IGNE IGENE Biotechnology Inc (CE)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

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

For the transition period from __________ to __________

Commission file number 0-15888

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer
 ___ ___

Non-accelerated filer Smaller reporting company x
 ___ ___

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

FORM 10-Q
IGENE Biotechnology, Inc.

INDEX

PART I - FINANCIAL INFORMATION
 Page

 Consolidated Balance Sheets (Unaudited)............... 5

 Consolidated Statements of Operations (Unaudited)..... 6

 Consolidated Statement of Stockholders' Deficiency
 (Unaudited)........................................... 7

 Consolidated Statements of Cash Flows (Unaudited)..... 8

 Notes to Consolidated Financial Statements
 (Unaudited)........................................... 9-14

 Management's Discussion and Analysis of Financial
 Conditions and Results of Operations ................. 15-18

 Controls and Procedures............................... 19

PART II - OTHER INFORMATION ...................... 20-21

SIGNATURES .............................................. 22

EXHIBIT INDEX ........................................... 23

 IGENE BIOTECHNOLOGY, INC. QUARTERLY REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

 IGENE Biotechnology, Inc. and Subsidiary
 Consolidated Balance Sheets


 June 30, December 31,
 2008 2007
 ____________ ____________
 (Unaudited)
ASSETS
CURRENT ASSETS
 Cash and cash equivalents $ 1,260,728 $ 1,026,350
 Accounts receivable 1,339,966 2,718,884
 Inventory 4,844,088 8,059,777
 Prepaid expenses and other current assets 37,726 38,351
 ____________ ____________
 TOTAL CURRENT ASSETS 7,482,508 11,843,362

 Property and equipment, net 924,526 713,493
 5 year non-compete (net of amortization
 of $15,398 and $0, respectively) 138,579 153,977
 Customer contracts (net of amortization
 of $116,829 and $0, respectively) 116,829 233,658
 Intellectual property 149,670 149,670
 Other assets 5,125 5,125
 ____________ ____________
 TOTAL ASSETS $ 8,817,237 $13,099,285
 ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
 Accounts payable and accrued expenses $ 4,296,766 $ 7,902,625
 ____________ ____________

 TOTAL CURRENT LIABILITIES 4,296,766 7,902,625

LONG-TERM DEBT
 Notes payable (net of unamortized discount of
 $685,038 and $1,198,818, respectively) 5,157,229 4,643,449
 Convertible debentures (net of unamortized discount of
 $1,141,938 and $1,331,548, respectively) 3,434,274 3,244,664
 Contingent liability on joint venture separation 5,000,000 5,000,000
 Accrued interest 6,836,829 6,442,076

REDEEMABLE PREFERRED STOCK
 Carrying amount of redeemable preferred stock, 8%
 cumulative, convertible, voting, series A, $.01 par
 value per share. Stated value $20.64 and $20.32,
 respectively. Authorized 1,312,500 shares; issued
 and outstanding 11,134 shares. 229,809 226,243
 ____________ ____________

 TOTAL LIABILITIES 24,954,907 27,459,057
 ____________ ____________

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
 Common stock --- $.01 par value per share.
 Authorized 750,000,000 shares; issued and
 outstanding 110,337,072 shares. 1,103,371 1,103,371
 Additional paid-in capital 33,276,687 33,276,687
 Accumulated deficit (50,565,704) (48,739,830)
 Other comprehensive income 47,976 ---
 ____________ ____________

 TOTAL STOCKHOLDERS' DEFICIENCY (16,137,670) (14,359,772)
 ____________ ____________

 TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 8,817,237 $13,099,285
 ============ ============

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

 IGENE Biotechnology, Inc. and Subsidiary
 Consolidated Statements of Operations
 (Unaudited)


 Three months ended Six months ended
 ____________________________ ____________________________
 June 30, June 30, June 30, June 30,
 2008 2007 2008 2007
 _____________ _____________ _____________ _____________
REVENUE
_______
 Sales $ 1,656,167 $ --- $ 4,527,669 $ ---
 Cost of sales 1,230,096 --- 3,597,506 ---
 _____________ _____________ _____________ _____________
GROSS PROFIT 426,071 --- 930,163 ---

