisfactory condition.
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS

Not applicable.

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

There were no matters submitted to a vote of the Company's 
security holders 
during the fourth quarter of the fiscal 
year ended December 31, 1996.
<PAGE>
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

Preferred Stock

Prices for the Preferred Stock were quoted on the over-the-
counter market on the 
National Association of Securities 
Dealers, Inc., Automated Quotation System ("NASDAQ") from 
November 25, 1987 
through January 25, 1988.  Prior to 
November 25, 1987 there was no public market for the Preferred 
Stock 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, 1997 was 17. 

Common Stock

The Common Stock has been traded in the over-the-counter market 
since July 23, 
1986.  Prior to July 23, 1986, there was no public market for the 
Common Stock.

On or about June 9, 1989, the Company was advised by NASDAQ that 
its capital and 
surplus (exclusive of Redeemable Preferred Stock), based on its 
financial 
statements at and for the quarter ended March 31, 1989, did not 
meet 
requirements for continued inclusion in the NASDAQ System.  
Accordingly, the 
quotation of Common Stock in the NASDAQ System was terminated.

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 1995 
and 1996.
<TABLE>
<CAPTION>
Calendar Quarter			High				Low
<S>						<C>				<C>
1995:	First Quarter		$ .13			$ .06
Second Quarter				$ .31			$ .02
Third Quarter				$ .13			$ .02
Fourth Quarter				$ .13			$ .01

1996:	First Quarter		$ .16			$ .03
Second Quarter				$ .14			$ .04
Third Quarter				$ .16			$ .11
Fourth Quarter				$ .12			$ .07

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 3, 1997 
was 254.  As of March 3, 1997, the high bid and low offer prices 
for the Common 
Stock, as shown in the "pink sheets" were $0.10 and $0.12, 
respectively.
</TABLE>
<PAGE>
Warrants

On or about February 15, 1991, the Company issued Warrants to 
purchase an 
aggregate of 800,000 shares of Common Stock to Kimelman & Baird, 
LLC, an 
employee of the same and Anthony B. Low-Beer, exercisable at $.25 
per share 
until February 14, 1995.  The Warrants were issued to the 
aforementioned for 
acting as placement agent in the Company's private placement of 
$1,149,000 in 
gross proceeds, which closed February 15, 1991, and there are 
substantial 
restrictions against the transfer of these Warrants.  The 
Warrants were not 
publicly traded and there were no trades of these Warrants before 
the expiration 
date.

On or about June 26, 1992, the Company issued Warrants to 
purchase an aggregate 
of 252,400 shares of Common 
Stock to Kimelman & Baird, LLC, at $.75 per share until June 26, 
1996.  The 
Warrants were issued to the aforementioned 
for acting as placement agent in the Company's private placement 
of $510,500 in 
gross proceeds, which closed June 26, 
1992, and there are substantial restrictions against the transfer 
of these 
Warrants.  In addition, 680,667 warrants to purchase 
common stock at $.75 per share were issued to other qualified 
investors as part 
of the private placement.   These warrants 
expired June 26, 1996.  These Warrants were not publicly traded 
and there were 
no trades of these Warrants before the 
expiration date.

On December 14, 1995 stockholders of the Company approved the 
cancellation of 
certain promissory notes of the 
Company in favor of those directors who made loans to the Company 
on various 
dates from August 25, 1993 through March 
7, 1995 for an aggregate amount of $536,300, and to issue common 
stock and 
warrants to purchase the same number of 
shares as common stock at the per share price of $.125, which 
warrants shall 
expire on April 3, 1998.

The aggregate number of record holders of all Warrants as of 
March 3, 1997 was 
41.

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, 1996 
the total amount of dividends in arrears 
with respect to the Company's Preferred Stock was $1,179,246. 

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.

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

1996 Compared with 1995

Sales revenue for the year ended December 31, 1996 increased from 
$25,563 in 
1995 to $43,091 in 1996.  The increase in overall sales revenues 
(68%) resulted 
from an increase in domestic sales of ClandoSan(r). The Company 
hopes to find a 
licensee for ClandoSan(r) in 1997 as it continues to focus its 
efforts on its 
AstaXin(r) product.  Long-term production and sales of AstaXin(r) 
will depend on 
the Company's ability to find suitable manufacturing partners 
since it has no 
commercial scale manufacturing facilities of its own.  No 
commercial quantities 
of AstaXin(r) were available for sale in 1996. In May 1995 the 
Company executed 
a non-exclusive technology licensing and royalty agreement with 
Archer Daniels 
Midland Co.  However, on February 29, 1996 Archer Daniels Midland 
informed the 
Company that it would no longer utilize the technology and 
terminated the 
agreement.  The Company is in discussion with other potential
<PAGE>
manufacturers for AstaXin(r) and, in addition, is seeking 
additional investment 
to enable it to purchase or lease a manufacturing facility of its 
own. 
Additional sales of ClandoSan(r) will depend on continued 
marketing arrangements 
with distributors for the product. The Company expects to 
continue its own 
limited sale of these products until a suitable licensee is found 
and a 
Licensing Agreement formalized.

Cost of product sales as a percentage of product sales decreased 
to 54% in 1996 
from 66% in 1995 and can be attributed in part to decreased 
freight charges 
incurred by the Company. 

Research, development and pilot plant expenses decreased 
approximately 11% for 
the current year.  This decrease 
was attributed to reduced payroll expenses resulting from a 
vacant position in 
the research department and reduced 
equipment repair expenses.  Research and development costs may be 
expected to 
increase gradually in support of increased 
manufacturing efforts for AstaXin(r), but would be offset by 
technology 
licensing and technology services income.

Marketing, general and administrative expenses increased 6% in 
1996 when 
compared to the expenses in 1995. 
Marketing expenses related to the Company's AstaXin(r) product 
could be expected 
to increase if production and sale of 
AstaXin(r) proceeds, but this will depend on marketing 
arrangements with 
distributors of the product.  This increase would be offset by 
sales income or 
from licensing additional technology.  General and administrative 
expenses could 
be expected to rise to reflect increasing costs of maintaining 
and enforcing the 
Company's patents and patent applications for AstaXin(r) and 
ClandoSan(r) 
worldwide, but only if commercial quantities of the products are 
manufactured.

Interest expense for the year ended December 31, 1996 increased 
by approximately 
$40,600 over the prior year. This increase reflects the increase 
in accumulating 
interest due on additional promissory notes issued to certain 
directors of the 
Company, and an addition to the increase in the interest rate 
being charged on 
the variable rate subordinate debenture from 8% to 12% effective 
October 1, 
1996. 

In 1995, the Company's operational costs were offset by aggregate 
payments 
totaling $249,215, which are part of a Licensing Agreement for 
AstaXin(r), which 
was terminated on February 29, 1996.

As a result of the foregoing, the Company reported a net loss of 
$776,873, or 
$.04 per common share in 1996, compared to a net loss of 
$503,156, or $.04 per 
common share in 1995.  The weighted average number of common 
shares outstanding 
increased to 18,604,171 in 1996 from 13,694,343 in 1995.  This 
increase in 
shares in 1996 reflects the annual issuance of common stock as 
payment of 
interest on a variable note subordinated debenture,  the 
conversion of 2,500 
shares of the Company's redeemable preferred stock into 5,000 
shares of common 
stock on January 23, 1996,   and the issuance of 4,290,000 shares 
of common 
stock to certain directors of the Company in lieu of retired 
Promissory Notes 
and Warrants issued from August 25, 1993 through March 7, 1995.

Financial Position

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, 1996, total dividends in arrears on 
the Company's 
Preferred Stock was $1,179,246 of which $189,246 ($5.28 per 
share) was included 
in the carrying value of the redeemable Preferred Stock and 
$990,000 ($5.28 per 
share) was included in the liquidation preference of the 
Preferred Stock.
<PAGE> 
Liquidity and Capital Resources.

Historically, the Company has been funded primarily by equity 
contributions, 
loans from stockholders and license fees.  As of December 31, 
1996 the Company 
had a working capital deficit of $983,816, and cash and cash 
equivalents of 
$41,339.

The Company Company continues to follow a plan designed to reduce 
expenses and 
conserve working capital. This plan included the reduction in 
staff as well as 
reductions in all areas of the Company's selling, research, 
general and 
administrative expenses and refocusing of research and 
development activities 
solely on the Company's AstaXin(r) product. These budgeted 
expenditures provided 
for minimizing capital expenditures for the Company's pilot plant 
facility in 
Columbia, Maryland or for any new manufacturing facilities.

