UNITED STATES SECURITIES AND EXCHANGE
                                 COMMISSION
                           Washington, D.C.  20549
                                FORM 10-KSB
(Mark One)
[X]  ANNUAL  REPORT  PURSUANT  TO SECTION  13  OR  15(d)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998

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

For the transition period from _ _ _ _ _ _ _ _ to _ _ _ _ _ _ _ _

Commission file number 0-15888

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

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

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

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 $218,095.
     
     As  of  March 1, 1999, there were 21,854,173 shares  of  the
issuer's Common Stock outstanding.  The aggregate market value of
the Common Stock held by non-affiliates was $1,545,106, based  on
the last bid quotation prices of the Common Stock as reported  by
the  National  Quotation Bureau's bulletin board  on  such  date.
(The   officers  and  directors  of  the  issuer  are  considered
affiliates only for purposes of this calculation.)

                               -1-
<PAGE>

CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS"  OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

EXCEPT  FOR  HISTORICAL  FACTS, ALL  MATTERS  DISCUSSED  IN  THIS
REPORT, WHICH ARE FORWARD LOOKING, INVOLVE A HIGH DEGREE OF RISKS
AND  UNCERTAINTIES.   POTENTIAL RISKS AND UNCERTAINTIES  INCLUDE,
BUT   ARE  NOT  LIMITED  TO,  COMPETITIVE  PRESSURES  FROM  OTHER
COMPANIES AND WITHIN THE BIOTECH INDUSTRY, ECONOMIC CONDITIONS IN
THE  COMPANY'S  PRIMARY MARKETS AND OTHER UNCERTAINTIES  DETAILED
FROM  TIME-TO-TIME  IN  THE  COMPANY'S  SECURITIES  AND  EXCHANGE
COMMISSION FILINGS.

                             PART I

ITEM 1.   DESCRIPTION OF BUSINESS

General

     IGENE Biotechnology, Inc. (the "Company") is engaged in  the
business  of developing, marketing, and manufacturing  industrial
microbiology and related biotechnology products.  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   agrochemical  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  leases manufacturing capacity in Mexico  City,
Mexico,   and  also  has  pilot  plant  facilities  in  Columbia,
Maryland.  The Company is manufacturing its own products and  has
also licensed certain products to third-party manufacturers.

Government Regulation

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

                                -2-
<PAGE>

Research and Development

     As   of   December  31,  1998,  the  Company  had   expended
approximately $11,175,000 on research and development  since  its
inception  on October 27, 1981 and has, as of December 31,  1998,
received   revenues   from  product  sales   and   royalties   of
approximately $2,013,000 from the proprietary processes resulting
from such research and development.  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 1999.

      Research and development expenditures for each of the  last
two years are as follows:
          
          1997    $  521,669
          1998    $  452,755

     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,  prawns,  and certain other  types  of  fish  and
shellfish.   In  the  ocean, salmon and trout obtain  astaxanthin
from  krill  and other planktonic crustaceans in their  diet.   A
krill  and  crustacean diet would be prohibitively expensive  for
farm  raised salmonids; without the addition of astaxanthin,  the
flesh  of  such  fish is a pale, off-white color  which  is  less
appealing to consumers expecting "salmon-colored" fish.  Efficacy
of  AstaXin(R) has been demonstrated by fish  feeding  trials  in
Europe,  Asia, and North and South America.  An estimated 700,000
metric   tons  of  farm  raised  salmon  are  produced   annually
worldwide.

      Prior  to  1997  the  Company  entered  into  a  number  of
manufacturing and licensing agreements for commercial  quantities
of  AstaXin(R). However, for a number of reasons, outside of  the
Company's control, none of these agreements were extended  beyond
the initial trial periods.

     On   July  3,  1997,  the  Company  signed  a  non-exclusive
manufacturing  agreement with Fermic, S.A.  de  C.V.,  of  Mexico
City,  Mexico,  for  the  production of its  natural  astaxanthin
pigment, AstaXin(R) in Fermic's manufacturing facility in Mexico.
Commercial  production began in January of 1998, and the  Company
continues to manufacture and intends to sell AstaXin(R)worldwide,
directly  or  through distributors to meet an anticipated  demand
for the product.
     
     The Fermic contract provides that the manufacturer has a non-
exclusive right to produce AstaXin(R) and is paid a fixed monthly
fee  which  is based on manufacturing capacity.  Fermic  provides
equipment  and facilities necessary to manufacture and store  the
product  and  is  responsible for purchasing raw materials.   The
Company  is  responsible for sales efforts and for  ensuring  the
quality  of the pigment.  The Company also has a role in ensuring
that  the manufacturing process works effectively.  The  term  of
the  contract has been extended on a month-to-month basis through
December 31, 1999, and it is anticipated that it will continue to
be  extended  beyond that date. (see also Item 2. Description  of
Property)  The Company intends to modify its fee arrangement with
the manufacturer in the near future so that fees will be based on
quantity of product produced.
     
     Based  on  estimates  of worldwide production  of  farm-bred
salmon, the Company believes the market for salmon feed additives
which   improve   coloration,  such   as    AstaXin(R),   exceeds 
$150,000,000  worldwide,  which   would  be  approximately  7,500  
metric   tons.   Production  was  approximately  50  metric  tons  
for  1998.   The  expected  production rate is between 50 and 150  
metric   tons   of   AstaXin(R)  for  1999,  which  is  equal  to 
approximately  2%  of  the  potential  worldwide  market for such 
feed additives.

                               -3-
<PAGE>
   
     The  Company is presently engaged in preliminary discussions
with  several  companies regarding possible  distribution  and/or
licensing of AstaXin(R).
     
      Sales  of  AstaXin(R) amounted to 93% and 0% of revenue for
1998  and 1997, respectively, of which 98% represent sales  to  a
single foreign distributor located in Mexico.

      During  1997 Archer-Daniels Midland, Inc. (ADM) filed  suit
against   the  Company  alleging  patent  infringement  regarding
AstaXin(R). The Company believes this suit is meritless  and  has
filed a counter-suit against ADM alleging theft of trade secrets.
This   litigation   is  on-going.  (See  also   Item   3.   Legal
Proceedings).

2.   ClandoSan(R)

     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   and  distributed  by   a   licensed
manufacturer in the United States.
     
     The  Company  receives royalties based on  a  percentage  of
sales of ClandoSan(R).  ClandoSan(R) royalties amounted to 7% and
100% of revenue for 1998 and 1997, respectively.

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 1997 and 1998, as part of the Company's
stringent  cost  containment efforts, all patents and  trademarks
were  carefully reviewed and those with no foreseeable commercial
value  have been abandoned to eliminate costly maintenance  fees.
Patents  (and applications) and/or trademarks on technology  with
recognized commercial  value  include  those  for  AstaXin(R) and
ClandoSan(R).    Extensive  additional  foreign  applications for
AstaXin(R) have been submitted during 1997 and 1998.

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 

                              -4-
<PAGE>

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.  This  market  is presently  dominated  by  a
single producer,  and certain other large companies are presently
known to be developing and marketing competitive products.

Sources and Availability of Raw Materials

      Raw materials used in the manufacture of AstaXin(R) consist
principally of agricultural commodities widely available in world
markets  from  many suppliers, which may be used interchangeably.
Raw materials used  in  the manufacture of  ClandoSan(R)  consist
principally of by-products of the seafood processing industry and
are  a  commodity  readily available from  many  suppliers,  used
interchangeably.    We   do   not   anticipate   material   price
fluctuations or changes in availability in these raw materials in
the near future.

Employees

     At  December 31, 1998, the Company had 7 full time employees
and  1 part time employee.  Three of the full time employees  are
in  administration and marketing, while the remainder are engaged
in  research,  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 approximately 8,500 square feet of space
in  the  Oakland Ridge Industrial Park located at 9110 Red Branch
Road, Columbia, Maryland.  The Company occupies the space under a
five-year lease expiring on January 31, 2001.  Approximate rental
expense is $73,000 for each remaining year of the lease.

     Approximately 2,000 square feet of the space occupied by the
Company  is  used  for executive and administrative  offices  and
approximately  2,500  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.
     
     The  Company  also leases manufacturing capacity  at  Fermic
S.A.  de  C.V. (Fermic) in Mexico City, Mexico. During  1997  the
Company   loaned   $500,000  to  Fermic  for  the   purchase   of
manufacturing  equipment, which is being used for the  production
of AstaXin(R), along with equipment which Fermic  already  owned.
Under  its agreement with this manufacturer, the Company is being
repaid  on  this loan over a two-year period which began  January
1998.  This  equipment  is owned by the  manufacturer,  with  the
Company  retaining  only a security interest.   The  Company  has
approximately $245,000 of additional manufacturing equipment  for
use in this manufacturing process in Mexico, in which the Company
retains title.

     The  Company  owns, leases or contracts, all  equipment  and
facilities necessary for its current operations and all equipment
is in satisfactory condition and adequately insured.
     
                               -5-
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     On  July  21, 1997 Archer Daniels Midland, Inc. (ADM)  filed
suit against the Company in the U.S. District Court in Greenbelt,
Maryland   alleging   patent  infringement   and   requesting   a
preliminary   injunction  against  the  Company  to   cease   the
manufacture  and  sale  of  AstaXin(R).  On  August 4,  1997, the 
Company filed a $300,450,000 contract and  trade  secrets lawsuit
in  U.S. District  court  in  Baltimore,  Maryland  against  ADM,
alleging theft of trade secrets.  The  Company is  also  claiming
breach of contract, in regards to the licensing agreement entered
into by the Company and ADM in 1995. The Company contends that it
complied  with  all  material  terms  of  this  agreement.    The
Company's claim was re-asserted as a counterclaim against ADM and
the  two  cases  were joined in the District Court in  Baltimore,
Maryland  on August 24, 1997.  On September 10, 1997 the District
Court  denied ADM's request for a preliminary injunction  on  the
basis  that ADM could not demonstrate a likelihood of success  on
the  merits  of its case.  Management believes ADM's  claims  are
meritless.   During 1998, a stay was imposed on both  parties  by
the  court  while a court-appointed expert analyzes the Company's
and ADM's yeast products.  This litigation is on-going.

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

     None.

                               -6-
<PAGE>

                             PART II

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

Common Stock
     
     Commencing  on or about June 12, 1989, the Company's  Common
Stock  began trading on the over-the-counter market on a  limited
basis and is quoted on the National  Quotation Bureau's "bulletin
board".   The  following  table shows, by calendar  quarter,  the
range of representative bid prices for the Common Stock for  1997
and 1998.