EQUITY IN REPAID ADVANCES
 OF JOINT VENTURE --- 199,672 --- 258,628
 _____________ _____________ _____________ _____________
OPERATING EXPENSES
__________________
 Marketing and selling 163,697 37,433 461,995 39,325
 Research and development 439,434 245,172 789,538 497,286
 General and administrative 227,685 275,149 404,795 478,062
 Operating expenses reimbursed by Joint Venture --- (515,442) --- (960,486)
 _____________ _____________ _____________ _____________
 TOTAL OPERATING EXPENSES 830,816 42,312 1,656,328 54,187
 _____________ _____________ _____________ _____________
 OPERATING PROFIT (LOSS) (404,745) 157,360 (726,165) 204,441
 _____________ _____________ _____________ _____________

OTHER INCOME --- 1,155 2,040 7,537

INTEREST EXPENSE (including amortization of debt
 discount of $351,695 for the three months ended
 June 30, 2008 and 2007, and $703,390 and
 $703,389 for the six months ended June 30, 2008
 and 2007, respectively) (550,897) (574,244) (1,101,749) (1,105,116)
 _____________ _____________ _____________ _____________
 NET LOSS $ (955,642) $ (415,729) $ (1,825,874) $ (893,138)
 _____________ _____________ _____________ _____________
Other comprehensive income (loss)
 Foreign exchange translation (171,880) --- 47,976 ---


 TOTAL COMPREHENSIVE LOSS $ (1,127,522) $ (415,729) $ (1,777,898) $ (893,138)
 ============= ============= ============= =============

BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.01) $ (0.00) $ (0.02) $ (0.01)
 ============= ============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 110,337,072 109,337,072 110,337,072 109,337,072
 ============= ============= ============= =============

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

 IGENE Biotechnology, Inc. and Subsidiary
 Consolidated Statement of Stockholders' Deficiency
 (Unaudited)


 Additional Other Total
 Common Stock Paid-in Accumulated Comprehensive Stockholders'
 (shares/amount) Capital Deficit Income Deficiency
 ____________________________ _____________ _____________ _____________ _____________
Balance at January 1, 2008 110,337,072 $ 1,103,371 $ 33,276,687 $(48,739,830) $ --- $(14,359,772)

Gain due to currency translation --- --- --- --- 47,976 47,976

Net loss for the six months ended
 June 30, 2008 --- --- --- (1,825,874) --- (1,825,874)
 _____________ _____________ _____________ _____________ _____________ _____________
Balance at June 30, 2008 110,337,072 $ 1,103,371 $ 33,276,687 $(50,565,704) $ 47,976 $(16,137,670)
 ============= ============= ============= ============= ============= =============

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

 IGENE Biotechnology, Inc. and Subsidiary
 Consolidated Statements of Cash Flows
 (Unaudited)


 Six months ended
 _______________________________
 June 30, June 30,
 2008 2007
 _____________ _____________
Cash flows from operating activities
 Net loss $ (1,825,874) $ (893,138)
 Adjustments to reconcile net loss to net cash provided by
 (used in) operating activities:
 Amortization of debt discount 703,390 703,389
 Depreciation 8,147 9,347
 Increase in preferred stock for cumulative dividends
 classified as interest 3,566 3,563
 Amortization of customer contracts and non-compete 132,227 ---
 Recoupment of payment of joint venture --- (258,628)

 Decrease in:
 Accounts receivable 1,378,919 ---
 Inventory 3,215,689 ---
 Prepaid expenses and other current assets 625 11,519

 Increase (decrease) in:
 Accounts payable and accrued expenses (3,211,107) 280,197
 _____________ _____________
 Net cash provided by (used in) operating activities 405,582 (143,751)
 _____________ _____________

Cash flows from investing activities
 Purchase of equipment (219,180) ---
 Recoupment of payment to joint venture --- 258,628
 _____________ _____________

 Net cash provided by (used in) financing activities (219,180) 258,628
 _____________ _____________

Cash flows from financing activities
 Proceeds from issuance of convertible debenture --- 762,000
 Repayment of convertible debenture --- (705,000)
 _____________ _____________

 Net cash provided by financing activities --- 57,000
 _____________ _____________

Gain due to currency translation 47,976 ---

Net increase in cash and cash equivalents 234,378 171,877

 Cash and cash equivalents at beginning of period 1,026,350 21,786
 _____________ _____________
 Cash and cash equivalents at end of period $ 1,260,728 $ 193,663
 ============= =============
Supplementary disclosure and cash flow information
__________________________________________________

Cash paid for interest $ --- $ 57,637
Cash paid for income taxes --- ---

See Note (4) for non-cash investing and financing activities.