Cash used by operations in 1996 and 1995 amounted to  $610,842 
and $340,904, 
respectively.  IGENE continues to focus on research and 
development of its 
products, achieving only minimal sales of its ClandoSan(r) and 
AstaXin(r) 
products.  IGENE was able to reduce the amount of cash required 
to fund 1995 
operations through a Licensing Agreement for AstaXin(r) with 
Archer Daniels 
Midland Co. ("ADM"), Decatur, Illinois, signed in May 1995.  That 
Agreement 
provided for a cash payment of $200,000 at signing and a royalty 
based on sales.   
In addition, the Company had received $24,415 from ADM for 
technology services 
related to the Agreement.  On December 4, 1995, the Company also 
received a 
payment of $25,000 from ADM as stipulated in the Licensing During 
1996 the 
Company received $23,482 for technology services related to the 
agreement.  On 
February 29, 1996, ADM terminated its Licensing Agreement with 
the Company. 

Cash used in investing activities (capital expenditures) 
decreased to $955 in 
1996 from $2,369 in 1995.  IGENE 
believes its existing equipment is substantially sufficient to 
meet its needs in 
continuing its research and development 
activities in the foreseeable future.   No equipment was sold in 
1995 or 1996.   

Following is a detail of the Company's financing activities for 
1996:

On February 9, 1996 and March 11, 1996, the Company issued 
Promissory Notes to 
certain Directors of the Company for an aggregate consideration 
of $140,000.  
These notes specify that at any time prior to repayment the 
holder has the right 
to convert the note to common stock of the Company at $.10 per 
share for the 
note issued February 9, 1996 and at $.09 per share for the note 
issued March 11, 
1996, and to receive warrants for an equivalent number of common 
shares at $.10 
per share for the note issued February 9, 1996 and at $.09 per 
share for the 
note issued March 11, 1996. 

On April 23, 1996, May 9, 1996 and June 7, 1996, the Company 
issued Promissory 
Notes to certain Directors of 
the Company for an aggregate consideration of $177,000.  These 
notes specify 
that at any time prior to repayment the holder 
has the right to convert the note to common stock of the Company 
at $.06 per 
share for the notes issued April 23, 1996 and 
May 9, 1996, and at $.05 for the note issued June 7, 1996, and to 
receive 
warrants for an equivalent number of common 
shares at $.06 per share for the notes issued April 23, 1996 and 
May 9, 1996 and 
at $.05 per share for the note issued June 
7, 1996.

On July 24, 1996 and September 24, 1996, the Company issued 
Promissory Notes to 
certain Directors of the 
Company for an aggregate consideration of $160,000.  These notes 
specify that at 
any time prior to repayment the holder 
has the right to convert the note to common stock of the Company 
at $.115 per 
share for the note issued July 24, 1996 and 
at $.125 per share for the note issued September 24, 1996, and to 
receive 
warrants for an equivalent number of common 
shares at $.115 per share for the note issued July 24, 1996 and 
$.125 per share 
for the note issued September 24, 1996.

On November 13, 1996 and December 11, 1996, the Company issued 
Promissory Notes 
to certain Directors of the Company for an aggregate 
consideration of $140,000.  
These notes specify that at any time prior to repayment the 
holder has the right 
to convert the note to common stock of the Company at $.09 per 
share for the 
notes dated November 13, 1996 and December 11, 1996, and to 
receive warrants for 
an equivalent number of common shares at $.09 per share for the 
note issued 
November 13, 1996 and December 11, 1996.  
<PAGE>
To continue operations short term, the Company will consider 
issuing additional 
stock and debt to officers and directors and encouraging holders 
of outstanding 
warrants to exercise these rights.  To increase its working 
capital position the 
Company will also encourage the holders of promissory notes to 
convert them into 
common stock.  To meet short-term cash needs the Company plans to 
issue 
additional notes to certain directors in January of 1997.

In the long-term, the Company is also continuing its development 
of additional 
AstaXin(r) technology which it plans 
to license and market and which it hopes will benefit future 
periods.

The Company does not believe that inflation has had a significant 
impact on the 
Company's operations during the past three years.

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>
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:

Name						Age		Position with IGENE

Michael G. Kimelman  		58		Chairman of the Board of
Directors

Thomas L. Kempner			69		Vice Chairman of the
Board of Directors

Stephen F. Hiu  	 		40		Director, President,
								Secretary, Acting
Treasurer, and Director
of Research and Development
Dexter W. Gaston  *			51		Chief Executive Officer

Patrick F. Monahan 		 	46		Director, and Director of
Manufacturing

Joseph C. Abeles  			82		Director

John A. Cenerazzo			73		Director

Sidney R. Knafel 			66		Director

* Mr. Gaston's contract as CEO was not renewed after January 7, 
1997.

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, Arlen Corp., CCC Information 
Services, 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>
DEXTER W. GASTON was appointed Chief Executive Officer on January 
11, 1996.  
Prior positions include CEO of Microbio Resources, Managing 
Director of Algatec, 
CEO and Chairman of Reclaimex and Director of Technical 
Operations, Revlon 
Health Care.  He is also a Director of the California Wine 
Company.  He holds a 
B.S. in chemistry from Rutgers University and a M.B.A. from the 
University of 
Chicago.

PATRICK F. MONAHAN was appointed Director of Manufacturing and 
elected a 
Director of the Company in April 1991 and has managed the 
Company's fermentation 
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, Peridot Holdings, Inc. 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 ommunications, 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

Forms 3 and 4 were filed by the Company in a timely manner in 
accordance with 
Section 16(a) of the Securities Act of 1934.

ITEM 10.	EXECUTIVE COMPENSATION

During 1996 no executive officer's annual cash compensation 
exceeded $100,000. 

Other than the 1986 Stock Option Plan described below, the 
Company has no profit 
sharing or incentive compensation.

Stock Option Plan

The 1986 Stock Option Plan (the "Plan"), which was approved by 
the stockholders 
on May 5, 1987 and amended on June 12, 1989, August 8, 1990, 
March 17, 1994, and 
December 14, 1995, provides for the issuance of options to 
acquire up to 
2,000,000 shares of Common Stock of the Company.  

The Plan is administered by a committee appointed by the 
Company's Board of 
Directors (the "Committee").  The 
Board of Directors may administer the Plan itself in the absence 
of an appointed 
Committee, or by vote of a majority of the 
members of the Board of Directors if a Committee is not in 
existence.
<PAGE>
The purpose of the Plan is to promote the long-term success of 
the Company by 
providing an incentive to directors 
and employees providing services to the Company and by 
encouraging such 
individuals to acquire a proprietary interest in 
the Company.  Any employee, officer or director of the Company 
who is determined 
by the Committee to be a "Key 
Employee" is eligible to receive options under the Plan.  The 
term of each 
option granted under the Plan will be for such 
period as the Committee may determine, but in no event to exceed 
10 years from 
the grant of such option.  With respect to 
options granted, the option price may be greater than, less than 
or equal to, 
the fair market value of the Company's Common 
Stock at the time the option is granted, as determined in the 
discretion of the 
Committee.  The Company may, in conjunction 
with the grant of options under the Plan, grant bonuses to 
optionees to assist 
them in the payment of income tax liabilities 
incurred upon the exercise of options, and may make or guarantee 
loans to 
optionees to assist them in the exercise of options. 
No options can be granted by the Committee under the Plan on or 
after January 
22, 1997.  The Committee may modify, 
extend or renew outstanding options granted under the Plan, or 
accept the 
surrender of outstanding options, to the extent not 
previously exercised.

Options are exercisable in annual installments, in such manner as 
the Committee 
may determine.  Options may be exercised by payment in full of 
the option price 
in cash, by tender of shares of the Company's Common Stock having 
a total fair 
market value on the date of exercise equal to the option price 
(subject to 
certain limitations) or in such other consideration as may be 
approved by the 
Committee.  The Committee has the power to condition the exercise 
of any option 
granted under the Plan on the continued employment by the Company 
of the Key 
Employee at the time of exercise or on the attainment of 
specified performance 
goals by the Key Employee or by the Company.

In the event of a reclassification, recapitalization, stock 
exchange, stock 
split, stock dividend or other similar event 
affecting the Company's Common Stock, the number and class of 
shares under 
previously granted options and the option 
price payable upon exercise of such options will be appropriately 
adjusted by 
the Committee to reflect the change in such 
manner as the Committee may determine.  In the event of a 
proposed merger, 
consolidation, share exchange or similar 
transaction to which the Company would be a party, or in the case 
of a tender 
offer for the Company's stock, the Committee 
or the Board of Directors may take such action as may be 
appropriate to protect 
the holders of options and to effectuate the purpose of the Plan.

The Board of Directors may terminate, suspend or amend the Plan 
at any time, 
without the approval of the Company's stockholders.  
Stockholders' approval is 
required to amend the Plan to (i) increase the aggregate number 
of shares 
subject thereto, (ii) change the provisions for establishing the 
option price, 
(iii) permit options to be exercisable after the period ending on 
the tenth 
anniversary date of the grant of the option, (iv) extend the term 
of the Plan, 
(v) materially modify the requirements as to eligibility for 
participation in 
the Plan or (vi) materially increase the benefits accruing to 
participants under 
the Plan.