<TABLE>
<CAPTION>
          Calendar Quarter              High                Low
          ----------------              -----               -----
<S>       <C>                           <C>                 <C>
1997:     First Quarter                 $ .08               $ .06
          Second Quarter                $ .17               $ .09
          Third Quarter                 $ .20               $ .11
          Fourth Quarter                $ .13               $ .08

1998:     First Quarter                 $ .11               $ .06
          Second Quarter                $ .21               $ .10
          Third Quarter                 $ .15               $ .05
          Fourth Quarter                $ .06               $ .04
          
</TABLE>

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

     The  aggregate number of record holders of the Common  Stock
as  of March 1, 1999 was 238.  As of March 1, 1999, the high  bid
and  low  offer  prices for the Common Stock,  as  shown  on  the
"bulletin board" were $0.11 and $0.11, respectively.

Preferred Stock

     There  was  no public market for the Preferred Stock  during
1997  and 1998 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,  1999
was 12.

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, 1998 the total amount of
dividends  in  arrears  with respect to the  Company's  Preferred
Stock was $194,124.

     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.

                                -7-
<PAGE>

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

     Certain  statements  in this report set  forth  management's
intentions,  plans, beliefs, expectations or predictions  of  the
future  based on current facts and analyses.  Actual results  may
differ materially from those indicated in such statements, due to
a  variety of factors including reduced product demand, increased
competition,  government action, weather  conditions,  and  other
factors.

    Results of Operations
    
    Sales  and  other  revenues for the year ended  December  31,
1998  increased from $14,394 in 1997 to $218,095 in  1998.   This
increase  in  overall revenue of 1,415% resulted  from  sales  of
AstaXin(R) of $203,860 during the second quarter of 1998.   There
were  no  commercial  quantities of AstaXin  available  for  sale
during  1997.   The  Company   began  commercial  production   of
AstaXin(R) with  a  contract  manufacturer in January 1998.   The
Company  is  presently  engaged   in  discussions  with   several
potential   purchasers   of  AstaXin(R),  and  expects  to   have
additional sales during 1999.  However, there can be no assurance
that  any  such sales  will occur  or that they will be material.
The  Company earned licensing revenue (royalties) of $14,235 from
ClandoSan(R) during 1998, compared with gross revenue from direct
sales  of ClandoSan(R)   of  $ 14,394 in 1997, which represents a
decrease  of less  than 1%.  The Company is presently negotiating 
continuation of  a  licensing agreement for ClandoSan(R), but has
continued to focus its efforts on AstaXin(R)during 1997 and 1998.

    Costs  of  sales  for 1998 and 1997 of $809,288  and  $9,963,
respectively,  increased by 8,023%, or $799,325.   This  increase
resulted entirely from  production  of  AstaXin(R)  during  1998.
During  1998, a gross loss on sales of AstaXin(R) of $605,428 was
recorded.   This  was  caused by inefficiencies  in  the  initial
commercial  production runs, costs of which exceeded  the  market
value of the product.  Production efficiency improved during 1998
and  the  Company expects to achieve gross profits  on  sales  of
AstaXin(R) produced  in 1999, provided that sufficient  sales are
achieved.   However, there can be no assurance  that  such  gross
profits  will be realized or that they will be material.   During
January  through  March of 1999, the Company implemented  certain
improvements in the production process.  During this  period,  no
manufacturing fees were incurred.  The Company expects  to  incur
future production  costs for AstaXin(R) of at least $138,000  per
month  beginning April 1999, which are expected to be  funded  by
product  sales.   However, there can be no  assurance  that  such
sales  will  occur,  or  that they will be  material.   Once  the
Company  is  producing and selling AstaXin(R) at a gross  profit,
management  plans  to  expand  production  capacity  to  meet  an
expected  increase  in  demand  for  AstaXin(R). There  were   no
production  costs  for  ClandoSan(R)  during  1998.  The  Company
discontinued direct production and sales of this product and  has
earned  revenue only through royalties on sales by  its  licensed
manufacturer in 1998, incurring no costs of sales.  Cost of sales
of $9,963 in 1997 resulted entirely from contracted production of
ClandoSan(R).

    Marketing  and selling expenses for 1998 and 1997  of  $9,862
and  $8,741,  respectively, increased $1,121, or 13%.   This  was
caused  by  increased marketing efforts for AstaXin(R) in 1998 as
compared  to 1997. Marketing expenses for AstaXin(R) are expected
to  continue to increase, since to achieve sales the Company will
need to make additional marketing efforts on its own and with the
help of distributors or marketers.  These additional expenses are
expected  to be funded by revenues from product sales, if  future
product sales occur.

    Research, development and pilot plant expenses for  1998  and
1997  were  $452,755 and $521,669, respectively;  a  decrease  of
$68,914, or 13%.  This decrease resulted from transfer of efforts
from   the   pilot   plant  to  direct  support   of   commercial
manufacturing in the fourth quarter of 1998.  These expenses  are
expected  to continue at approximately $35,000 per month  in  the
near  term  in  support  of  increasing  the  efficiency  of  the
manufacturing  process through experimentation in  the  Company's
pilot plant and additional research.  These expenses are expected
to  be  funded  through  June  of  1999  by  available  cash  and
additional   funding  from  stockholders,   and   by   profitable
operations beyond that date, if profitable operations occur.

                                -8-
<PAGE>

    General  and  administrative  expenses for 1998 and 1997 were
$502,564  and  $432,842, respectively; an increase of $69,722, or
16%.   This increase resulted primarily from the hiring of a  CEO
during  1997,  which  resulted in an  increase  of  approximately
$92,000  in  compensation and benefits in 1998  over  1997.   The
Company's CEO resigned during 1998 and the Company does not  plan
to hire a replacement in the near future, but will be operated by
its President and Board of Directors.  General and administrative
expenses  are  expected  to  continue  in  the  near  future   at
approximately $36,000 per month.  These expenses are expected  to
be  funded  through June of 1999 by available cash and additional
funding  from  stockholders, and by profitable operations  beyond
that date, if profitable operations occur.

    Litigation  expenses  for 1998 and  1997  were  $399,492  and
658,185,  respectively,  a decrease of $258,693  or  39%.   These
expenses  in 1998 and 1997 represent continuing costs  associated
with  the  Company's defense of the suit by ADM and the Company's
counter-suit.   Management  expects  to  recover  legal  expenses
through  damage awards and through preservation of the commercial
product rights associated with AstaXin(R). However, there can  be
no  assurance that the Company will receive damage awards or that
its  rights  will be preserved.  The Company estimates  that  the
costs  of  litigation will continue in the near future at  levels
based  on management's continuing assessments of potential  costs
and  benefits  of various litigation strategies and alternatives.
These  expenses are expected to be funded by available  cash  and
additional  funding  from stockholders.   A range  of  reasonably
possible losses from the litigation cannot be estimated  at  this
time.

    The  Company  reported other income of $51,204 in  1997  from
the  renegotiation of certain disputed vendor liabilities.   This
is  expected to be a non-recurring event and no such  income  was
reported in 1998.

    Net  interest  expense  for 1998 and 1997  was  $540,275  and
$326,563,  respectively, an increase of $213,712, or  65%.   This
increase  resulted from additional debt issued in  the  Company's
rights offering of February 1998.

    As  a  result  of  the  foregoing, the Company  reported  net
losses  of $(2,499,694) and $(1,888,082), respectively, for  1998
and 1997; an increased loss of $(611,612) or 32%.  This is a loss
of  $(.12) and $(.10) per share, respectively, for 1998 and 1997.
The weighted average number of shares of common stock outstanding
of  20,672,092  and 18,870,314, respectively, for 1998  and  1997
have  increased  by  1,801,778 shares.  This  resulted  from  the
issuance of 80,000 shares during 1998 in lieu of interest payment
on  a subordinated debenture, the conversion of 187,500 shares of
preferred  stock  into 375,000 shares of common  stock,  and  the
issuance of 2,190,000 shares of common stock in payment of  legal
fees during 1998.
    
Financial Position

During  1998 and 1997, the following actions materially  affected
the Company's financial position:
    
    o The  Company  loaned  $500,000  in  1997  to  its  contract
      manufacturer   of   AstaXin(R)   for   the   purchase    of
      manufacturing   equipment   needed   for  the production of 
      AstaXin(R).   The  loan  is  repayable  over  23 months and
      matures November 1999  with interest at 10%.  The remaining
      balance  of  this loan is $250,783 as of December 31, 1998,
	which  is  classified  as  a current asset.
    
    o The Company purchased $73,171 and  $186,421,  respectively, 
      in manufacturing  equipment  in  1998 and 1997 for  use  in  
      the production of AstaXin(R).  The Company  also  purchased 
      $58,354 and $98,933,  respectively  of  other  equipment in 
      1998  and  1997,  primarily  for  use  in  its  pilot plant 
      facility.

    o The Company  issued  $365,500,  during  1997, in promissory
      notes  to  directors,  which  along  with amounts issued in 
      prior  years'  totals $1,082,500 outstanding as of December 
      31, 1998, and which mature on March 31, 2003.

                                    -9-
<PAGE>

    o The  Company  issued $950,000 and $1,875,000, respectively, 
      in debt during 1998  and  1997,  which  was  cancelled  and 
      repaid in March 1998 through  use of proceeds from a rights 
      offering. The Company  issued  $5,000,000 in debt through a 
      rights offering in March  1998,  which  matures  March  31, 
      2003.   The  Company capitalized  $211,713  in  debt  issue 
      costs  associated  with this debt,  of  which  $31,757  was 
      amortized  in  1998.  The  net  proceeds  from  the  rights 
      offering was $1,963,287.
    
    o The  Company  retained   inventory  from   manufacture   of
	AstaXin(R)  of  $870,260  as   of  December  31,  1998,  an
	increase  of $870,260 from 1997.
    
    o The Company  prepaid expenses of $83,933 in 1998 which have
      been recorded as current assets as of December 31, 1998 and
      consist mainly of legal retainers.
    
    o The Company issued 80,000 shares  in  each of 1998 and 1997 
      of common  stock  in  payment  of  interest  on a  variable  
      rate subordinated  debenture  with  a  principal balance of 
      $1,500,000,  recording   interest  expense  and  increasing 
      common  stock  and  paid-in capital for $180,000 in each of 
      1998 and 1997.

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

    o The  carrying  value  of  redeemable  preferred  stock  was
      increased   and   paid-in   capital   available  to  common 
      shareholders   was   decreased  for  $18,940  and  $21,938, 
      respectively,  in  1998  and  1997,   reflecting cumulative 
      unpaid dividends on redeemable preferred stock.

    o Holders   of   limited   redemption   preferred  stock  and 
      redeemable  preferred  stock  converted  187,500  and 6,250 
      shares, respectively, in 1998 and  1997, of preferred stock 
      into  375,000 and 12,500 shares,  respectively,  of  common 
      stock,  providing  additional  capital   and  reducing  the 
      liquidation   value   of   redeemable  preferred  stock  by 
      $86,000 in 1997.
    
    o The  Company  issued  2,190,000  shares  of common stock in
      payment  of  legal  fees,  recording additional capital and 
      legal expenses of $162,000 based on the market value of the 
      stock at date of issue.
    
    o The Company recorded additional paid-in capital of $205,640
      in  1998  to reflect forgiveness of interest on outstanding
      promissory  notes in conjunction with the Company's  rights
      offering.
    