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

IGENE Biotechnology, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(Unaudited)

(1) Unaudited Consolidated Financial Statements

The June 30, 2008 consolidated financial statements presented herein are unaudited, and in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows. Such financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. This Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report on Form 10-KSB for IGENE Biotechnology, Inc. ("Igene") for the year ended December 31, 2007. The December 31, 2007 consolidated balance sheet is derived from the audited balance sheet included therein.

(2) Nature of Operations

IGENE Biotechnology, Inc. ("Igene" or the "Company") was incorporated in the State of Maryland on October 27, 1981 to develop, produce and market value-added specialty biochemical products. Igene is a supplier of natural astaxanthin, an essential nutrient in different feed applications and a source of pigment for coloring farmed salmon species. Igene is also venturing to supply astaxanthin as a nutraceutical ingredient. Igene is focused on research and development in the areas of fermentation technology, nutrition and health and the marketing of products and applications worldwide. Igene is the developer of AstaXin(R), a natural astaxanthin product made from yeast, which is used as a source of pigment for coloring farmed salmonids.

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

In 2000, Igene formed a wholly-owned subsidiary, Igene Chile Comercial, Ltda., in Chile. The subsidiary has a sales and customer service office in Puerto Varas, Chile, and a product warehouse in Puerto Montt, Chile.

In an effort to develop a dependable source of production, on March 19, 2003, Tate & Lyle PLC ("Tate") and Igene announced a 50:50 joint venture to produce AstaXin(R) for the aquaculture industry, which we refer to as the "Joint Venture." Production utilized Tate's fermentation capability together with the unique technology developed by Igene. Part of Tate's existing citric acid facility located in Selby, England, was modified to include the production of this product. Tate's investment of approximately $24,600,000 included certain of its facility assets that were used in citric acid production. Igene's contribution to the Joint Venture, including its intellectual property and its subsidiary in Chile, was valued by the parties as approximately equal to Tate's contribution. For accounting purposes, Igene's accounting contribution was valued at zero.

On October 31, 2007, Igene and Tate entered into a Separation Agreement pursuant to which the Joint Venture Agreement was terminated. As part of the Separation Agreement, Igene sold to Tate its 50% interest in the Joint Venture and the Joint Venture sold to Igene its intellectual property, inventory and certain assets and lab equipment utilized by the Joint Venture, as well as Igene's subsidiary in Chile. The purchase price paid by Tate to Igene for its 50% interest in the Joint Venture was 50% of the Joint Venture's net working capital. The purchase price paid by Igene for the inventory was an amount equal to 50% of the Joint Venture's net working capital, the assumption of various liabilities and the current market price of the inventory, less specified amounts. In addition, Igene agreed to pay to Tate an amount equal to 5% of Igene's gross revenues from the sale of astaxanthin up to a maximum of $5,000,000. Tate agreed for a period of five years not to engage in the astaxanthin business.

As a result of the Joint Venture termination, Igene is not currently producing astaxanthin products, and is researching several alternatives for a potential new source of production. At the current pace, Igene expects to have inventories of existing product necessary to meet demand through 2008. Igene expects to be out of the market for an uncertain period of time until a new source of production can be identified, commence operations and yield salable product.

IGENE Biotechnology, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(Unaudited)

(continued)

(3) Noncash Investing and Financing Activities

During the six months ended June 30, 2008 and 2007, the Company recorded in each quarter dividends in arrears on 8% redeemable preferred stock accumulating at $.16 per share aggregating to $3,566 and $3,563, respectively.