In 1989 the Company took action to replace outstanding options 
for the purchase 
of 64,000 shares at $5.40 per share 
with options to purchase 64,000 shares at $1.00 per share, but 
otherwise having 
the same terms as the options replaced. 
Currently, there are a total of 7 persons eligible to participate 
in the Plan.

Options to acquire 1,742,750 shares of Common Stock of the 
Company have been 
issued and 257,250 shares of 
Common Stock are outstanding under the Plan.  Options for 107,000 
shares of 
Common Stock were exercised in fiscal 1993. 
No options were exercised in fiscal years 1994, 1995, or 1996.

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.  No options were 
exercised by any 
officers during 1996.  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, 1996 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.
<PAGE>
<TABLE>
<CAPTION>
Aggregate Fiscal Year End Option Values

Number of			
							Unexercised 	Dollar Value of 
 				Options 		In-The-Money
Number	 			At End of 		Options At End
Of Shares    	Dollar	Fiscal Year	of Fiscal Year1
Acquired 	   	Value		
Name      On Exercise  	Realized 	Exercisable/	Exercisable/
						 	Unexercisable	Unexercisable
<S>		<C>			<C>		<C>			<C>
Stephen F. Hiu	 
 	------		-------  	581,667/373,333	 23,368/14,933
Patrick F. Monahan	 
 		------	  	-------	412,500/230,000 16,500/9,200
                                              

1.	The value of unexercised in-the-money options at December 
31, 1996 is 
based on the difference between $.09 per 
share and the per share option exercise price, multiplied by the 
number of 
shares of common stock underlying such 
option.

</TABLE>

Compensation of Directors

During 1996, Directors were not compensated for their Board or 
Committee 
activities.
<PAGE>
ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets forth information as of March 1, 1997 
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	8,568,4251		19.30	-----	-----
  c/o Abel Associates
  220 E. 42nd Street
  New York, NY  10017

John A. Cenerazzo	1,155,2002		2.60		-----	-----
Stokesay Castle Lane
Reading, PA  19606

Stephen F. Hiu		  788,8333		1.78		----- 	-----
  9110 Red Branch Road
  Columbia, MD  21045

Thomas L. Kempner	 9,858,1914	22.21	----- 	-----
  c/o Loeb Partners Corporation
  61 Broadway
  New York, NY  10006

Michael G. Kimelman	2,705,5255		6.09		----- 	-----
  c/o Kimelman & Baird, LLC
  100 Park Avenue, Suite 1105
  New York, NY  10017


Sidney R. Knafel	8,364,9266		18.85	-----	-----
  c/o SRK Management
  126 East 56th Street
  New York, NY  10022

Patrick F. Monahan	 544,5007		1.22		----- 	-----
  9110 Red Branch Road
  Columbia, MD  21045

All Directors and 
Officers			31,985,6008	72.06	-----	-----
as a Group (7 persons)
Dow Chemical Company	   535,0029	1.2 		187,500	100.0%

All Shareholders	44,385,69110	100.0	187,500	100.0%
1	Includes the following: 2,109,404 shares and warrants for 
991,344 shares 
held by Mr. Abeles, 2,724,393 shares and 
warrants for 2,724,393 shares subject to the conversion of 
$204,345 of 
promissory notes held by Mr. Abeles, 4,140 
shares held by Mr. Abeles' wife, 2,250 shares subject to the 
redemption of 1,125 
shares of redeemable preferred 
stock held by Mr. Abeles, and 12,500 shares subject to the 
redemption of 6,250 
shares of redeemable preferred stock 
owned by Mr. Abeles' wife.  Mr. Abeles disclaims beneficial 
ownership of the 
shares held in a trust for which he 
is the trustee and the shares held by his wife.
<PAGE>
2	Includes 283,458 shares and warrants for 131,192 shares held 
by Mr. 
Cenerazzo, 32,750 shares which are subject 
to options currently exercisable or exercisable within 60 days, 
and includes 414 
shares held by Mr. Cenerazzo's wife. 
Also includes 353,693 shares and warrants for an additional 
353,693 shares 
subject to the conversion of $26,529 
of promissory notes held by Mr. Cenerazzo.

3	Includes 500 shares held by Dr. Hiu and 788,333 shares which 
are subject 
to options currently exercisable, or 
exercisable within sixty days.

4	Includes 386,972 shares and warrants for 212,960 shares held 
by Mr. 
Kempner; 94,000 shares held by a trust under 
which Mr. Kempner is one of two trustees and the sole 
beneficiary; 1,482,987 
shares and warrants for 931,744 
shares held by a trust under which Mr. Kempner is one of two 
trustees and a one-
third beneficiary; 182,526 shares 
held by his wife; and 257,880 shares held by trusts under which 
Mr. Kempner is 
one of two trustees with his brothers 
as beneficiaries.  Also includes 3,154,561 shares and warrants 
for an additional 
3,154,561 shares subject to the 
conversion of $236,610 of promissory notes held by Mr. Kempner or 
various trusts 
under which Mr. Kempner is 
one of two trustees and a direct or indirect beneficiary.  Mr. 
Kempner has 
disclaimed beneficial ownership of all but 
386,972 shares held in his name; 94,000 shares held by a trust 
under which he is 
the sole beneficiary, 494,329 of 
the shares held by a trust of which he is a one-third 
beneficiary, and 1,557,114 
of the shares and warrants for an 
additional 1,557,114 of the shares subject to the conversion of 
promissory notes 
held by Mr. Kempner or by trusts 
under which Mr. Kempner is one of two trustees and a sole or one-
third 
beneficiary; warrants for 212,960 shares 
held by Mr. Kempner; and 310,581 of the warrants held by a trust 
of which Mr. 
Kempner is one of two trustees and 
a one-third beneficiary.

5	Includes 521,104 shares and warrants for 521,104 shares held 
by Mr. 
Kimelman.  Also includes 263,256 shares held 
by Kimelman & Baird, LLC, and 100,000 shares held by his wife, of 
which Mr. 
Kimelman disclaims all but his 
partnership interest in Kimelman & Baird, LLC.  Also includes 
650,031 shares and 
warrants for an additional 
650,031 shares subject to the conversion of $48,756 or promissory 
notes held by 
Mr. Kimelman.

6	Includes 1,505,945 shares and warrants for 967,016 shares 
held by Mr. 
Knafel, and 538,771 shares held in trust for 
the benefit of Mr. Knafel's sons.  Also includes 2,676,597 shares 
and warrants 
for an additional 2,676,597 shares 
subject to the conversion of $200,760 of promissory notes held by 
Mr. Knafel.

7	Includes 2,000 shares held by Mr. Monahan and 542,500 shares 
which are 
subject to options currently exercisable, 
or exercisable within sixty days.

8	Includes 1,363,583 shares of common stock which are subject 
to options 
currently exercisable or exercisable within 
60 days; unexpired warrants to purchase 3,755,360 shares of 
common stock; 14,750 
shares of common stock subject 
to the redemption of 7,375 shares of redeemable preferred stock; 
and 9,559,275 
shares of common stock and 
warrants to purchase an additional 9,559,275 shares of common 
stock subject to 
the conversion of $717,000 of 
promissory notes held by Directors of the Company.  Preferred 
stock does not 
include 7,375 shares held or 
beneficially owned by a Director, which are subject to redemption 
at the rate of 
two shares of common stock for each 
preferred share, and have therefore been included in shares of 
common stock 
beneficially owned by Directors at their 
equivalent value of 14,750 shares of common stock.  The 
redeemable preferred 
shares carry voting rights prior to 
their redemption at two votes per share.

9	Includes 160,002 shares of common stock which represent 
shares issued in 
lieu of interest on the $1,500,000 
debenture held by Dow, and 375,000 shares of common stock subject 
to the 
conversion of the $1,500,000 debenture. 
The debenture carries no voting rights prior to its conversion.  
Dow has waived 
certain redemption rights as to the 
187,500 shares of preferred stock, which it holds and which are 
not redeemable 
at the shareholder's option.  These 
limited redemption preferred shares carry no voting rights prior 
to redemption.
<PAGE>
10	For the purposes of this table, total outstanding shares of 
common stock 
includes shares which are subject to rights 
of acquisition within sixty days as follows: 1,898,917 shares of 
common stock 
which are subject to options currently 
exercisable; unexpired warrants to purchase 4,290,400 shares of 
common stock; 
9,559,275 shares and warrants to 
purchase an additional 9,559,275 shares of common stock which are 
subject to the 
conversion of $717,000 of 
promissory notes held by Directors; 375,000 shares of common 
stock which are 
subject to the conversion of the 
$1,500,000 debenture held by Dow; and 71,684 shares of common 
stock which are 
subject to the redemption of 
35,842 shares of redeemable preferred stock outstanding, and 
which shares have 
not been included in total 
outstanding preferred stock for the purposes of this table.