    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, 1998, total dividends in arrears  on
the  Company's Preferred Stock total $194,124 ($6.56  per  share)
and  are  included  in  the  carrying  value  of  the  redeemable
Preferred Stock.

Liquidity and Capital Resources

    Historically,  the  Company  has  been  funded  primarily  by
equity  contributions, loans from stockholders and license  fees.
As of December 31, 1998 the Company had a working capital deficit
of $1,307,368, and cash and cash equivalents of $364,796.
    
    Cash  used by operating activities in 1998 and 1997  amounted
to $2,731,077 and $1,484,353, respectively.
    
    Cash  provided  (used) by investing activities  increased  by
$914,530, from $(785,356) in 1997 to $129,174 in 1998.  This is a
result   of  capital  expenditures  for  manufacturing  equipment
relating to production of AstaXin(R) in 1997, and $500,000 loaned
to Fermic for the purchase of manufacturing equipment relating to
production of AstaXin(R) in 1997 of which $249,217 was repaid  in
1998.

                               -10-
<PAGE>

    Cash  provided by financing activities increased by  $689,233
from   $2,252,918  in  1997  to  $2,942,151  in  1998.  Financing
activities included net proceeds of $950,000 and $2,228,776  from
issuance  of  notes to directors in 1998 and 1997,  respectively.
In  1998,  financing activities also included $1,963,287  in  net
proceeds from a rights offering.
    
    Over  the  next twelve months, the Company believes  it  will
need  between $1,000,000 and $2,000,000 in working capital.   The
Company  hopes  to  achieve  this  from  profits  from  sales  of
AstaXin(R)  and  additional  stockholder  funding.    The Company
intends to spend approximately  $350,000  on technology  research
over  the  next  twelve months to improve manufacturing processes
and research new strains for production of pigments.

    The  Company  does  not  believe that  inflation  has  had  a
significant impact on its operations during 1998 and 1997.

Year 2000 Issues

     Many  existing  computer  programs  and systems use only the
last  two  digits  to refer to a year.  Therefore, these programs
and   systems  will  not  properly   recognize   dates,  and  may
malfunction when using dates after December 31, 1999. The Company
has made efforts to assess its exposure and vulnerability to Year
2000  Issues.   This  assessment  is not yet completed.  However,
management has determined that  certain  consequences of its Year
2000 Issues may have a material effect on the Company's business,
results of operations, or  financial  condition,  without  taking
into account the Company's effort to avoid those consequences.

     The  Company  presently  conducts  substantially  all of its
manufacturing   operations   at   the facility  of  its  contract
manufacturer, located  in Mexico City, Mexico.  The Company is in
the process of determining  whether  the systems of this contract
manufacturer  are  Year  2000  Compliant.   However,  the Company
believes  that  its  manufacturing  operation is not likely to be
materially  affected  if  the  contract  manufacturer's  internal
systems  are  not  Year 2000 Compliant.  The Company has also not
determined, and may be unable to determine, whether the municipal
infrastructure  and utility providers' systems in Mexico City are
Year  2000 Compliant.   The  Company's  manufacturing  operations
could  be  materially  affected by power failures or malfunctions
caused  by  Year  2000  Issues  in Mexico City, if its efforts to
mitigate   them   are   unsuccessful.   The  Company  may  suffer
production  interruptions  during  power  failures caused by Year
2000  Issues.   The  Company  plans  to have sufficient inventory
levels on hand to meet demand in case of short-term manufacturing
interruptions.  The contract manufacturer plans to obtain back-up
generator  power systems in case of prolonged power outages.  The
Company  does  not  anticipate  significant costs associated with
addressing these Year 2000 Issues.

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.

                              -11-
<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:

<TABLE>
<CAPTION>

        Name            Age      Position with IGENE
<S>                     <C>      <C>
Michael  G. Kimelman     60      Chairman of the  Board  of
                                 Directors

Thomas L. Kempner        71      Vice Chairman  of
                                 the Board of Directors

Stephen  F.  Hiu         42      Director, President,  Acting
                                 Treasurer,and Director of 
     					   Research and Development

Patrick F. Monahan       48      Director, Secretary, and 
     					   Director of Manufacturing

Joseph C. Abeles         84      Director

John A. Cenerazzo        75      Director

Sidney R. Knafel         68      Director

</TABLE>

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

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

STEPHEN  F.  HIU was appointed President and Treasurer  in  March
1991,  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.

PATRICK  F.  MONAHAN was appointed Director of Manufacturing  and
elected  a Director of the Company in April 1991 and was  elected
as  Secretary  in September 1998.  He 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.

                              -12-
<PAGE>

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

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

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

Compliance with Section 16(a) of the Exchange Act

     The  Company believes that during 1997 and 1998 all  of  its
officers,  directors and holders of more than 5%  of  its  Common
Stock  complied with all filing requirements under Section  16(a)
of  the  Securities Exchange Act of 1934, except as follows:   In
1997  certain directors of the Company made various loans to  the
Company.   The  loans  are  evidenced by notes  convertible  into
Common  Stock.   Certain  directors  also  received  warrants  to
purchase  shares of Common Stock in 1997 and 1998 in  conjunction
with the 1997 notes and with a 1998 rights offering. None of  the
foregoing  securities were reported on Forms 4 or Forms  5  filed
with  the  Securities and Exchange Commission.   In  making  this
disclosure,   the   Company   has  relied   solely   on   written
representations  of  its directors, officers  and  more  than  5%
holders  and on copies of reports that have been filed  with  the
Securities and Exchange Commission.

ITEM 10.    EXECUTIVE COMPENSATION

    During  1998  and  1997  no executive officer's  annual  cash
compensation exceeded $100,000.00.  Following the resignation  of
the  Company's  former CEO, Ramin Abrishamian  during  1998,  the
functions  of  chief  executive officer  were  performed  by  the
Company's  Board  of Directors, acting as  a group.  During  1997 
and  1998  the  Directors  were not  compensated  for their Board 
or Committee activities.

<TABLE>

                  SUMMARY COMPENSATION TABLE
<CAPTION>
                                        Long-Term Compensation Awards-
                                        ------------------------------
                                        # of Securities Underlying
Name/Position         Year    Salary    Options
------------------    ----    --------  ------------------------------
<S>                   <C>     <C>       <C>
Ramin Abrishamian/    1998    $ 83,700  1,500,000
      Former CEO

</TABLE>

<TABLE>
                               OPTION GRANTS IN 1998
                                (Individual Grants)
<CAPTION>
                   # of Securities    Percent of      Exercise    
                   Underlying Options Total Options   or Base       Expiration
Name               Granted            Granted in 1998 Price ($/sh.) Date
------------------ ------------------ --------------- ------------- --------------
<S>                <C>                <C>             <C>           <C>
Ramin Abrishamian  1,500,000          31%             $.10          April 24, 2000

</TABLE>

                              -13-

<PAGE>

<TABLE>
                           AGGREGATED
                     YEAR-END OPTION VALUES
<CAPTION>
                    # of Unexercised     Value of Unexercised
                    Options as of        In-The-Money Options
Name                December 31, 1998    as of December 31, 1998
------------------  ------------------   -----------------------
<S>                 <C>                  <C>
Ramin Abrishamian   1,500,000            $15,000

</TABLE>

     No options were exercised by executive officers during 1998.
All  options  listed in the table above were  exercisable  as  of
December 31, 1998.  The value of unexercised in-the-money options
at  December 31, 1998 is based on the difference between $.11 per
share  (the market price at December 31, 1998) and the per  share
option  exercise  price, multiplied by the number  of  shares  of
common stock underlying such options.

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

Simple Retirement Plan

     Effective  February  1, 1997 the Company  adopted  a  Simple
Retirement Plan under Internal Revenue Code Section 408(p).   The
plan  is  a  defined contribution plan, which covers all  of  the
Company's  employees who receive at least $5,000 of  compensation
for  the  preceding  year.   The plan permits  elective  employee
contributions.   The Company makes a nonelective contribution  of
2%  of each eligible employee's compensation for each year.   The
Company's  contributions to the plan for 1997 were $5,483,  which
is  expensed in the 1997 statement of operations.  The  Company's
contributions to the plan for 1998 were $6,979, which is expensed
in the 1998 statement of operations.

Stock Option Plan

    The  1997  Stock Option Plan (the "Plan"), which was approved
by  the stockholders on November 17, 1997, and which succeeds the
1986  Stock Option Plan, provides for the issuance of options  to
acquire  up to 20,000,000 shares of Common Stock of the  Company.
The  1986 Stock Option Plan provided 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 of  the  Board  of
Directors.
    
    The  purpose of the Plan is to advance the interests  of  the
Company  by encouraging and enabling the acquisition of a  larger
personal  proprietary interest in the Company by  directors,  key
employees,  consultants  and  independent  contractors  who   are
employed  by,  or  perform  services for,  the  Company  and  its
subsidiaries  and  upon  whose judgment  and  keen  interest  the
Company  is largely dependent for the successful conduct  of  its
operations.  It is also expected that the opportunity to  acquire
such  a  proprietary  interest will enable the  Company  and  its
subsidiaries to attract and retain desirable personnel, directors
and other service providers.
    
    Options  are exercisable at such rates and times  as  may  be
fixed by the committee.  Options also become exercisable in  full
upon  (i)  the holder's retirement on or after his 65th birthday,
(ii)  the  disability  or  death of the holder,  (iii)  or  under
special  circumstances as determined by the  Committee.   Options
generally terminate on the tenth business day following cessation
of  service  as an employee, director, consultant or  independent
contractor.
    
    Options  may  be exercised by payment in full of  the  option
price in cash or check, or by delivery of previously-owned shares
of  common stock having a total fair market value on the date  of
exercise  equal to the option price, or by such other methods  as
permitted by the Committee.
    
                               -14-
<PAGE>
    
    The  Plan  contains anti-dilution provisions in the event  of
certain corporate transactions.
    
    The  Board  of  Directors may at any time withdraw  from,  or
amend   the   Plan  and  any  options  not  heretofore   granted.
Stockholder  approval is required to (i) increase the  number  of
shares  issuable  under  the plan, (ii) increase  the  number  of
options  which  may be granted to any individual during  a  year,
(iii)  or  change  the class of persons to whom  options  may  be
granted.   No  options  shall be granted  under  the  Plan  after
September 19, 2007.
    
    Options  to  acquire 6,947,719 shares of  common  stock  have
been  granted  under  the 1986 and 1997 Stock  Option  Plans  and
6,327,885  options are outstanding under the  Plans.    4,947,719
options were granted during 1998.
    
Compensation of Directors

    During  1997  and  1998, Directors were not  compensated  for
their Board or Committee activities.