(4) Amendment to Long - Term Liabilities

Igene entered into Convertible Promissory Notes (the "Convertible Notes") with each of the following note holders for the following respective amounts (a) NorInnova AS
(formerly Forskningsparken I Tromso AS) for $106,500; (b)
Knut Gjernes for $7,500; (c) Magne Russ Simenson for $278,000; and (d) Nord Invest AS for $313,000. Each of the Convertible Notes had a maturity date of November 1, 2004. On November 18, 2005, each of the Convertible Note holders provided Igene with written notice of default under each of the Convertible Notes.

On November 29, 2006, the Convertible Note holders filed a complaint against the Company in the Circuit Court of Howard County, Maryland seeking payment of all outstanding amounts due under the Convertible Notes, the "Notes Litigation." On February 23, 2007, the Company paid $762,638, representing the full amount due including interest, to the Convertible Note holders as settlement of all claims related to the Notes Litigation. The complaint was dismissed with prejudice on March 6, 2007.

In an attempt to settle the matter, the Note holders were offered the ability to extend the Convertible Notes for a period of ten years at an interest rate of 5%. The conversion would be changed from the original debenture rate of $.10 (ten cents) per share to the current market rate of $.02 (two cents) per share. They rejected the offer.

The funds to settle the Notes Litigation were provided by two of Igene's directors through the issuance of debentures on the terms of the offering to the Convertible Note holders described above. On February 15, 2007, Igene issued and sold $762,000 in aggregate principal amount of 5% convertible debentures, 50% each to Thomas Kempner and Sidney Knafel, directors of Igene. These debentures are convertible into shares of Igene's common stock at $.02 per share, based on the market price of Igene's shares at the time the debentures were agreed to. These debentures, if not converted earlier, become due on February 15, 2017.

(5) Previous Joint Venture

On March 18, 2003, the Company entered into a Joint Venture Agreement with Tate & Lyle Fermentation Products Ltd. ("Tate"). Pursuant to the Joint Venture Agreement, the Company and Tate agreed to form a joint venture (the "Joint Venture") to manufacture, market and sell astaxanthin and derivative products throughout the world for all uses other than as a nutraceutical or otherwise for direct human consumption. Tate contributed $24,600,000, including certain facility assets that were used in citric acid production, while the Company transferred to the Joint Venture its technology relating to the production of astaxanthin and assets related thereto. The assets transferred by the Company were used by the Joint Venture in the same manner as historically used by the Company. The Company and Tate each had a 50% ownership interest in the Joint Venture and equal representation on the Board of Directors of the Joint Venture. The value of the Company's initial investment in the Joint Venture was recorded at an amount equal to Igene's historical book value. As the cost of the Company's technology and intellectual property had been previously expensed and had a carrying amount of zero, the investment in the Joint Venture was originally recorded with a book value of $316,869, which represented the unamortized production costs contributed to the Joint Venture. The Company also contributed $6,000 to the capital of the Joint Venture.

Production utilized Tate's fermentation capability together with the unique technology developed by Igene. Part of Tate's existing Selby, England, citric acid facility was modified to produce up to 1,500 tons per annum of astaxanthin. Sales and cost of sales activity were recorded as part of the earnings of the unconsolidated venture.

IGENE Biotechnology, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(Unaudited)

(continued)

On October 31, 2007, Igene and Tate entered into a Separation Agreement pursuant to which the Joint Venture Agreement was terminated. As part of the Separation Agreement, Igene sold to Tate its 50% interest in the Joint Venture and the Joint Venture sold to Igene its intellectual property, inventory and certain assets and lab equipment utilized by the Joint Venture as well as the Chilean sales subsidiary. The purchase price paid by Tate to Igene for its 50% interest was 50% of the Joint Venture's net working capital. The purchase price paid by Igene for the inventory was an amount equal to 50% of the Joint Venture's net working capital, the assumption of various liabilities and the current market price of the inventory, less specified amounts. In addition, Igene agreed to pay to Tate an amount equal to 5% of Igene's gross revenues from the sale of astaxanthin up to a maximum of $5,000,000. Tate agreed for a period of five years not to engage in the astaxanthin business.