</TABLE>


ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Effective February 15, 1991, the Company accepted subscriptions 
in a private 
placement to purchase 4,596,000 
newly issued shares of Common Stock from accredited investors, 
certain of whom 
were Directors of the Company.  The 
shares were issued at a price of $.25 per share for an aggregate 
consideration 
of $1,149,000.  The Company engaged the 
investment-banking firm of Kimelman & Baird, LLC ("Firm") to act 
as placement 
agent for the offering.  Michael G. 
Kimelman, a general partner, and Anthony B. Low-Beer, at the time 
an employee of 
Kimelman & Baird, primarily directed 
placement efforts.  The Company agreed to pay the Firm, an 
unrelated employee of 
the Firm and Anthony B. Low-Beer an 
aggregate placement fee in the form of a Warrant to purchase 
800,000 shares of 
Common Stock at an exercise price of $.25 
per share exercisable over a period of four years ending February 
14, 1995.  Mr. 
Kimelman also serves as a member of the 
Board of Directors of the Company.

Effective June 26, 1992 the Company accepted subscriptions in a 
private 
placement to purchase 680,667 newly 
issued shares of Common Stock from accredited investors, certain 
of whom were 
Directors of the Company.  The shares and 
warrants for an additional 680,667 shares were issued at a price 
of $.75 per 
share for an aggregate consideration of 
$510,500.  Kimelman & Baird, LLC acted as placement agent for the 
offering and 
received an aggregate placement fee in 
the form of a Warrant to purchase 252,400 shares of Common Stock 
at $.75 per 
share exercisable over a period of four years 
until June 26, 1996.  The shares issued by the Company in this 
offering were to 
provide the Company with working capital 
funds through the first quarter 1993.

On August 23, 1993 and on or about November 19, 1993, the Company 
issued 
Promissory Notes to certain directors 
of the Company  for an aggregate consideration of $108,250 and 
$131,050, 
respectively.  The notes specify that interest will 
be paid quarterly in arrears at Prime Rate.  In addition, at any 
time before 
repayment, the value of the note may be converted 
to common shares of the Company at $.48 per share and the Company 
will provide a 
warrant to purchase a like number of 
shares at $.48 per share.

On February 10, 1994, the Company issued Promissory Notes to 
certain directors 
of the Company for an aggregate 
consideration of $22,000. The notes specify that interest will be 
paid quarterly 
in arrears at Prime Rate.  In addition, at any 
time before repayment, the value of the notes may be converted to 
common shares 
of the Company at $.375 per share.  In 
the event of any such conversion, warrants to purchase a like 
number of common 
shares at a price of $.375 per share shall 
be issued, which warrant may be exercised by the holder at any 
time subsequent 
to delivery.

On September 26, 1994, October 24, 1994, and November 28, 1994, 
the Company 
issued Promissory Notes to 
certain directors of the Company for an aggregate consideration 
of $50,000, 
$50,000, and $48,250, respectively.  The notes 
specify that interest will be paid quarterly in arrears at Prime 
Rate.  In 
addition, at any time before repayment, the value of 
the notes may be converted to common shares of the Company at 
$.25 per share and 
the Company will provide warrants to 
purchase a like number of common shares at a price of $.25 per 
share. $1,750 of 
this amount was not received until January, 
1995.

On January 23, 1995, and March 7, 1995, the Company issued 
additional promissory 
notes to certain directors of 
the Company for an aggregate consideration of $125,000.  The 
notes specify that 
at any time prior to repayment the holder 
has the right to convert the note to common stock of the Company 
at $.1875 per 
share for the note issued January 23, 1995 
and at $.125 per share for the note issued March 7, 1995 and to 
receive warrants 
for an equivalent number of common shares 
at $.1875 per share for the note issued January 23, 1995 and at 
$.125 per share 
for the note issued March 7, 1995.
<PAGE>
On November 16, 1995 and December 22, 1995, the Company issued 
additional 
promissory notes to certain directors of the Company for an 
aggregate 
consideration of $100,000.  These notes specify that at any time 
prior to 
repayment the holder has the right to convert the note to common 
stock of the 
Company at $.05 per share and to receive a warrant for an 
equivalent number of 
common shares at $.05 per share.  The promissory notes are due on 
demand with 
interest charged at the prime rate.    A total of $55,320 was 
received prior to 
December 31, 1995, the remaining $44,680 
was received during January 1996.

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 
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.

On February 9, 1996, and March 11, 1996, the Company issued 
additional 
promissory notes to certain directors of 
the Company for an aggregate consideration of $140,000.  The 
notes specify that 
at any time prior to repayment the holder 
has the right to convert the note to common stock of the Company 
at $.10 per 
share for the note issued February 9, 1996 and 
at $.09 per share for the note issued March 11, 1996 and to 
receive warrants for 
an equivalent number of common shares 
at $.10  per share for the note issued February 9, 1996 and at 
$.09 per share 
for the note issued March 11, 1996.	

On April 23, 1996, May 9, 1996 and June 7, 1996, the Company 
issued Promissory 
Notes to certain Directors of the Company for an aggregate 
consideration of 
$177,000.  These notes specify that at any time prior to 
repayment the holder 
has the right to convert the note to common stock of the Company 
at $.06 per 
share for the notes issued April 23, 1996 and 
May 9, 1996, and at $.05 for the note issued June 7, 1996, and to 
receive 
warrants for an equivalent number of common 
shares at $.06 per share for the notes issued April 23, 1996 and 
May 9, 1996 and 
at $.05 per share for the note issued June 
7, 1996.

On July 24, 1996 and September 24, 1996, the Company issued 
Promissory Notes to 
certain Directors of the 
Company for an aggregate consideration of $160,000.  These notes 
specify that at 
any time prior to repayment the holder 
has the right to convert the note to common stock of the Company 
at $.115 per 
share for the note issued July 24, 1996 and 
at $.125 per share for the note issued September 24, 1996, and to 
receive 
warrants for an equivalent number of common 
shares at $.115 per share for the note issued July 24, 1996 and 
$.125 per share 
for the note issued September 24, 1996.  
The unpaid portion of these Promissory Notes as of December 31, 
1996 was $4,760.

On November 13, 1996 and December 11, 1996, the Company issued 
Promissory Notes 
to certain Directors of the 
Company for an aggregate consideration of $140,000.  These notes 
specify that at 
any time prior to repayment the holder 
has the right to convert the note to common stock of the Company 
at $.09 per 
share for the notes dated November 13, 1996 
and December 11, 1996, and to receive warrants for an equivalent 
number of 
common shares at $.09 per share for the note 
issued November 13, 1996 and December 11, 1996.  The unpaid 
portion of these 
Promissory Notes as of December 31, 
1996 was $12,110.

On January 15, 1997 the Company issued Promissory Notes to 
certain Directors of 
the Company for an aggregate 
consideration of $70,000.  These notes specify that at any time 
prior to 
repayment the holder has the right to convert the note 
to common stock of the Company at $.07 per share and to receive 
warrants for an 
equivalent number of common shares at 
$.07 per share.

On February 24, 1997 the Company issued Promissory Notes to 
certain Directors of 
the Company for an aggregate 
consideration of $100,000.  These notes specify that at any time 
prior to 
repayment the holder has the right to convert the 
note to common stock of the Company at $.11 per share and to 
receive warrants 
for an equivalent number of common shares 
at $.11 per share.
<PAGE>
PART IV

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

A.1.	The following financial statements relating to 1996 and 1995 
are filed as 
a part of this Report:

Independent Auditors' Report.
Balance Sheet as of December 31, 1996.
Statements of Operations for the years ended December 31, 1996 
and December 31, 
1995.
Statements of Stockholders' Deficit for the years ended December 
31, 1996 and 
December 31, 1995.
Statements of Cash Flows for the years ended December 31, 1996 
and December 31, 
1995.
Notes to Financial Statements.

A.1.a.	The following financial statement schedules relating to 
1996 and 
1995 are filed as a part of this Report:

Schedule V.		Property, Plant and Equipment.
Schedule VI.		Accumulated Depreciation and Amortization of
				Property, Plant and Equipment.
Schedule X.		Supplementary Income Statement Information.

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, constituting 
Exhibit 3.1 to 
Registration Statement No. 33-5441 
on Form S-1, and Amendment, constituting Exhibit 3.1 to 
Registration Statement 
No. 33-23266, are hereby 
incorporated herein by reference.

3.2	Articles Supplementary of the Registrant filed September 28, 
1987 and 
October 26, 1987 constituting 
Exhibit 3.2 to Registration Statement No. 33-18179 are hereby 
incorporated 
herein by reference.

3.3	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 Underwriter's Warrant, constituting  Exhibit 4 to 
Registration 
Statement No. 33-5441 on Form S-1, 
is hereby incorporated herein by reference.

4.2	Form of Preferred Stock Certificate constituting Exhibit 4.2 
to 
Registration Statement No. 33-18179 is 
hereby incorporated herein by reference.

4.3	Form of Warrant Certificate and Warrant Agreement dated as 
of May 31, 1988 
between the Registrant and 
Manufacturers Hanover Trust Company, constituting Exhibit 4.3 to 
Registration 
Statement No. 33-5441 on Form S-1, is hereby incorporated herein 
by reference.