                               -15-

<PAGE>

ITEM  11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND
           MANAGEMENT

    The  following table sets forth information as  of  March  1,
1999  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 or beneficially 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
                                   --------------------------
                                   Number of
Name and Address                   Shares          Percent *
------------------------           -------------   ----------
<S>                                <C>             <C>
Joseph C. Abeles                   15,012,789(1)      43
  c/o Abel Associates
  220 E. 42nd Street
  New York, NY  10017

John A. Cenerazzo                   1,912,456(2)       8
  Stokesay Castle Lane
  Reading, PA  19606

Stephen F. Hiu                      3,030,500(3)      12
  9110 Red Branch Road
  Columbia, MD  21045

Thomas L. Kempner                  44,241,169(4)      69
  c/o Loeb Partners Corporation
  61 Broadway
  New York, NY  10006

Michael G. Kimelman                 7,218,950(5)      26
  c/o Kimelman & Baird, LLC
  100 Park Avenue, Suite 1105
  New York, NY  10017

Sidney R. Knafel                   41,368,264(6)      68
  c/o SRK Management
  126 East 56th Street
  New York, NY  10022

Patrick F. Monahan                  1,756,900(7)       7
  9110 Red Branch Road
  Columbia, MD  21045

All Directors and Officers        114,541,028(8)      89
  as a Group (7 persons)

Others

Ramin Abrishamian                  1,500,000(9)        6
Jerry Finkelstein                  1,000,000(10)       5
Fraydun Manocherian                7,500,000(11)      26


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

                               -16-
<PAGE>

1.    Includes  the  following:  2,109,404 shares;  2,250  shares
  issuable upon the conversion of 1,125 shares of preferred stock;
  3,782,083  shares  issuable  upon the conversion of $311,663 of 
  long-term notes issued  by  the Company; and 9,093,427 warrants 
  held by Mr. Abeles.    Also  includes 4,140 shares, and  12,500  
  shares issuable  upon  conversion  of 6,250 shares of preferred 
  stock and 8,985 warrants held by Mr. Abeles' wife.

2.    Includes  the  following:  283,458 shares;  32,750  options
  currently  exercisable;  492,321  shares  issuable   upon   the
  conversion of $40,622 of long-term notes issued by the Company;
  and 1,103,513  warrants  held  by Mr. Cenerazzo.  Also includes 
  414 shares held by Mr. Cenerazzo's wife.

3.    Includes  the following:  25,500 shares; 2,955,000  options
  currently exercisable; and 50,000 warrants  held by Dr. Hiu.

4.    Includes 386,972 shares;  and 536,920 warrants held by  Mr.
  Kempner.  Also includes 94,000 shares, 1,616,066 shares subject
  to  the conversion of $140,872 of long-term notes issued by the
  Company; and 16,055,091 warrants held by a  trust  under  which 
  Mr.Kempner  is  one  of  two trustees and the sole beneficiary.
  Also includes  54,000   shares;  1,616,067  shares  subject  to
  the conversion  of  $140,873  of  long-term notes issued by the
  Company; and  16,033,487  warrants held a trust under which Mr.
  Kempner  is  one  of  two  trustees  and  one of  his  brothers
  is  the  sole  beneficiary.  Also  includes  203,880 shares and
  110,095 warrants held  by  a  trust  under which Mr. Kempner is
  one of two trustees and  another  of  his  brothers is the sole
  beneficiary. Also includes  1,482,987  shares; 1,147,667 shares
  subject to the conversion of $79,200 of long-term  notes issued
  by the Company; and  4,622,846  warrants  held  by trusts under
  which Mr. Kempner is one  of  two  trustees  and is a one-third
  beneficiary.   Also includes 182,526 shares and 98,565 warrants
  held by Mr. Kempner's wife.

5.    Includes  911,360  shares; 804,568 shares  subject  to  the
  conversion of $63,070 of long-term notes issued by the Company;
  and 5,503,022 warrants.

6.    Includes 2,044,716 shares; 3,715,706 shares subject to  the
  conversion of $306,200 of long-term notes issued by the Company;
  and 35,607,842 warrants.

7.     Includes   24,400  shares;  1,682,500  options   currently
  exercisable; and 50,000 warrants held by Mr. Monahan.

8.    Includes 7,807,757 shares; 14,750 shares issuable upon  the
  conversion  of  7,375  shares  of  preferred  stock;  4,670,250
  options currently   exercisable;  13,174,478  shares   issuable
  upon the conversion  of  $5,656,030 of long-term  notes  issued
  by the Company; and 88,873,793 warrants.

9.   Includes  1,500,000  options  currently exercisable, held by
  Mr. Abrishamian.

10.  Includes 1,000,000 shares held by Mr. Finkelstein.

11.  Includes 7,500,000 warrants held by Mr. Manocherian.

</TABLE>

                                -17-
<PAGE>

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    On   December  14,  1995  the  shareholders  of  the  Company
approved cancellation of promissory notes and warrants issued  to
certain  directors  of the Company between August  25,  1993  and
March  7, 1995 and the conversion of these notes to common  stock
of  the  Company at $.125 per share and warrants to  purchase  an
equal  amount of common stock of the Company at $.125 per  share,
originally  expiring  April 3, 1998, which was  the  fair  market
value  of  the  common stock as quoted on April  3,  1995.   Such
warrants  were  extended during 1998 and their new expiration  is
April 3, 2005.
    
    Beginning  November 16, 1995 and continuing  through  May  8,
1997,  the  Company issued promissory notes to certain  directors
for  aggregate consideration of $1,082,500.  These notes  specify
that  at any time prior to repayment the holder has the right  to
convert  the  notes  to  common stock of the  Company  at  prices
ranging  from $0.05 per share to $0.135 per share, based  on  the
market  price of common shares at the issue date.  In  connection
with  such  issuance, the holders also received warrants  for  an
equivalent  number of shares at the equivalent price  per  share.
The warrants expire ten years from the issue of the notes.  These
notes  were modified in conjunction with the 1998 rights offering
and  are  now due on March 31, 2003.  The notes bear interest  at
the prime rate.

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

<TABLE>
<CAPTION>
                                                     Conversion/
                                   Note              Warrant
Issue Date                         Amount            Price/Share
--------------------               ----------        ------------
<S>                                <C>               <C>
November 16, 1995                  $   40,000        $   0.050
December 22, 1995                      60,000            0.050
                                   ----------
Total issued in 1995                  100,000
                                   ----------

February 14, 1996                      70,000            0.100
March 11, 1996                         70,000            0.090
April 23, 1996                         36,000            0.060
May 9, 1996                            71,000            0.060
June 7, 1996                           70,000            0.050
July 24, 1996                          90,000            0.115
September 24, 1996                     70,000            0.125
November 15, 1996                      70,000            0.090
December 11, 1996                      70,000            0.090
                                   ----------
Total issued in 1996                  617,000
                                   ----------

January 14, 1997                       70,000            0.070
February 24, 1997                     100,000            0.110
March 31, 1997                         75,000            0.100
April 3, 1997                          24,500            0.100
May 8, 1997                            80,000            0.135
May 8, 1997                            16,000            0.135
                                   ----------
Total issued in 1997                  365,500
                                   ----------
TOTAL                              $1,082,500
                                   ==========

</TABLE>
                                  -18-
<PAGE>


     Beginning  June 5, 1997 and continuing through  December  5,
1997,  the  Company issued promissory notes to certain  directors
and  another  investor for aggregate consideration of $1,875,000.
These  notes  specified that at any time prior to  repayment  the
holder had the right to convert the notes to common stock of  the
Company  at  $.10  per share.  These notes bore interest  at  8%.
These  notes  were  due on March 31, 1998 and  were  repaid  with
proceeds from the Rights Offering, as described below.

    The Company distributed, to holders of record on February 13,
1998,  transferable rights to subscribe for and purchase 0.54  of
a Unit for each share of common share or equivalent owned by such
holder.  Each Unit entitled the holder to receive $0.10 principal
amount  of  8% Notes due March 31, 2003 and warrants to  purchase
one  share  of  common stock at an exercise price  of  $0.10  per
share.   Common  shares  or equivalents  include:  Common  Stock,
Preferred  Stock,  unexpired warrants, options  exercisable,  and
convertible  notes  outstanding.  The Company  raised  $5,000,000
through   this  Rights  Offering,  which  was  fully  subscribed.
Certain directors and another investor, agreed to purchase  Units
equal to the difference between $2,000,000 and the proceeds  from
the  Rights Offering; however, concurrently therewith the Company
was required to repay $1,875,000 in promissory notes.  The Rights
Offering  expired  March  31,  1998.   In  consideration  of  the
investors  agreeing to subscribe to Units such that  the  Company
receives  at  least  $2,000,000, the  Company  issued  additional
warrants  to  these  investors to purchase 20,000,000  shares  of
Common  Stock,  exercisable at $0.10 per share and  expiring  ten
years after issue.

     The  Company's stockholders purchased a total of  50,000,000
Units,  including additional Units available to fully subscribing
shareholders  as  a  result  of  unexercised  rights   of   other
shareholders, under the terms of the Rights Offering. The  Rights
Offering  period  expired March 31, 1998.   The  Company's  gross
proceeds  from  the  Rights Offering were  $5,000,000,  of  which
$1,875,000 was used to repay outstanding promissory notes due  on
March  31, 1998; and $950,000 was used to repay demand promissory
notes  issued from January 1, 1998 through March 31,  1998.   The
Company  incurred fees and costs of $211,713 in relation  to  the
Rights  Offering, resulting in net proceeds after fees  and  debt
repayment  of  $1,963,287.  The Company  recorded  $5,000,000  in
principal  of  new  notes issued to holders of subscribed  units,
which are payable five years from date of issue and bear interest
at  8%.   In connection with the Rights Offering, the holders  of
subscriber  Units  also received warrants to purchase  50,000,000
shares of common stock expiring ten years from date of issue  and
exercisable at $.10 per share.

     During 1998, the Company also issued 4,000,000 warrants,  at
$.10  per  share,  to  its Chairman of the Board;  and  9,500,000
warrants,  at $.10 per share, to certain directors who  were  the
holders of $950,000 in demand notes issued during 1998.

                              -19-
<PAGE>

                             PART IV

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

A.1. The  following financial  statements  relating to 1998  and
     1997 are filed as a part of this Report:
    
     Independent Auditors' Report.
     Balance Sheet as of December 31, 1998.
     Statements  of Operations for the years ended  December  31,
          1998 and December 31, 1997.
     Statements of Stockholders' Deficit  for  the  years  ended
          December 31, 1998 and December 31, 1997.
     Statements of  Cash Flows for the years ended  December  31,
          1998 and December 31, 1997.
     Notes to Financial Statements.

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

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

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

    4.1 Form    of   Variable   Rate   Convertible   Subordinated
        Debenture  Due 2002 (Class A), constituting  Exhibit  4.4
        to  Registration Statement No. 33-5441 on  Form  S-1,  is
        hereby incorporated herein by reference.
    