Upon the termination of the Joint Venture it was determined that the transaction should be recorded as an asset purchase. This determination was based upon the assets received not constituting a business in accordance with EITF 98-3. Based on that determination, an independent valuation expert was hired to determine the fair value of the assets received and the liabilities assumed. As the fair value received exceeded the liabilities assumed, the fair value of the assets received were reduced to equal the liabilities assumed. Consistent with FASB Statement 141, in this exchange transaction between two parties the value received is considered to be equal to what was assumed. All contingent liabilities were recorded at their maximum amount along with the value of the other consideration given. The reduction in value to arrive at the other consideration given was allocated pro rata to the long term assets.

As a result of the Joint Venture termination, Igene is now researching several alternatives for a potential new source of production. At the current pace, Igene expects to have inventories of existing product necessary to meet demand through 2008. Igene expects to be out of the market for an uncertain period of time until a new source of production can be identified, commence operations and yield salable product.

Prior to the separation, sales and marketing of astaxanthin took place in the unconsolidated Joint Venture. From inception on March 18, 2003 through June 30, 2007, Igene's portion of the Joint Venture's net loss was $20,532,070. The loss was a result of a 50% interest in the negative gross profit from inception of $20,570,606 on sales of $34,836,739, less manufacturing cost of $55,407,345, selling and general and administrative expenses of $15,521,283, and interest expense of $4,972,250. The total resulting loss was $41,064,139, of which 50% was Igene's portion.

Because the Company accounted for its investment in the Joint Venture under the equity method of accounting, it would ordinarily recognize a loss representing its 50% equity interest in the loss of the Joint Venture or the amount that is guaranteed by the Company, if any. However, losses in the Joint Venture were recognized only to the extent of the investment in and advances to the Joint Venture. Losses in excess of this amount were suspended from recognition in the financial statements.

At June 30, 2007, prior to the recognition of its portion of the Joint Venture loss, Igene's investment in the Joint Venture consisted of $322,869 and its net advances to the Joint Venture amounted to $910,484, for a total of $1,233,353. Through December 31, 2006, Igene recognized $1,491,981 of the $15,922,400 loss, which existed as part of the Joint Venture. In the first quarter of 2007, the balances of the funds due to Igene were reduced by a net repayment of $58,956, resulting in the March 31, 2007 balance of $1,433,025. For the three months ended June 30, 2007, Igene recognized a gain for the repayment of the advance for that period of $199,672. This repayment increased the suspended loss in addition to the $2,753,602 loss for the quarter. The cumulative suspended loss at June 30, 2007 was $19,298,717 and was carried forward to offset Igene's share of earnings from the Joint Venture. The balance in the Advances to and Investment in Joint Venture account on the Company's financial statements was zero at June 30, 2007.

The following schedules display certain account balances of the Joint Venture as of June 30, 2007 and the period since initial investment at March 18, 2003 (inception):

 IGENE Biotechnology, Inc. and Subsidiary
 Notes to Consolidated Financial Statements
 (Unaudited)
 (continued)

 June 30,
 2007
 _____________
ASSETS
CURRENT ASSETS
 Cash $ 1,211,000
 Account Receivable 5,697,000
 Inventory 11,925,000
 _____________
 18,833,000

OTHER ASSETS
 Property, plant and equipment, net 19,958,000
 Intangibles 24,614,000
 _____________
 TOTAL ASSETS $ 63,405,000
 =============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
 Accounts payable and accrued expenses
 (majority of which is due to one joint venturer) $ 41,947,000
 Working capital loan 10,525,000
 _____________
 TOTAL LIABILITIES 52,472,000
 Equity 10,933,000
 _____________
 TOTAL LIABILITIES AND EQUITY $ 63,405,000
 =============


 Period from
 March 18, 2003
 (initial investment) to
 June 30, 2007
 _______________________

Net Sales $ 34,836,739
Less: manufacturing cost (55,407,345)
 _____________
Gross Profit (Loss) (20,570,606)
Less: selling, general and administrative (15,521,283)
 _____________
Operating Loss (36,091,889)
Interest Expense (4,972,250)
 _____________
Net Loss $(41,064,139)
 =============
Igene's 50% equity interest in the net loss $(20,532,070)
Igene's Investment in and Advances to the Joint Venture (1,233,353)
 _____________
Igene's suspended loss at June 30, 2007 $(19,298,717)
 =============

The following statement displays the significant activity for the Joint Venture for the three and six months ended June 30, 2007.