4.4	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	Agreement, effective as of September 16, 1985, between IGI 
Biotechnology, 
Inc. and Hercules Incorporated 
constituting Exhibit 10.9 to the Registration Statement No. 33-
5441 on Form S-1 
is hereby incorporated 
herein by reference.

10.2	1986 Stock Option Plan of IGENE Biotechnology, Inc. 
constituting Exhibit 
(10)(15) to the Registrant's 
Report on Form 10-K for the year ended December 31, 1986 is 
hereby incorporated 
herein by reference.

10.3	Letter Agreement dated October 15, 1987 between Hercules 
Specialty 
Chemicals Company and the 
Registrant constituting Exhibit 10.17 to the Registrant Statement 
No. 18179 on 
Form S-1 is hereby incorporated herein by reference.
<PAGE>
10.4	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.

10.5.	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 

10.6	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.

10.7	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.

10.8	Agreement of Lease effected February 1, 1991 between 
Columbia Warehouse 
Limited Partnership and 
IGENE Biotechnology, Inc. constituting exhibit 10.8 to the 
registrant's report 
on Form 10-K for the year 
ended December 31, 1991 is hereby incorporated herein by 
reference.

10.9	Letter of Intent as of March 26, 1993, between Burns Philp 
Food Inc. and 
IGENE Biotechnology, Inc. 
constituting Exhibit 10.9 to the Registrant's Report on Form 10-
KSB for the year 
ended December 31, 1992 
is hereby incorporated herein by reference.

10.10	Technology Evaluation Agreement as of March 4, 1994 
between the Food 
Science Group of Pfizer Inc and 
IGENE Biotechnology, Inc. constituting Exhibit 10.10 to the 
Registrant's Report 
on Form 10-KSB for the 
year ended December 31, 1993 are hereby incorporated herein by 
reference.

10.11	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.

10.12	Amendment to 1986 Stock Option Plan of IGENE 
Biotechnology, Inc. having 
been filed electronically on 
October 16, 1995 within the Company's Preliminary Proxy Statement 
and voted on 
at the Company's December 14, 1995 Annual Meeting of Shareholders 
is hereby 
incorporated herein by reference.

10.13	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.

(b)	No reports on Form 8-K were filed during the Fourth Quarter 
of 1996.
<PAGE>
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.  In 
connection with our audits of the financial statements, we also 
have audited the 
financial statement schedules as listed in 
response to A.1a. of Item 13.  These financial statements and 
financial 
statement schedules are the responsibility of the 
Company's management.  Our responsibility is to express an 
opinion on these 
financial statements and financial statement 
schedules 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, 1996 and 1995, and the results of its operations and 
its cash flows 
for the 
years then ended in conformity with generally accepted accounting 
principles.  
Also in our opinion, the related financial 
statement schedules, when considered in relation to the basic 
financial 
statements taken as a whole, present fairly, in all 
material respects, the information set forth therein.

The accompanying financial statements and financial statement 
schedules have 
been prepared assuming that IGENE 
Biotechnology, Inc. will continue as a going concern.  As 
discussed in note 13 
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 13.  The 
financial statements and financial statement 
schedules do not include any adjustments that might result from 
the outcome of 
this uncertainty.

BERENSON & COMPANY LLP
March 13, 1997
New York, NY
<PAGE>
<TABLE>
IGENE Biotechnology, Inc.
Statement of Operations Data

<CAPTION>
Years Ended December 31,      		 
       		1996    	1995    	1994     	1993   	1992 	
<S>			<C>		<C>		<C>		<C>		<C>
Sales		43,091   25,563	   	113,166 	68,516	165,060 	

Total 
Revenues	 	66,573 	274,978 	363,349 	69,089 	170,654 

Cost 
of Sales 		23,198	16,878 	36,945	32,137	118,652

Research, Development 
and Pilot Plant 
Expenses		309,351	348,139	391,912	329,030	409,645

Other 
Expenses  		512,504	447,335	474,752	416,489	432,380

Net Loss		(776,873)	(503,156)	(540,260)	(708,567)	(790,023)

Net Loss 
Per Common 
Share (1)		(.04)	 ( .04)	 (.04)	 (.06)	(.07)

Coverage Deficiency
of Fixed 
Charges (2)	921,572 	647,695	 684,959	853,266	934,722

</TABLE>

<TABLE>
IGENE Biotechnology, Inc.
Balance Sheet Data
<CAPTION>
As of December 31		
	     	1996    	1995  	1994     	1993    	1992     
<S>			<C>		<C>		<C>		<C>		<C>
Cash 
and Cash 
Equivalents  	41,339	8,326	 19,529	65,897	128,118

Working 
Capital 
(Deficit)  	(983,816)	(336,992)	 (645,815)(286,881)	(26,918)

Total Assets  	109,054	104,255	 77,556	258,417	315,834

Long-term Debt 	1,500,000	 1,500,000	 1,500,000	 1,500,000	 1,500,000

Total 
Liabilities 	2,562,799	 1,901,127	 2,177,572	 1,938,173	 1,677,272

Redeemable 
Preferred Stock  475,982	   484,643	  463,104	   438,405	    13,706

Stockholders' 
Deficit   (2,929,727)(2,281,515)(2,563,119)(2,118,161)(1,775,144)

Common 
Shares 
Outstanding 18,631,139 18,572,805 13,028,571 12,975,237 2,475,853 

Preferred 
Shares 
Outstanding    223,342 	225,842 	226,092 	226,092 	226,092 
  
1	Net loss per common share for the year ended December 31, 
1992 is based on 
12,084,190 shares.  Net loss per common 
share for each of the years in the four-year period ended 
December 31, 1996 is 
based on 12,769,011, 13,002,050, 13,694,343 
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.

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.

</TABLE>

<TABLE>
				IGENE Biotechnology, Inc.
					Balance Sheet
					December 31
<CAPTION>
										1996     
<S>								<C>
ASSETS                             
CURRENT ASSETS
	Cash and cash equivalents			$      41,339 	
Accounts receivable  					   9,996 
Supplies 								   6,126 
Prepaid Expenses 						   4,652 
Due from stockholders (note 6)	   			  16,870

TOTAL CURRENT ASSETS	     				  78,983 
OTHER ASSETS
 	Property and equipment, net (note 3) 	  19,471 
	Security deposits 	      			  10,600 

TOTAL ASSETS						$     109,054 

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and 
 	accrued expenses (note 4) 		$     300,799 
Debenture interest payable (note 5)	     	  45,000 
Promissory notes payable (note 6)	     	 717,000 

TOTAL CURRENT LIABILITIES 	   		    1,062,799 

OTHER LIABILITIES
Variable rate subordinated 
	debenture (note 5) 				    1,500,000 

TOTAL LIABILITIES                       	    2,562,799 


COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)
REDEEMABLE PREFERRED STOCK
Carrying amount of redeemable preferred stock, 
8% cumulative, Convertible, voting, Series A, 
$.01 par value per share.  Stated Value $13.28 
per share. Authorized 920,000 shares; issued
35,842 shares.  Redemption amount $475,982 
(notes 5, 7 and 8)	  				    	    475,982
STOCKHOLDERS' DEFICIT (notes 7 and 8)
Preferred stock -- $.01 par value per share.  
	8% cumulative, Convertible, voting, Series A. 
	Authorized and issued 187,500 shares
	(aggregate involuntary liquidation value 
	of $2,490,000)						    1,875
Common stock -- $.01 par value per share. 
	Authorized 35,000,000 shares;
	Issued 18,631,139 shares				    186,311
Additional paid-in capital				    17,971,220
Deficit		 						   (21,089,133)

TOTAL STOCKHOLDERS' DEFICIT				   (2,929,727)
                                                                           
	              
	             
	TOTAL LIABILITIES AND 
STOCKHOLDERS' DEFICIT				    $  109,054 

</TABLE>

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

<TABLE>
				IGENE Biotechnology, Inc.
				Statements of Operations


<CAPTION>
Years ended December 31,
                              		     1996  		1995    
<S>								<C>			<C>
Sales 							43,091		25,563 	
Cost of sales 					     23,198 	     16,878 

     Gross profit 					19,893 	  	8,685 

Technology licensing income (note 14)	-- 			225,000 
Technology services income (note 14)   	23,482		24,415 

     Net sales 		      			43,375 	     258,100 

Selling, general and administrative expenses:
Marketing and selling 	 			5,438 		12,813 
Research, development and pilot plant 	309,351 		348,139 
General and administrative 		     331,211 	     303,998 

     Total selling, general 
	and administrative expenses 		646,000 	     664,950 

Operating loss 						(602,625)		(406,850)

Other income (expenses):
Forgiveness of Debt  (note 6)			-- 			33,395 
Investment income 					1,607 	   	527 
Other income (expense) 				(4,743)		296 
	Interest expense 		    		(171,112)	    	(130,524)