    10.1 Form  of  Conversion  and Exchange Agreement used in May 
        1988  in  connection  with the conversion and exchange by
        certain  holders  of  shares  of  Preferred   Stock   for
        Common Stock and Warrants, constituting Exhibit 10.19  to
        Registration  Statement  No.  33-5441  on  Form  S-1,  is
        hereby incorporated herein by reference.
    
    10.2 Exchange Agreement made as of July 1, 1988  between  the
        Registrant and Essex Industrial Chemicals, Inc., now  Dow
        Chemical  Company, Inc. with respect to the  exchange  of
        187,500  shares  of  Preferred  Stock  for  a  Debenture,
        constituting Exhibit 10.21 to Registration Statement  No.
        33-5441  on  Form S-1, is hereby incorporated  herein  by
        reference.

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

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

    10.5  Letter  Agreement executed May 11, 1995 between  Archer
        Daniels  Midland,  Inc.  and  IGENE  Biotechnology, Inc.,
        along  with  November  11, 1995  Amendment,  constituting
        Exhibit 10.11 to  the  Registrant's Report on Form 10-KSB
        for  the  year  ended  December  31, 1995 is incorporated 
        herein by reference.
    
    10.6  Agreement  of Lease effected December 15, 1995  between
        Columbia   Warehouse   Limited   Partnership   and  IGENE
        Biotechnology,  Inc.  constituting  Exhibit  10.13 to the
        registrant's report on Form  10-KSB  for  the  year ended
        December 31, 1995 is incorporated herein by reference.

                                     -20-
<PAGE>


    10.7 Toll  Manufacturing  Agreement  effective  as of June 24,
        1997 between Igene Biotechnology, Inc. and Fermic, S.A. de 
        C.V., constituting Exhibit 10.7 to the Registrant's Report 
        on Form 10-KSB for  the  year  ended December 31, 1997, is
        incorporated  herein  by  reference.   (Portions  of  this
        exhibit  have  been  omitted  pursuant  to  a  request for 
        confidential treatment.)

    21.  Subsidiaries

                None

    27.  Financial Data Schedule
    
    
 (b)  No  reports on Form 8-K were filed during the Fourth  Quarter
      of 1998.

                                    -21-
<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.   These financial
statements  are  the responsibility of the Company's  management.
Our  responsibility is to express an opinion on  these  financial
statements based on our audits.

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

In  our  opinion,  the  financial statements  referred  to  above
present  fairly, in all material respects, the financial position
of  IGENE  Biotechnology, Inc. as of December 31,  1998  and  the
results of its operations and its cash flows for the years  ended
December  31, 1998 and 1997 in conformity with generally accepted
accounting principles.

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




                         BERENSON & COMPANY LLP



March 5, 1999
New York, NY

                                -22-
<PAGE>

                     IGENE Biotechnology, Inc.
                          Balance Sheet
                        December 31, 1998


ASSETS

CURRENT ASSETS

  Cash and cash equivalents                                 $   364,796
  Inventory                                                     870,260
  Supplies                                                       11,145
  Loan Receivable (note 3)                                      250,783
  Prepaid expenses                                               83,933
                                                            -----------
     TOTAL CURRENT ASSETS                                     1,580,917

OTHER ASSETS
  Property and equipment, net (note 4)                          370,057
  Debt issue costs (note 7)                                     179,956
  Security deposits                                              10,600
                                                            -----------
     TOTAL ASSETS                                           $ 2,141,530
                                                            ===========

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable and accrued expenses (note 5)            $   228,549
  Debenture interest payable (note 6)                            45,000
                                                           ------------
     TOTAL CURRENT LIABILITIES'                                 273,549

LONG-TERM DEBT
  Notes payable (note 7)                                      6,092,500
  Variable rate subordinated debenture (notes 6 and 7)        1,500,000
  Accrued interest (note 7)                                     364,950
                                                           ------------
     TOTAL LIABILITIES                                        8,230,999
                                                           ------------

COMMITMENTS AND CONTINGENCIES (Notes 11, 12, 14 and 15)

REDEEMABLE PREFERRED STOCK
  Carrying amount of redeemable preferred stock, 8% cumulative,
  convertible, voting, series A, $.01 par value per share.
  Stated value $14.56 per share.   Authorized 1,312,500 shares;
  issued and outstanding 29,592 shares. Redemption amount
  $430,860 (notes 8 and 9)                                      430,860

STOCKHOLDERS' DEFICIT (notes 8 and 9)
  Common stock -- $.01 par value per share.  Authorized
     250,000,000 shares; issued and outstanding
     21,854,173 shares                                          218,542
  Additional paid-in capital                                 18,738,038
  Deficit                                                   (25,476,909)
                                                           ------------
     TOTAL STOCKHOLDERS' DEFICIT                             (6,520,329)
                                                           ------------
     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT           $  2,141,530
                                                           ============
The  accompanying  notes are an integral part  of  the  financial
statements.
                              -23-
<PAGE>

<TABLE>

                    IGENE Biotechnology, Inc.
                    Statements of Operations
                                
                                
                                
<CAPTIONS>                                
                                                   Years ended December 31,    
                                                   1998                1997
                                             ---------------     ---------------
<S>                                          <C>                 <C>
Sales                                        $      203,860      $       14,394
Cost of sales                                       809,288               9,963
                                             ---------------     ---------------
    Gross profit (loss)                            (605,428)              4,431
Technology licensing income                          14,235                 ---
                                             ---------------     ---------------
    Net revenue                                    (591,193)              4,431
                                             ---------------     ---------------
Operating expenses:

    Marketing and selling                             9,862               8,741
    Research, development and pilot plant           452,755             521,669
    General and administrative                      502,564             432,842
    Litigation expenses (note 12)                   399,492             658,185
                                             ---------------     ---------------
    Total operating expenses                      1,364,673           1,621,437
                                             ---------------     ---------------
    Operating loss                               (1,955,866)         (1,617,006)

Other income (expenses):

    Income from renegotiation of liabilities            ---              51,204
    Miscellaneous                                    (3,553)              4,283
    Interest expense (net of interest income 
	of $74,565 and $2, respectively, 
      in 1998 and 1997)                            (540,275)           (326,563)
                                             ---------------     ---------------
    Net Loss                                     (2,499,694)         (1,888,082)

Deficit at beginning of year                    (22,977,215)        (21,089,133)
                                             ---------------     ---------------
Deficit at end of year                       $  (25,476,909)     $  (22,977,215)
                                             ===============     ===============
Net loss per common share (note 10)          $        (0.12)     $        (0.10)
                                             ===============     ===============
</TABLE>

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

                              -24-
<PAGE>

<TABLE>
                                  IGENE Biotechnology, Inc.
                            Statements of Stockholders' Deficit
                                
<CAPTION>
                                    Redeemable Preferred Stock       Preferred Stock
                                    --------------------------  --------------------------
                                    # shares          Amount    # shares          Amount
                                    ---------       ----------  ---------       ----------
<S>                                 <C>             <C>         <C>             <C>
Balance at December 31, 1996          35,842        $ 475,982    187,500        $   1,875

Issuance of common stock in lieu
  of cash of in payment of
  interest on variable rate
  subordinated debenture (note 6)        ---              ---        ---              ---

Issuance of common stock through
  exercise of employee stock options     ---              ---        ---              ---

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

Conversion of redeemable preferred
  stock into common stock             (6,250)         (86,000)       ---              ---

Net loss for 1997                        ---              ---        ---              ---
                                    ---------        ---------  ---------        ---------
Balance at December 31, 1997          29,592          411,920    187,500            1,875

Issuance of common stock in lieu
  of cash in payment of interest on
  subordinated debenture (note 6)        ---              ---        ---              ---

Cumulative undeclared dividends
  on redeemable preferred stock          ---           18,940        ---              ---

Conversion of preferred stock
  into common stock                      ---              ---   (187,500)          (1,875)

Issuance of common stock in lieu of
  cash in payment of legal fees          ---              ---        ---              ---

Exercise of warrants                     ---              ---        ---              ---

Capital contribution - forgiveness of
  interest on promissory notes           ---              ---        ---              ---

Net loss for 1998                        ---              ---        ---              ---
                                    ---------        ---------  ---------        ---------
Balance at December 31, 1998          29,592         $430,860        ---         $    ---
                                    =========        =========  =========        =========

</TABLE>

The accompanying notes are an integral part of the financial
statements.
                               -25-
<PAGE>

<TABLE>

                                  IGENE Biotechnology, Inc.
                            Statements of Stockholders' Deficit
                                        (Continued)
                                
<CAPTION>                                  Common Stock      Additional                 Total
                                      ---------------------- Paid-in                    Stockholders'
                                      Shares      Amount     Capital      Deficit       Deficit
                                      ----------- ---------- ------------ ------------- -------------
<S>                                   <C>         <C>        <C>          <C>           <C>     
Balance at December 31, 1996          18,631,139  $ 186,311  $17,971,220  $(21,089,133) $ (2,929,727)

Issuance of common stock in lieu of
  cash in payment of interest
  on variable rate subordinated
  debenture (note 6)                      80,000        800      179,200           ---       180,000

Issuance of common stock through
  exercise of employee stock options     482,834      4,829       19,313           ---        24,142

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

Conversion of redeemable preferred
  stock into common stock                 12,500        125       85,875           ---        86,000
 
Net loss for 1997                            ---        ---          ---    (1,888,082)   (1,888,082)
                                      ----------- ---------- ------------ ------------- -------------
Balance at December 31, 1997          19,206,473    192,065   18,233,670   (22,977,215)   (4,549,605)

Issuance of common stock in lieu
  of cash in payment of interest on
  subordinated debenture (note 6)         80,000        800      179,200           ---       180,000

Cumulative undeclared dividends
  on redeemable preferred stock              ---        ---      (18,940)          ---       (18,940)

Conversion of preferred stock
  into common stock                      375,000      3,750       (1,875)          ---           ---

Issuance of common stock in lieu of
  cash in payment of legal fees        2,190,000     21,900      140,100           ---       162,000

Exercise of warrants                       2,700         27          243           ---           270

Capital contribution - forgiveness of
  interest on promissory notes               ---        ---      205,640           ---       205,640

Net loss for 1998                            ---        ---          ---    (2,499,694)   (2,499,694)
                                      ----------- ---------- ------------ ------------- -------------
Balance at December 31, 1998          21,854,173  $ 218,542  $18,738,038  $(25,476,909) $( 6,520,329)
                                      =========== ========== ============ ============= =============

</TABLE>

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

                              -26-
<PAGE>

<TABLE>

                                  IGENE Biotechnology, Inc.
                                  Statements of Cash Flows
                    