Net Loss    						(776,873)		(503,156)

Deficit at beginning of year 			(20,312,260)(19,809,104)

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

Net loss per common share (note 9) 	  $(.04)	       $(.04)

</TABLE>

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

<TABLE>
				IGENE Biotechnology, Inc.
			Statements of Stockholders' Deficit

<CAPTION>
		Redeemable      		    
	   			Preferred Stock  Preferred Stock Common Stock    
			     (Shares/Amount)(Shares/Amount)(Shares/Amount)   
<S>			<C>			<C>			<C>
Balance at 
December 31, 
1994           38,592/$463,104 187,500/$1,875 13,028,571/$130,285 
	 
Issuance of 53,334 shares of common stock as
payment of interest on variable rate
subordinate debenture 
(note 5)		--- 				--- 			53,334/$533 

Cumulative undeclared 
dividends on redeemable
preferred 
stock		24,539 	          --- 	               --- 

Issuance of 1,200,000 shares of common stock
pursuant to direct purchase of shares by
certain directors of the Company 
(note 8)		--- 				--- 		1,200,000/$12,000 
Issuance of 4,290,400 shares of common stock
on conversion of promissory 
notes 		--- 				--- 		4,290,400/$42,905 

Conversion of redeemable preferred stock 
into 
common stock 	(250)/$(3,000)		--- 		500/$5 

Net loss 
for 1995 		--- 	 	         	--- 	      --- 

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
subordinate debenture 
(note 5)		--- 				--- 		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 8,631,139/$186,311 



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

<TABLE>
IGENE Biotechnology, Inc.
Statements of Stockholders' Deficit
(Continued)



<CAPTION>	            			               		 
              	Additional      		    	Total Stockholder's 
	   		Paid-In Capital Deficit 		Deficit      

<S>			<C>			<C>			<C>
Balance at 
December 31, 
1994 	     17,113,824 	(19,809,104)	(2,563,120)
 
Issuance of 53,334 shares of common stock as
payment of interest on variable rate
subordinate debenture 
(note 5)		119,467 		--- 	   		120,000 

Cumulative undeclared dividends on redeemable
preferred stock	 (24,539)	  	--- 	           (24,539)

Issuance of 1,200,000 shares of common stock
pursuant to direct purchase of shares by
certain directors of 
the Company 
(note 8)		138,000 	  	--- 			150,000 

Issuance of 4,290,400 shares of common stock
on conversion of promissory 
notes 		493,395 		--- 			536,300 

Conversion of redeemable preferred stock 
  into 
common stock 	2,995 		--- 			3,000 

Net loss 
for 1995 		--- 	  		(503,156)	 	(503,156)

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
subordinate debenture 
(note 5)		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)

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

</TABLE>

<TABLE>
			IGENE Biotechnology, Inc.
			Statements of Cash Flows
<CAPTION>
							Years ended December 31,     
							1996			1995
<S>							<C>			<C>
Cash flows from operating activities:
Net loss						$(776,873)		($503,156)
Adjustments to reconcile net income to net cash
provided by operating activities:
    Depreciation 	 			6,261 		 8,048 
    Loss on sale of assets 	 	4,743 	  	 --- 
Interest on debenture paid 
in shares of
common stock	 				120,000 		120,000 
Decrease 
(increase) in:
        Accounts receivable	  	1,133 	 	(339)
        Pepaid expenses, 
		supplies and deposits	(10,778)		1,438 
Increase (decrease) in:
	   Accounts payable and 
	   other accrued expenses		44,672 	      33,105 

Net cash used in operating 
	   activities		  		(610,842)	   	(340,904)

Cash flows from investing activities:
Capital expenditures		 	     (955) 	     (2,369) 

Net cash used in investing 
activities 		       		(955)	     (2,369)

Cash flows from financing activities:
Proceeds from issuance 
of common stock				   	-- 			150,000 
Issuance of promissory notes	    644,810 	     182,070 

Net cash provided by 
financing activities			    644,810 	     332,070 

Net increase (decrease) in cash 	33,013 		(11,203)

Cash and cash equivalents - 
beginning of the year		      8,326 	      19,529 
Cash and cash equivalents - 
end of the year		 		    	41,339 	       8,326 

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

Non-cash investing and financing activities:
During 1996 and 1995, the Company issued 53,334 shares of common 
stock in each 
year in payment of interest on the 
variable rate subordinated debenture.  If paid in cash, the 
interest would have 
been payable at 8% during 1996 and 1995, 
or $120,000 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 1996 and 1995 at $2.25 per share, or 
$120,000 in each year.  (See also note 5)
During 1996 and 1995 the Company recorded dividends in arrears on 
8% redeemable 
preferred stock at $.64 per share 
aggregating $22,939 and $24,539, 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 
7)

During 1995 the Company issued 4,290,400 shares of common stock 
pursuant to the 
conversion of $536,300 of promissory 
notes held by certain directors of the Company. (See also note 8)
During 1995 the Company issued promissory notes to certain 
directors of the 
Company in the face amount of $226,750. As 
of December 31, 1995 $182,070 had been received in cash proceeds 
by the Company.  
$44,680 remained due from certain 
directors of the Company on December 31, 1995, which was received 
during 1996. 
(See also note 8)

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 as of December 31, 1996. (See also note 
8)

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

</TABLE>

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.

Estimates

The preparation of financial statements in conformity with 
generally accepted 
accounting principles require 
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 lone-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.

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; 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 
1995 its highest price was $1.25) the Company can continue to 
issue stock in 
lieu of cash payments at $2.25 per 
share.  Effective October 1, 1996 the Company will begin 
recording interest on 
its variable rate subordinated 
debenture at a level rate of 12%; rather than at the fair-market 
value of 
shares, which have been issued in lieu 
of cash payments of interest.
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements
			(continued)


Accounting for stock based compensation

The Company applies APB Opinion 25 in accounting for employee 
stock option plans 
(note 8).  Accordingly, no 
compensation cost has been recognized in 1996 and 1995.  Had 
compensation cost 
been determined on the basis of FASB 
Statement 123, the following changes would have resulted:
<TABLE>
<CAPTION>
1996 1995   
<S>					<C>			<C>
Net loss:
		As reported	$  	(776,873)	$  	(503,156)
		Pro forma			(781,189)		(503,156)

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

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.

</TABLE>

(3)	Property and Equipment

Property and equipment are stated at cost and are summarized as 
follows:
Laboratory equipment and fixtures               $   70,060
Pilot plant equipment and fixtures                   8,200
Machinery and equipment                             57,979
Office furniture and fixtures                       33,526
                                                   169,765
Less accumulated depreciation                      150,294
                                                $   19,471


(4)	Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:
Accounts payable                                $  251,050
Audit fees and payroll taxes                        13,600
Accrued interest, promissory notes                  36,149
                                                $  300,799


(5)	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% cumulative 
convertible preferred 
stock, Series A for a $1,500,000 
variable rate convertible subordinated debenture due 2002, Class 
A.
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements
			(continued)

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 1996 and 1995, the 
Company issued 106,668 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, 
Series B at a 
rate of $8 per preferred share.

(6)	Promissory Notes Payable

On August 23, and November 19, 1993, the Company issued 
promissory notes to 
certain directors of the Company 
for an aggregate consideration of $239,300.  The notes specify 
that at any time 
prior to repayment the holder has 
the right to convert the note to common stock of the Company at 
$.48 per share 
and to receive a warrant for an 
equivalent number of common shares at $.48 per share.  The 
promissory notes were 
due on demand with interest charged 
at the prime rate.

On February 10, 1994, and September 26, October 24, 1994 and 
November 28, 1994, 
the Company issued additional 
promissory notes to certain directors of the Company for an 
aggregate 
consideration of $170,250.  The notes specify 
that at any time prior to repayment the holder has the right to 
convert the note 
to common stock of the Company at 
$.375 per share for the note issued February 10, 1994 and at $.25 
per share for 
all other notes and to receive  
warrants for an equivalent number of common shares at $.375 per 
share for the 
note issued February 10, 1994 and at 
$.25 per share for all other notes.  These promissory notes were 
also due on 
demand with interest charged at the 
prime rate.

On January 23, 1995, and March 7, 1995, the Company issued 
additional promissory 
notes to certain directors 
of the Company for an aggregate consideration of $125,000.  The 
notes specify 
that at any time prior to repayment 
the holder has the right to convert the note to common stock of 
the Company at 
$.1875 per share for the note issued 
January 23, 1995 and at $.125 per share for the note issued March 
7, 1995 and to 
receive warrants for an equivalent 
number of common shares at $.1875 per share for the note issued 
January 23, 1995 
and at $.125 per share for the note 
issued March 7, 1995.