<CAPTION>                    
                                                         Years ended December 31,
                                                          1998              1997
                                                    --------------    --------------
<S>                                                 <C>               <C>
Cash flows from operating activities:
  Net loss                                          $  (2,499,694)    $  (1,888,082)
  Adjustments to reconcile net loss to net
      Cash used by operating activities:
      Depreciation                                         43,438             7,821
      Amortization of debt issue costs                     31,757               ---
      Loss on sale of assets                                3,553               ---
      Interest on debenture paid 
          in shares of common stock                       180,000           180,000
      Legal fees paid in shares of common stock           162,000               ---
      Decrease (increase) in:
          Accounts receivable                              14,494            (4,498)
          Inventory                                      (870,260)              ---
          Prepaid expenses and supplies                   (90,368)            6,068
      Increase (decrease) in:
        Accounts payable and other accrued expenses       294,003           214,338
                                                    --------------    --------------
            Net cash used in operating activities      (2,731,077)       (1,484,353)
                                                    --------------    --------------
Cash flows from investing activities:
  Proceeds from disposal of equipment                      11,482               ---
  Capital expenditures                                   (131,525)         (285,356)
  Repayments from (loan to) contract manufacturer         249,217          (500,000)
                                                    --------------    --------------
           Net cash provided by (used in) 
             investing activities                         129,174          (785,356)
                                                    --------------    --------------
Cash flows from financing activities:
      Repayments by stockholders                           28,594               ---
  Proceeds from issuance of common stock                      270            24,142
  Proceeds from rights offering                         1,963,287               ---
  Issuance of other debt                                  950,000         2,228,776
                                                    --------------    --------------
           Net cash provided by financing activities    2,942,151         2,252,918
                                                    --------------    --------------
           Net increase (decrease)in cash 
             and cash equivalents                         340,248           (16,791)

Cash and cash equivalents -   beginning of the year        24,548            41,339
                                                    --------------    --------------
Cash and cash equivalents -   end of the year       $     364,796     $      24,548 
                                                    ==============    ==============
Supplementary disclosure and cash flow information:
  Cash paid during the year for interest            $         924     $         ---
  Cash paid during the year for income taxes                  ---               ---

Non-cash investing and financing activities:

  During  1998  and  1997, the Company issued  80,000  shares  of
common  stock, in each year, in payment of interest on a variable
rate subordinated debenture.  If paid in cash, the interest would
have  been  payable at 12% during 1998 and 1997, or $180,000  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
1998  and  1997  at $2.25 per share, or $180,000, in  each  year.
(See also note 6)
                              -27-
<PAGE>
                    IGENE Biotechnology, Inc.
                    Statements of Cash Flows
                           (continued)

Non-cash investing and financing activities: (continued)
  
  During  1998 and 1997 the Company recorded dividends in arrears
on  8%  redeemable preferred stock at $.64 per share  aggregating
$18,940  and  $21,938, respectively, which has been removed  from
paid-in  capital  and  included in  the  carrying  value  of  the
redeemable preferred stock.  (See also note 8)

  During  1997  the  Company issued promissory notes  to  certain
directors of the Company in the face amount of $2,365,500.  As of
December  31, 1997 $2,228,776 had been received in cash  proceeds
by  the Company.  $136,724 remained due from certain directors of
the  Company for these promissory notes as of December 31,  1997.
(See also note 7)

  During  the  year ended December 31, 1998, the  Company  issued
notes   payable   of   $5,000,000  through  a  rights   offering.
Stockholders  purchased  rights, using $1,875,000  in  promissory
notes  and $950,000 of demand notes due to the Company, resulting
in net cash proceeds of $1,963,287 which is after fees associated
with  the  offering  of $211,713. These related  fees  have  been
capitalized  as debt issue costs and will be amortized  over  the
term  of the debt.  As part of this transaction, the Company also
recorded  forgiveness of interest on certain promissory notes  of
$205,640 as additional paid-in capital.

  During  the year ended December 31, 1998, the Company cancelled
certain promissory notes payable to, and related amounts due from
a   stockholder  aggregating  $125,000  by  agreement  with   the
stockholder.

  During  the year ended December 31, 1998, the holder of 187,500
shares of preferred stock (par value of $.01 per share or $1,875)
as   to  which  mandatory  redemption  rights  had  been  waived,
converted the preferred stock into 375,000 shares of common stock
(par  value  of $0.01 per share or $3,750).  Paid-in capital  and
preferred stock have each been reduced by $1,875.

  During  the year ended December 31, 1998, the Company satisfied
prior  years' accounts payable of $10,000 by issuing  $10,000  in
notes payable.

</TABLE>

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

                             -28-
<PAGE>

                    IGENE Biotechnology, Inc.
                  Notes to Financial Statements
                                

(1) Nature of Business

    IGENE  Biotechnology,  Inc.  (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.
    
    Inventories
    
    Inventory,  stated at lower of cost, on a first-in  first-out
    basis,  or  market  value, represents AstaXin(R) manufactured
    and held for sale, as follows:
    
      Raw materials          $             ---
      Work-in-process                      ---
      Finished goods                   870,260
                             ------------------
      Total inventory        $         870,260
                             ==================

    Inventory  has been reduced by approximately $253,000  as  of
    December  31,  1998 to reflect the excess of  inventory  cost
    over market value.

    Research and development costs

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

    Depreciation

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

    Estimates

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

                               -29-
<PAGE>

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

(2) Summary of Significant Accounting Policies (continued)
    
    Fair value of financial instruments

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

    Sales Returns

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

    The   Company   records  interest  on   its   variable   rate
    subordinated debenture (see also note 6) at a level  rate  of
    8%  through  October  1, 1996 and at 12%  thereafter;  rather
    than  at  the  fair-market value of shares  which  have  been
    issued  in  lieu of cash payments of interest.   This  is  an
    estimated  average  rate  based  on  the  Company's  plan  to
    continue  (as  it has since October 1, 1989) to pay  interest
    on  the  debenture by issuing shares of common stock  at  the
    higher of $2.25 per share or the current market value of  the
    Company's  shares,  as  allowed  under  the  terms   of   the
    debenture.   If  the  market value  of  the  Company's  stock
    remains  below  $2.25  per  share  (during  the  period  from
    October  1989  through December 1998 its  highest  price  was
    $1.25)  the  Company can continue to issue stock in  lieu  of
    cash payments at $2.25 per share.
    
    Accounting for stock based compensation

    The   Company  applies  APB  Opinion  25  in  accounting  for
    employee  stock  option  plans  (note  9).   Accordingly,  no
    compensation cost has been recognized in 1998 or  1997.   Had
    compensation  cost  been determined  on  the  basis  of  FASB
    Statement 123, the following changes would have resulted:

<TABLE>
<CAPTION>
                                      1998               1997
                                 --------------	    --------------
    <S>                          <C>                <C>
    Net loss:
      As reported                $  (2,499,694)     $  (1,888,082)
      Pro forma                     (2,572,480)        (1,888,082)

    Net loss per common share:
      As reported                $        (.12)     $        (.10)
      Pro forma                           (.12)              (.10)

</TABLE>

    The  fair value of compensation was computed using an option-
    pricing  model, which took into account the following factors
    as of the grant date:
    
    -    The exercise price and expected life of the option.
    -    The current price of the stock and its expected volatility.
    -    Expected dividends, if any.
    -    The  risk-free  interest  rate for the expected term of the
         option  using  Treasury  Note  rates  with a remaining term 
         equal to the expected life of the options.

                             -30-
<PAGE>    
    
                    IGENE Biotechnology, Inc.
                  Notes to Financial Statements
                           (continued)
    
    
(3) Loan Receivable

    During  1997,  the Company loaned $500,000  to  its  contract
    manufacturer of AstaXin(R) for the purchase of  manufacturing
    equipment needed for the production of AstaXin(R).  The  loan
    is  payable  over  23 months and matures November  1999  with
    interest  at  10%.  As of December 31, 1998, the  balance  of
    $250,783 is classified as a current asset.

(4) Property and Equipment

    Property  and equipment are stated at cost and are summarized
    as follows:

    Laboratory equipment and fixtures                 $  127,433
    Pilot plant equipment and fixtures                    93,228
    Manufacturing equipment                              244,557
    Idle equipment                                        56,150
    Office  furniture and fixtures                        29,335
                                                      -----------
                                                         550,703
    Less  accumulated depreciation                      (180,646)
                                                      -----------
                                                      $  370,057
                                                      ===========

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

(5) Accounts Payable and Accrued Expenses

    Accounts  payable  and  accrued  expenses  consist   of   the
    following:

    Accounts payable, trade                           $  206,049
    Audit fees                                            22,500
                                                      -----------
                                                      $  228,549
                                                      ===========


(6) Variable Rate Subordinated Debenture

    In  July  1988,  the Company and a principal  holder  of  the
    Company's  redeemable  preferred  stock  agreed  to  exchange
    187,500  shares  of  the Company's 8% cumulative  convertible
    preferred  stock,  Series  A for a $1,500,000  variable  rate
    convertible subordinated debenture due 2002, Class A.
    
    The  debenture  bears  interest at a rate  of  8%  per  annum
    through  September 30, 1996 and thereafter at a rate  of  12%
    per  annum.  Interest was payable in cash through October  1,
    1989.   Thereafter, the debenture agreement provides that  at
    the  option  and  at the discretion of the Company,  interest
    may  be  paid in shares of the Company's common stock at  the
    greater  of $2.25 per share or the average market  value  per
    share.   During  1998  and  1997 the  Company  issued  80,000
    shares,  in  each  year, of its common stock  as  payment  of
    interest on the debenture. The debenture is convertible  into
    common stock of the Company at any time at the option of  the
    holder  at  an initial rate of $4 per share of common  stock.
    The  debenture is redeemable at the option of the Company  at
    any   interest  payment  date  at  par  value  plus   accrued
    interest.   Upon maturity of the debenture, the  Company,  at
    its  option, may repay the remaining principal in  shares  of
    8%  cumulative convertible preferred stock, at a rate  of  $8
    per  preferred  share.  Accrued interest of  $45,000  through
    December 31, 1998 is recorded in these financial statements.

                               -31-
    <PAGE>

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


(7) Notes Payable

    Beginning  November 16, 1995 and continuing  through  May  8,
    1997,   the  Company  issued  promissory  notes  to   certain
    directors  for aggregate consideration of $1,082,500.   These
    notes  specify that at any time prior to repayment the holder
    has  the  right to convert the notes to common stock  of  the
    Company at prices ranging from $0.05 per share to $0.135  per
    share,  based  on the market price of common  shares  at  the
    issue  date.   In connection with such issuance, the  holders
    also received warrants for an equivalent number of shares  at
    the  equivalent  price  per share. The  warrants  expire  ten
    years  from  the  issue  of  the  notes.   These  notes  were
    originally  demand notes, but were modified in February  1998
    to  mature  on March 31, 2003 and bear interest at the  prime
    rate.
    
    The  notes are detailed, by issue date, and by conversion and
    warrant price, as follows:

<TABLE>
<CAPTION>
                                                  Conversion
                                   Note           Warrant
          Issue Date               Amount         Price/Share
          --------------------     -----------    -----------
          <S>                      <C>            <C>
          November 16, 1995        $   40,000     $    0.050
          December 22, 1995            60,000          0.050
                                   -----------
          Total issued in 1995        100,000
                                   -----------

          February 14, 1996            70,000          0.100
          March 11, 1996               70,000          0.090
          April 23, 1996               36,000          0.060
          May 9, 1996                  71,000          0.060
          June 7, 1996                 70,000          0.050
          July 24, 1996                90,000          0.115
          September 24, 1996           70,000          0.125
          November 15, 1996            70,000          0.090
          December 11, 1996            70,000          0.090
                                   -----------
          Total issued in 1996        617,000
                                   -----------

          January 14, 1997             70,000          0.070
          February 24, 1997           100,000          0.110
          March 31, 1997               75,000          0.100
          April 3, 1997                24,500          0.100
          May 8, 1997                  80,000          0.135
          May 8, 1997                  16,000          0.135
                                   -----------    
          Total issued in 1997        365,500
                                   -----------
          TOTAL                    $1,082,500
                                   ===========
</TABLE>

    Beginning  June  5, 1997 and continuing through  December  5,
    1997,   the  Company  issued  promissory  notes  to   certain
    directors  and  investors  for  aggregate  consideration   of
    $1,875,000. These notes specified that at any time  prior  to
    repayment  the holder had the right to convert the  notes  to
    common  stock of the Company at $.10 per share.  These  notes
    bore  interest  at 8% and were due on March  31,  1998.   All
    indebtedness  under  these  notes  was  repaid  and  canceled
    through  use  of  proceeds  from  the  Rights  Offering,   as
    described below.

                               -32-
<PAGE>
                                
                    IGENE Biotechnology, Inc.
                  Notes to Financial Statements
                           (continued)

(7)  Notes Payable (continued)

    The  Company distributed to holders of record on February 13,
    1998, transferable rights to subscribe for and purchase  0.54
    of  a Unit for each share of common share equivalent owned by
    such  holder.  Each Unit entitled the holder to receive $0.10
    principal amount of 8% Notes due March 31, 2003 and  warrants
    to  purchase  one share of common stock at an exercise  price
    of  $0.10  per  share. Common shares or equivalents  include:
    Common  Stock,  Preferred Stock, unexpired warrants,  options
    exercisable, and convertible notes outstanding.  The  Company
    raised  $5,000,000  through this Rights Offering,  which  was
    fully  subscribed. Concurrently therewith the Company  repaid
    $1,875,000  in promissory notes. The Rights Offering  expired
    March  31,  1998.   In  consideration  of  certain  investors
    agreeing  to  subscribe  to  Units  such  that  the   Company
    received  at least $2,000,000, the Company issued  20,000,000
    additional warrants to these investors, exercisable at  $0.10
    per share and expiring ten years after issue.
    
    On  January 13, February 2, February 23, March 10, and  March
    20,  1998 the Company issued non-convertible demand notes  to
    certain   directors   for  an  aggregate   consideration   of
    $950,000.   These loans bore interest at the prime  rate  and
    were  cancelled and repaid through use of proceeds  from  the
    rights offering.
    
    As of March 31, 1998, the Company's stockholders purchased  a
    total   of  50,000,000  Units,  including  additional   Units
    available  to fully subscribing shareholders as a  result  of
    unexercised rights of other shareholders, under the terms  of
    the  Rights  Offering.   The Rights Offering  period  expired
    March  31,  1998  and has not been extended.   The  Company's
    gross  proceeds from the Rights Offering were $5,000,000,  of
    which  $1,875,000  was  used to repay outstanding  promissory
    notes  due on March 31, 1998; and $950,000 was used to  repay
    demand  promissory notes issued from January 1, 1998  through
    March  31,  1998  as described above.  The  Company  incurred
    fees  and  costs  of  $211,713  in  relation  to  the  Rights
    Offering,  resulting  in net proceeds  after  fees  and  debt
    repayment of $1,963,287.  The Company recorded $5,000,000  in
    principal  of  new  notes  issued to  holders  of  subscribed
    units,  which are payable five years from date of  issue  and
    bear  interest at 8%. In connection with the Rights Offering,
    the  holders  of subscriber Units also received  warrants  to
    purchase  50,000,000  shares of  common  stock  expiring  ten
    years  from date of issue and exercisable at $.10 per  share.
    The  related  fees  and  costs  amounting  to  $211,713  were
    capitalized  as  debt issue costs, which are being  amortized
    over the term of the debt, which is 5 years, on the straight-
    line method.
    
    As  of December 31, 1998, these debt issue costs are shown in
    the financial statements as follows:
    
         Debt issue costs                  $   211,713
         Accumulated amortization              (31,757)
                                           ------------
                                           $   179,956
                                           ============

                               -33-
<PAGE>


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


(7)  Notes Payable (continued)

Notes Payable are summarized as follows as of December 31, 1998:

<TABLE>
<CAPTION>
                                                               Accrued
                                                Principal      Interest
                                                -------------  -------------
    <S>                                         <C>            <C>
    Long-term notes payable, bearing interest
        at prime, maturing March 31, 2003,
        convertible into common stock           $  1,082,500   $     64,950
    Long-term notes payable, bearing interest
        at 8%, maturing March 31, 2003             5,000,000        300,000
    Note payable to vendor, non-interest
        bearing, maturing December 31, 2000           10,000            ---
                                                -------------  -------------
                                                $  6,092,500   $    364,950
                                                =============  =============
</TABLE>
    
    Combined  aggregate amounts of maturities for  all  long-term
    borrowings are as follows for each of next five years:

                 Year                   Amount
                 -----               ------------
                 1999                $       ---
                 2000                     10,000
                 2001                        ---
                 2002                  1,500,000
                 2003                  6,082,500


(8) Redeemable Preferred Stock

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

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

    Shares of redeemable preferred stock are redeemable for  cash
    in  whole or in part at the option of the Company at any time
    at  the stated value plus accrued and unpaid dividends to the
    redemption  date.   Dividends  are  cumulative  and   payable
    quarterly on January 1, April 1, July 1 and October 1,  since
    January  1,  1988.   See  note  6  relating  to  exchange  of
    redeemable  preferred stock and note 9 relating to conversion
    of  redeemable  preferred  stock  and  waiver  of  redemption
    privileges.  Mandatory  redemption  is  required  by  October
    2002.   As  of  December  31, 1998, cumulative  dividends  in
    arrears  total $194,124($6.56 per share) and are included  in
    the carrying value of redeemable preferred stock.

                               -34-
<PAGE>

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

(9) Stockholders' Equity
    
    Options
    
    In  November of 1997 the stockholders approved the 1997 Stock
    Option  Plan  which succeeds the Company's 1986 Stock  Option
    Plan,  as  amended.   All  outstanding,  unexercised  options
    granted   under   the  1986  Plan  remain  outstanding   with
    unchanged  terms.   The number of shares issuable  under  the
    1997  Plan  is 20,000,000, and the number issuable under  the
    1986 Plan was 2,000,000.

    The   following   is  a  summary  of  options   granted   and
    outstanding  under  the  plans as of December  31,  1998  and
    1997:
    
<TABLE>    
<CAPTION>
                                         1998                    1997
                                 ----------------------  ----------------------
                                             Weighted                Weighted
                                             Average                 Average
                                             Exercise                Exercise
                                 Number      Price       Number      Price
                                 ----------  ----------  ----------  ----------
    <S>                          <C>         <C>         <C>         <C>
    Options outstanding
    and exercisable,
    beginning of year            1,670,750       $.050   2,153,584       $.050
    
    Options granted              4,947,719       $.099         ---         ---
    
    Options exercised                  ---         ---    (482,834)      $.050
    
    Options forfeited,
    or withdrawn with
    consent of holders            (290,584)      $.055         ---         ---
    
    Options expired                    ---         ---         ---         ---
                                 ----------  ----------  ----------  ----------    
    Options outstanding
    and exercisable,
    end of year                  6,327,885       $.077   1,670,750       $.050
                                 ==========  ==========  ==========  ==========

</TABLE>
    
    On  April  17, 1996 the Company decreased the exercise  price
    of  outstanding,  previously granted employee  stock  options
    issued  through  March 9, 1995 to $.05 per share,  which  was
    the then current fair market value.
    
    Warrants
    
    During  1997,  the  Company  issued  20,000,000  warrants  to
    purchase  common stock at $.10 per share to certain investors
    who  guaranteed subscriptions of at least $2,000,000  in  the
    Company's  Rights Offering of February 1998.  These  warrants
    expire  at  various  dates from June 5  through  December  5,
    2004.
                              -35-
<PAGE>    
    
    
    
                    IGENE Biotechnology, Inc.
                  Notes to Financial Statements
                           (continued)


(9) Stockholders' Equity (continued)

    During  1998,  the  Company  issued  50,000,000  warrants  to
    purchase  common  stock at $.10 per share  to  investors  who
    exercised rights in the rights offering of February 1998,  in
    connection  with the issuance of $5,000,000 in  debt.   These
    warrants  expire on March 31, 2003.  During  1998,  2,700  of
    these   warrants   were  exercised,  and  49,997,300   remain
    outstanding as of December 31, 1998.
    
    During  1998, the Company also issued 4,000,000 warrants,  at
    $.10  per  share to its Chairman of the Board; and  9,500,000
    warrants at $.10 per share to certain directors who were  the
    holders of $950,000 in demand notes issued during 1998.
    
    The  following table summarizes warrants issued,  outstanding
    and exercisable:

<TABLE>

<CAPTION>
                             As of December 31,
                      --------------------------------
                         1998                 1997
                      -----------          -----------
    <S>               <C>                  <C>
    Issued            100,964,877           37,464,877
    Outstanding       100,962,177           37,464,877
    Exercisable       100,962,177           37,464,877

</TABLE>

    Common Stock

    At  December  31, 1998, 100,962,177 shares of authorized  but
    unissued   common  stock  were  reserved  for   exercise   of
    outstanding  warrants, 21,410,166 shares  of  authorized  but
    unissued common stock were reserved for exercise pursuant  to
    the  1986  and  1997  Stock Option Plans,  59,184  shares  of
    authorized  but  unissued  common  stock  were  reserved  for
    issuance   upon  conversion  of  the  Company's   outstanding
    preferred  stock, 220,000 shares of authorized  but  unissued
    common  stock were reserved for issuance in lieu  of  payment
    of  interest  on  the  variable rate subordinated  debenture,
    375,000  shares of authorized but unissued common stock  were
    reserved  for  issuance upon conversion of the variable  rate
    subordinated  debenture and 13,174,477 shares  of  authorized
    but   unissued   stock  were  reserved  for   issuance   upon
    conversion of outstanding convertible notes.
    