On November 16, 1995, and December 22, 1995, the Company issued 
additional 
promissory notes to certain 
directors of the Company for an aggregate consideration of 
$100,000.  These 
notes specify that at any time prior 
to repayment the holder has the right to convert the note to 
common stock of the 
Company at $.05 per share and to 
receive a warrant for an equivalent number of common shares at 
$.05 per share.  
The promissory notes are due on 
demand with interest charged at the prime rate.  As of December 
31, 1995 $55,320 
was received by the Company.  The 
remaining $44,680 was received in January, 1996.

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 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. 
Interest accrued of $33,395 was forgiven by the shareholders.

On February 9, 1996, and March 11, 1996, the Company issued 
additional 
promissory notes to certain directors 
of the Company for an aggregate consideration of $140,000.  The 
notes specify 
that at any time prior to repayment 
the holder has the right to convert the note to common stock of 
the Company at 
$.10 per share for the note issued 
February 9, 1996 and at $.09 per share for the note issued March 
11, 1996 and to 
receive warrants for an equivalent 
number of common shares at $.10  per share for the note issued 
February 9, 1996 
and at $.09 per share for the note 
issued March 11, 1996.	
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements
			(continued)


On April 23, 1996, May 9, 1996 and June 7, 1996, the Company 
issued Promissory 
Notes to certain Directors 
of the Company for an aggregate consideration of $177,000.  These 
notes specify 
that at any time prior to repayment 
the holder has the right to convert the note to common stock of 
the Company at 
$.06 per share for the notes issued 
April 23, 1996 and May 9, 1996, and at $.05 for the note issued 
June 7, 1996, 
and to receive warrants for an 
equivalent number of common shares at $.06 per share for the 
notes issued April 
23, 1996 and May 9, 1996 and at $.05 
per share for the note issued June 7, 1996.

On July 24, 1996 and September 24, 1996, the Company issued 
Promissory Notes to 
certain Directors of the 
Company for an aggregate consideration of $160,000.  These notes 
specify that at 
any time prior to repayment the 
holder has the right to convert the note to common stock of the 
Company at $.115 
per share for the note issued July 
24, 1996 and at $.125 per share for the note issued September 24, 
1996, and to 
receive warrants for an equivalent 
number of common shares at $.115 per share for the note issued 
July 24, 1996 and 
$.125 per share for the note issued 
September 24, 1996.  As of December 31, 1996 the unpaid portion 
of these 
Promissory Notes was $4,760.

On November 13, 1996 and December 11, 1996, the Company issued 
Promissory Notes 
to certain Directors of the 
Company for an aggregate consideration of $140,000.  These notes 
specify that at 
any time prior to repayment the 
holder has the right to convert the note to common stock of the 
Company at $.09 
per share for the notes dated 
November 13, 1996 and December 11, 1996, and to receive warrants 
for an 
equivalent number of common shares at $.09 
per share for the note issued November 13, 1996 and December 11, 
1996.  As of 
December 31, 1996 the unpaid portion 
of these Promissory Notes was $12,110.

(7)	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 5 relating to 
exchange of redeemable preferred stock and note 8 relating to 
conversion of 
redeemable preferred stock and waiver 
of redemption privileges. Mandatory redemption is required by 
October 2002.  As 
of December 31, 1996, cumulative 
dividends in arrears totaled $189,246 ($5.28 per share) and were 
included in 
carrying value of redeemable preferred 
stock.  See Note 5 relating to exchange of redeemable preferred 
stock and Note 8 
relating to conversion of 
redeemable preferred stock and waiver of redemption privileges.

(8)	Stockholders' Equity

Common Stock

In January 1987, the Board of Directors approved the 1986 Stock 
Option Plan 
("Plan").  In August 1990, the 
shareholders approved an increase in the number of shares 
issuable pursuant to 
options granted under the Plan.  
Under the Plan options to acquire up to 978,850 shares of the 
Company's common 
stock may be issued to certain 
directors, officers and employees.  Options granted under the 
Plan are 
exercisable in installments of twenty percent 
each year beginning on the first anniversary of the date when 
such options are 
granted and expire not later than 
ten years from the date of grant.  On January 22, 1987, the Board 
of Directors 
approved the granting, under the 
Plan, of options to purchase 72,750 shares of the Company's 
common stock at 
$5.40 per share to 23 full-time 
employees of the Company.  The option price represented a 
discount from the 
market price at the date of grant.  The 
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements
			(continued)


total amount of such discount was accounted for as compensation 
expense and 
recognized over the period in which 
employees were providing the related services.  In May 1989 the 
Compensation 
Committee of the Board of Directors 
approved the reduction of the exercise price from $5.40 to $1.00 
per share of 
the  aforementioned  options.   In 
addition, the Compensation Committee approved the granting of 
options to 
purchase an additional 146,350 shares at 
an exercise price of $1.00 per share pursuant to the Plan.  In 
May 1990, the 
Compensation Committee of the Board 
of Directors approved the granting of options to purchase an 
additional 560,250 
shares at an exercise price of $.10 
per share pursuant to the Plan.  In January 1991, options to 
purchase 250,000 
shares of common stock of the Company 
at $.25 per share were granted to two officers and one key 
employee of the 
Company. In January 1992,  options to 
purchase 350,000 shares of common stock of the Company at $.625 
per share were 
granted to one officer and one key 
employee of the Company. In April 1993, options to purchase 
50,000 shares of 
common stock of the Company at $1.00 
per share were granted to one key employee of the Company. The 
options granted 
in May 1989, May 1990, January 1991, 
January 1992, and April 1993 were at an exercise price in excess 
or equal to the 
current market price and, 
accordingly, no additional compensation expense was recognized. 
Prior to 1993, 
no options were exercised under the 
Plan.  In 1993 options to purchase 87,000 shares of common stock 
at $.10 per 
share and 20,000 shares of common stock 
at $.25 per share were exercised pursuant to the Plan.  On March 
17, 1994 the 
Board of Directors approved an 
increase from 978,850 to 1,200,000 in the number of shares 
issuable pursuant to 
options granted under the plan which 
was approved by stockholders at the Company's 1994 Annual 
Meeting. On December 
16, 1995 an increase from 1,200,000 
to 2,000,000 in the number of shares issuable pursuant to options 
granted under 
the plan which was approved by 
stockholders at the Company's 1995 Annual Meeting. 

On January 11, 1996, warrants to purchase 1,418,502 shares of 
common stock of 
the Company at $.05 were 
granted to the CEO of the Company, and options to purchase 
800,000 shares to two 
officers of the Company at $.05 
per common share.  One-third of the shares were to be vested 
immediately and 
one-third on each anniversary of the 
grant.  The Compensation Committee also recommended the 
conversion of previously 
granted employee stock options 
issued between March 9, 1987 to March 9, 1995 to options at $.05 
per share, 
which was the fair market value at that 
time.  The Board of Directors approved this recommendation on 
April 17, 1996.  
Upon termination of the CEO in 
January 1997, only 472,834 of shares granted to the CEO were 
vested and are 
exercisable until January 7, 1998.

In May and November 1988, holders of 314,092 shares of redeemable 
preferred 
stock converted those shares into 
628,184 shares of the Company's common stock and received 
warrants to purchase 
314,092 shares of common stock at 
a rate of $6.00 per share which expired on July 30, 1993.  During 
1990, holders 
of 13,500 shares of redeemable 
preferred stock converted those shares to 27,000 shares of the 
Company's common 
stock.  During 1991 holders of 5,125 
shares of redeemable preferred stock converted those shares to 
10,250 shares of 
the Company's common stock.  During 
1993 and 1994 no shares of redeemable preferred stock were 
converted to shares 
of the Company's common stock.

In February 1991, the Company sold 4,596,000 shares of common 
stock and received 
net proceeds of $1,109,000. 
Also in February, 1991, the Company issued warrants to purchase 
800,000 shares 
of common stock at $.25 per share 
to a stockholder controlled company for acting as placement 
agent.  

In June 1992, the Company sold 680,667 shares of common stock and 
received net 
proceeds of $503,693.  Also 
in June, 1992, the Company issued warrants to purchase 252,400 
shares of common 
stock at $.75 per share to a 
stockholder controlled Company for acting as placement agent.  In 
addition, 
680,667 warrants to purchase common 
stock at $.75 per share were issued to other qualified investors 
as part of the 
private placement.   