    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  8  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.  During
    1998,  the  holder of the redeemable preferred  stock  as  to
    which  mandatory redemption rights were waived, as  described
    above,  converted  the  187,500 shares  of  such  stock  into
    375,000 shares of common stock of the Company.

    During  1997 holders of redeemable preferred stock  converted
    6,250  shares of preferred stock into 12,500 shares of common
    stock of the Company.

    At   December  31,  1998,  cumulative  dividends  in  arrears
    totaled $194,124 ($6.56 per share) and were included  in  the
    aggregate  involuntary  liquidation value  of  the  preferred
    stock.

    At  December  31,  1998,  187,500 shares  of  authorized  but
    unissued  preferred  stock were reserved  for  issuance  upon
    maturity of the variable rate subordinated debenture.

                              -36-
<PAGE>
    
                    IGENE Biotechnology, Inc.
                  Notes to Financial Statements
                           (continued)

(10)Net Loss Per Common Share

    Net  loss  per  common share for 1998 and 1997  is  based  on
    20,672,092   and   18,870,314   weighted   average    shares,
    respectively.  For purposes of computing net loss per  common
    share,  the  amount  of  net  loss  has  been  increased   by
    dividends  declared  and cumulative undeclared  dividends  in
    arrears on preferred stock.
    
    Common   Stock  equivalents,  including:  options,  warrants,
    convertible   debt,   convertible   preferred   stock,    and
    exercisable  rights have not been included in the computation
    of  earnings  per  share in 1998 and 1997 because  to  do  so
    would  have been anti-dilutive.  However, these common  stock
    equivalents  could have potentially dilutive effects  in  the
    future (see also notes 6, 7, 8 and 9).
    
(11)  Commitments

    The   Company   is   obligated  for  office  and   laboratory
    facilities  and other rentals under separate operating  lease
    agreements,  which expire in 2001. The basic  annual  rentals
    are  expected to be approximately $73,000 under such  leases.
    Annual  rent  expense relating to the leases  for  the  years
    ended  December  31,  1998 and 1997 approximated  $67,000  in
    each year.

    Future  minimum  rental payments, in the  aggregate  and  for
    each of the next five years are as follows:

                 Year                  Amount
                 -----            ---------------
                 1999             $       59,360
                 2000                     59,360
                 2001                      4,947
                 2002                        ---
                 2003                        ---
                                  ---------------

                                  $      123,667
                                  ===============

     On   July  3,  1997,  the  Company  signed  a  non-exclusive
     manufacturing   agreement  with   Fermic,   S.A.   de   C.V.
     ("Fermic"),  of Mexico City, Mexico, for the  production  of
     AstaXin(R).  The   Fermic   contract   provides   that   the
     manufacturer has a non-exclusive right to produce AstaXin(R)
     and  is  paid  a  fixed  monthly  fee,  which  is  based  on
     manufacturing  capacity.   Fermic  provides  equipment   and
     facilities  necessary to manufacture and store  the  product
     and  is  responsible  for  purchasing  raw  materials.   The
     Company  is  responsible for sales efforts and for  ensuring
     the quality of the pigment.  The Company also has a role  in
     ensuring  that the manufacturing process works  effectively.
     The  term  of the contract has been extended on a  month-to-
     month basis through December 31, 1999, and it is anticipated
     that it will continue to be extended beyond that date.   The
     Company  intends  to  modify its fee  arrangement  with  the
     manufacturer in the near future so that fees will  be  based
     on quantity of product produced.


                              -37-
<PAGE>

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


(12)Contingencies

    In  May  1995,  the Company signed a non-exclusive  licensing
    agreement with Archer Daniels Midland Company (ADM)  for  the
    manufacture  and sale of AstaXin(R). On February 29, 1996 ADM
    informed  the Company that it had decided not to utilize  the
    technology   and   requested   that   the   Company    return
    approximately   $250,000  in  payments  under   the   License
    Agreement.   The Company maintains that ADM is  not  entitled
    to  the  payments and that additional monies are owed to  the
    Company.   On  July  21,  1997, ADM filed  suit  against  the
    Company  in  the  U.S. District Court in Greenbelt,  Maryland
    alleging  patent  infringement and requesting  a  preliminary
    injunction  against the Company to cease the manufacture  and
    sale  of AstaXin(R).  ADM's request for injunctive relief was
    denied.   On August 4, 1997, the Company filed a $300,450,000
    contract and trade secrets lawsuit in U.S. District Court  in
    Baltimore,  Maryland  against ADM, alleging  theft  of  trade
    secrets.   The  Company is also claiming breach of  contract,
    in  regards  to the licensing agreement entered into  by  the
    Company  and  ADM  in  1995.  The Company  contends  that  it
    complied  with  all  material terms of  this  agreement.  The
    Company's  claim  was  re-asserted as a counterclaim  against
    ADM  and  the two cases were joined in the District Court  in
    Baltimore,  Maryland on August 24, 1997.   On  September  10,
    1997  the District Court denied ADM's request for preliminary
    injunction  on  the  basis that ADM could not  demonstrate  a
    likelihood  of  success on the merits of  its  case.   During
    1998,  a stay was imposed on both parties by the court  while
    a  court-appointed  expert analyzes the Company's  and  ADM's
    yeast  products.  It is management's contention  that  it  is
    not  probable that this dispute will result in an unfavorable
    outcome. Accordingly, no liability has been reflected in  the
    accompanying  balance  sheet.  The Company  had  expenses  of
    $399,492  and  $658,185,  respectively,  in  1998  and   1997
    relating to this litigation, which is on-going.
    
(13)Income Taxes

    At  December 31, 1998, the Company has federal and state  net
    operating  loss  carry-forwards of approximately  $22,350,000
    that  expire  at various dates from 1999 through  2013.   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  1998
    and 1997.

    The  sources  of the deferred tax asset are approximately  as
    follows:

       Net operating loss carry-forward benefit    $ 8,940,000
       Valuation allowance                          (8,940,000)
                                                   ------------
       Deferred tax asset, net                     $       ---
                                                   ============

(14)  Uncertainty

    The  Company  has  incurred net losses in each  year  of  its
    existence,   aggregating   approximately   $25,500,000   from
    inception  to  December  31, 1998  and  its  liabilities  and
    redeemable   preferred   stock   exceeded   its   assets   by
    approximately   $6,520,000  at  that  date.   These   factors
    indicate  that  the Company will not be able to  continue  in
    existence  unless it is able to raise additional capital  and
    attain profitable operations.
    
    Management  has  instituted  a program  of  significant  cost
    reductions,   deferred   all  except  immediately   necessary
    capital  expenditures, and suspended payment of dividends  on
    the  Company's preferred stock.  The implementation of  these
    measures  to  conserve  working  capital  together  with  the
    successful   marketing  and  licensing   of   the   Company's
    products,  which management hopes to achieve, may permit  the
    Company  to  attract  additional capital  and  enable  it  to
    continue.
    
    The  Company  began manufacturing AstaXin(R) during 1998. The
    Company believes this technology to be highly marketable.

                              -38-
<PAGE>

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


(14)Uncertainty (continued)

    To  increase  working capital, the Company  issued  a  rights
    offering  in  February  1998, and modified  the  maturity  of
    convertible   promissory  notes.  The   Company   will   also
    encourage  the  holders of convertible  promissory  notes  to
    convert them into common stock.
      
(15)Nature of Risks and Concentrations

    The  Company  derived  93% of its revenue  during  1998  from
    sales  of the product, AstaXin(R), 98% of which sales were to
    one  foreign  distributor, located in  Mexico.   All  of  the
    Company's   manufacturing   operations   for   AstaXin(R) are
    conducted in a single manufacturing facility in Mexico  City,
    Mexico.
    
    All  of  the preceding concentrations subject the Company  to
    certain  risks.  For  example,  it  is  considered  at  least
    reasonably    possible   that   any   particular    customer,
    distributor,  product  line,  or  provider  of  services   or
    facilities  may  be  lost  in the  near  term.   It  is  also
    considered  at  least  reasonably  possible  that  operations
    located  outside  the United States may be disrupted  in  the
    near   term.    However,  the  Company  has  at  present   no
    information that would lead it to believe that it  will  lose
    its   principal  distributor,  product,  or  its   contracted
    manufacturer; or that its operations in Mexico City  will  be
    disrupted.

(16)Simple Retirement Plan
    
    Effective  January  1,  1997, the  Company  adopted  a  Simple
    Retirement  Plan  under Internal Revenue Code Section  408(p).
    The  Plan is a defined contribution plan, which covers all  of
    the  Company's  employees  who  receive  at  least  $5,000  of
    compensation   for  the  preceding  year.  The  Plan   permits
    elective   employee  contributions.   The  Company   makes   a
    nonelective  contribution  of 2% of each  eligible  employee's
    compensation  for  each year. The Company's  contributions  to
    The   Plan   for  1998  and  1997  were  $6,979  and   $5,483,
    respectively,  which  are  expensed  in  the  1998  and   1997
    statements of operations.

 (17) Subsequent Events

    On  January 18, 1999 certain directors and other stockholders
    of  the  Company  committed  to provide  up  to  $750,000  in
    additional  funding to the Company. In return, the  investors
    will  be  issued  up to 12,500,000 in new  shares  of  common
    stock  at $.06 per share, which was the market price  of  the
    stock  on  that  date.   These investors  will  also  receive
    12,500,000  warrants to purchase common  stock  at  $.06  per
    share expiring in 10 years.  The monies will be used to  fund
    continued  operations  of  the Company  and  projected  legal
    expenses  associated  with  the  ADM  litigation.   Of   this
    commitment, $250,000 was received by the Company  as  of  the
    date of this report.

                              -39-
<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 March 31, 1999.


                              IGENE Biotechnology, Inc.

                                
Date:  April  13, 1999     By: /s/ Stephen F. Hiu, President
                               --------------------------------


                           By: /s/ Melissa M. Stump, Controller
                               --------------------------------


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 13, 1999
--------------------------
      (Joseph C. Abeles)


  /s/  John A. Cenerazzo      Director                   April 13, 1999
--------------------------
      (John A. Cenerazzo)


  /s/  Stephen F. Hiu         Director, President,       April 13, 1999
--------------------------
      (Stephen F. Hiu)        and Acting Treasurer
                              Chief Financial Officer, 
                              and Chief Accounting 
                              Officer


  /s/ Thomas  L. Kempner      Vice Chairman of Board     April 13, 1999
--------------------------
      (Thomas L. Kempner)


  /s/ Michael G. Kimelman     Chairman of the Board      April 13, 1999
--------------------------    of Directors
      (Michael G. Kimelman)      


  /s/  Sidney R. Knafel       Director                   April 13, 1999
--------------------------
      (Sidney R. Knafel)


  /s/  Patrick F. Monahan     Director and Secretary     April 13, 1999
--------------------------
      (Patrick F. Monahan)
                                
                                        -40-
<PAGE>      
/DOCUMENT>