On March 25, 1993 the Company issued 33,334 shares of common 
stock at $.75 upon 
execution of a Letter of 
Intent with Burns Philp Food Inc. to enter into a Technology 
License Agreement.  
Upon execution of a Technology 
License Option Agreement on April 16, 1993, Burns Philp purchased 
166,666 newly 
issued shares of common stock at 
$.75 per share, and an additional 62,500 shares at $.48 per share 
on July 13, 
1993.  On October 13 the Company 
issued 76,550 shares of common stock at $1.00 per share as part 
of the 
termination of the Agreement with Burns 
Philp.
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements
			(continued)

At December 31, 1994, 86,746 shares of authorized but unissued 
common stock were 
reserved for exercise at 
$6.64 per share pursuant to a stock purchase warrant granted to 
the underwriter 
in connection with the Company's 
initial public offering, 978,850 shares of authorized but 
unissued common stock 
were reserved for exercise pursuant 
to the 1986 Stock Option Plan, 452,184 shares of authorized but 
unissued common 
stock were reserved for issuance 
upon conversion of the Company's outstanding preferred stock, 
314,092 shares of 
authorized but unissued common stock 
were reserved for issuance upon exercise at $6.00 per share of 
stock purchase 
warrants issued to preferred 
stockholders who converted to common stock in 1988, 800,000 
shares of authorized 
but unissued common stock were 
reserved for issuance upon reinvestment of interest on the 
variable rate 
subordinated debenture and 375,000 shares 
of authorized but unissued common stock were reserved for 
issuance upon 
conversion of the variable rate subordinated 
debenture. 

On August 15, 1995, the Company sold 1,200,000 shares of common 
stock to certain 
directors of the Company 
at $.125 per share and received net proceeds of $150,000.

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>
						December 31,         
					1996                   1995  
<S>				<C>				<C>
Issued                7,508,652             5,642,550
Outstanding           7,403,652             5,537,550              
Exercisable           5,822,651             5,237,550              

</TABLE>

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 5 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.

On January 23, 1996 a holder of preferred stock converted 2,500 
shares of 
preferred stock into 5,000 share 
of common stock of the Company.

At December 31, 1996, cumulative dividends in arrears totaled 
$990,000 ($5.28 
per share) and were included 
in the aggregate involuntary liquidation value of the preferred 
stock.

At December 31, 1996, 187,500 shares of authorized but unissued 
preferred stock 
were reserved for issuance 
upon maturity of the variable rate subordinated debenture.

(9)	Net Loss Per Common Share

Net loss per common share for 1996 and 1995 is based on 
18,604,171 and 
13,694,343 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.
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements
			(continued)

(10)	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 between $57,000 - $59,000 under 
such leases.  Annual rent expense relating to the leases for the 
years ended 
December 31, 1996 and 1995 approximated 
$68,000 and $83,000, respectively.

Exclusive worldwide rights to manufacture and sell one of the 
products developed 
by the Company were granted 
to Hercules Incorporated ("Hercules"), in exchange for an initial 
license fee of 
$500,000 pursuant to a licensing 
agreement dated as of September 16, 1985.  Hercules did not 
produce commercially 
any quantities of the product and 
by an agreement dated October 15, 1987, the Company and Hercules 
agreed to 
terminate the license agreement.  
Pursuant to termination agreements negotiated between the 
parties, the Company 
paid Hercules $25,000 for termination 
of the license and will not refund the $500,000 initial license 
fee paid by 
Hercules.  If the Company commercializes 
the product, the Company will pay Hercules up to an additional 
$600,000 from 
revenues from the sale or licensing 
of the product.

(11)	Contingencies

On September 24, 1982, the Company and McKesson Corporation 
formed a joint 
venture for the purpose of 
developing, manufacturing and selling certain whey-based 
products.  On June 26, 
1984, McKesson Corporation assigned 
to the Company all of its rights, titles and interests in the 
joint venture in 
consideration of a cash payment for 
the joint venture's inventory and a commitment to pay an 
additional amount of 
approximately $500,000, payable 
without interest in five equal annual installments, commencing 
after the first 
fiscal year in which the Company 
attains pre-tax profits, as defined, or at least $1 million.  
Because the 
payment is dependent upon the Company's 
attaining profitable operations in the future, no liability 
therefore has been 
reflected in the accompanying balance 
sheet.

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. 
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.

(12)	Income Taxes

At December 31, 1996 and 1995, the Company has federal and state 
net operating 
loss carry-forwards of 
approximately $20,100,000 and $19,300,000, respectively, that 
expire from 1997 
to 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:             
										1996     
Net operating loss carry-forward benefit		$  8,200,000  	
Valuation allowance						  (8,200,000)	
Deferred tax asset						$      -      

(13)	Uncertainty

The Company has incurred net losses in each year of its 
existence, aggregating 
approximately $21,100,000 from 
inception to December 31, 1996 and its liabilities and redeemable 
preferred 
stock exceeded its assets by 
approximately $2,900,000 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.
<PAGE>
			IGENE Biotechnology, Inc.
			Notes to Financial Statements 
			(continued)

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 payments.  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 is actively seeking and is in discussion with a 
potential 
manufacturer of its AstaXin(r) 
technology.  The Company believes this technology to be highly 
marketable and is 
hopeful that an income-producing 
technology licensing agreement could be executed during 1997 for 
this product.

To increase working capital, the Company plans to issue 
additional stock to 
officers and directors and to 
encourage holders of outstanding warrants to exercise these 
rights.  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 15)

(14)	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 and $24,415 in 1996 and 1995, 
respectively, for 
technology services pertaining to the 
Agreement.  The Company also received payment of $25,000 in 
December, 1995 under 
the terms of the Agreement.   On 
February 29, 1996 Archer-Daniels-Midland Company terminated its 
Licensing 
Agreement with the Company (See Note 11).

(15)	Subsequent Events

Effective January 1, 1997 the Company initiated a SIMPLE 
retirement plan.  All 
employees who received at 
least $5,000 of compensation for the preceding year are eligible 
to participate 
in the plan.  The Company makes a 
non-elective contribution for each participating employee equal 
to 2% of each 
such employee's compensation.

On January 15, 1997 the Company issued Promissory Notes to 
certain Directors of 
the Company for an aggregate 
consideration of $70,000.  These notes specify that at any time 
prior to 
repayment the holder has the right to 
convert the note to common stock of the Company at $.07 per share 
and to receive 
warrants for an equivalent number 
of common shares at $.07 per share.

On February 24, 1997 the Company issued Promissory Notes to 
certain Directors of 
the Company for an aggregate 
consideration of $100,000.  These notes specify that at any time 
prior to 
repayment the holder has the right to 
convert the note to common stock of the Company at $.11 per share 
and to receive 
warrants for an equivalent number 
of common shares at $.11 per share.                                          
<PAGE>
<TABLE>
Schedule V

IGENE Biotechnology, Inc.
Property, Plant and Equipment

<CAPTION>
				Balance at			   			Balance   
                    Beginning 		Additions 			at end    
Classification		of period		at cost Retirements	of period 
<S>				<C>			<C>		<C>		<C>
Year ended December 31, 1996:
Laboratory equipment 
and fixtures		$   85,092		$ --- 	$ 15,032 	$ 70,060
Pilot plant 
equipment and 
fixtures			    56,862 	  955     	  49,615 	   8,200
	Machinery 
	and equipment	   101,683		  ---       43,704	  57,979
Office furniture 
and fixtures	   	    42,864	       ---        9,338	  33,526

				$ 286,501 		$ 955 	$117,689 	$169,765 
</TABLE>
<TABLE>
Schedule VI

Accumulated Depreciation and Amortization 
of Property, Plant and Equipment

<CAPTION>
				Balance at		Depreci-  	 		Balance   
				beginning 		ation     			at end    
Classification		of period 		Expense Retirements	of period 
<S>				<C>			<C>		<C>		<C>
Year ended December 31, 1996:
Laboratory equipment 
	and fixtures	$   73,091	$    2,000	$   15,032 $   60,059
Pilot plant equipment 
and fixtures			56,863 	   67 	49,614  	7,314
Machinery and equipment	84,234 	 4,122	38,961  	49,395
Office furniture 
and fixtures	 		42,792 	    72 	 9,338    33,526

				 $  256,980 $   6,261$  112,946$  150,294 
</TABLE>
<TABLE>
Schedule X
Supplementary Income Statement Information
<CAPTION>
							   1996   	   1995   
<S>							<C>		<C>
	Maintenance and repairs ......	$  27,174	$  35,849 
	Taxes, other than 
	payroll and income taxes......	   18,193	   15,267 
</TABLE>
<PAGE>
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, 1997.

IGENE Biotechnology, Inc.
Date:	April 15, 1997			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.
Signature					Title					
	Date

  /s/  Joseph C. Abeles       Director			April 15, 1997
	(Joseph C. Abeles)
  /s/  John A. Cenerazzo      Director			April 15, 1997 
	(John A. 
Cenerazzo)
  /s/  Stephen F. Hiu    		Director, 
	(Stephen F. Hiu)		President,			April 15, 1997
      					Secretary, and Treasurer		
						Chief Financial Officer,
						Chief Accounting Officer
  /s/  Thomas L. Kempner  	Vice Chairman 
	(Thomas L. Kempner)		of Board			April 15, 1997
  /s/  Michael G. Kimelman 	Chairman 
	(Michael G. Kimelman)	of the Board		April 15, 1997
						of Directors
  /s/  Sidney R. Knafel  		Director			April 15, 1997
	(Sidney R. Knafel)
  /s/  Patrick F. Monahan     Director			April 15, 1997 
	(Patrick 
F. Monahan)
<PAGE>