 Three Months Ended Six Months Ended
 ____________________________ ____________________________
 June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
 _____________ _____________ _____________ _____________
Net Sales $ 3,483,572 $ 2,264,600 $ 7,063,860 $ 5,454,739
Less: manufacturing cost (4,291,174) (2,591,300) (12,469,311) (5,940,194)
Gross Profit (Loss) (807,602) (326,700) (5,405,451) (485,455)
Less: selling, general and admin (1,218,744) (778,600) (2,430,995) (1,883,319)
Operating Loss (2,026,346) (1,105,300) (7,836,446) (2,368,774)
Interest Expense (727,256) (423,300) (1,383,716) (1,124,200)
Net Loss Before tax (2,753,602) (1,528,600) (9,220,162) (3,492,974)
Reversal of tax expense --- 1,205,900 --- ---
Net Loss $ (2,753,602) $ (322,700) $ (9,220,162) $ (3,492,974)

50% equity interest $ (1,376,801) $ (161,350) $ (4,610,081) $ (1,746,487)

Igene's Repayments from and additional
 (Investment in and Advances to
 the Joint Venture) 199,672 171,639 258,628 (18,263)
Igene's incremental suspended loss for period $ (1,576,473) $ (322,989) $ (4,868,709) $ (1,728,224)

IGENE Biotechnology, Inc. and Subsidiary Notes to Consolidated Financial Statements

(Unaudited)

(continued)

(6) Stockholders' Deficiency

As of June 30, 2008, 22,268 shares of authorized but unissued common stock were reserved for conversion of the Company's outstanding preferred stock.

As of June 30, 2008, 72,232,334 shares of authorized but unissued common stock were reserved for distribution and exercise pursuant to the Company's employee stock option plans.

As of June 30, 2008, 23,421,273 shares of authorized but unissued common stock were reserved for the conversion of outstanding convertible promissory notes held by directors of the Company in the aggregate amount of $1,082,500.

As of June 30, 2008, 66,427,651 shares of authorized but unissued common stock were reserved for the conversion of outstanding convertible promissory notes held by directors of the Company.

As of June 30, 2008, 38,100,000 shares of authorized but unissued common stock were reserved for the conversion of outstanding convertible promissory notes issued as part of the settlement of the ProBio notes.

As of June 30, 2008, 205,261,073 shares of authorized but unissued common stock were reserved for the exercise of outstanding warrants.

(7) Basic and Diluted Net Loss per Common Share

Basic and diluted net loss per common share for the six- month periods ended June 30, 2008 and 2007, are based on 110,337,072 and 109,337,072, respectively, of weighted average common shares outstanding. The same figures for the three month period then ended are based upon 110,337,072 and 109,337,072 weighted average common shares outstanding. No adjustment has been made for any common stock equivalents outstanding because their effects would be antidilutive. As of June 30, 2008 and 2007, potentially dilutive shares totaled 488,414,337 and 405,614,599, respectively.

(8) Going Concern

Igene has incurred net losses in each year of its existence, aggregating approximately $50,566,000 from inception to June 30, 2008 and as of June 30, 2008, Igene's liabilities exceeded its assets by approximately $16,138,000. These factors indicate that Igene may not be able to continue in existence unless it is able to raise additional capital and attain profitable operations.

As a result of the Joint Venture termination, Igene maintains the salable inventory but is not currently producing astaxanthin products, and is researching several alternatives for a potential new source of production. At the current pace, Igene expects to have inventories of existing product necessary to meet demand through 2008. Igene expects to be out of the market for an uncertain period of time until a new source of production can be identified, commence operations and yield salable product. No adjustments to the financial statements have been made as a result of this uncertainty. In the interim, Igene will sell the existing inventory in order to maintain its relationship with customers and use these funds to cover expenses.

IGENE Biotechnology, Inc. and Subsidiary

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENTS 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 RISK AND UNCERTAINTY. CERTAIN STATEMENTS IN THIS REPORT SET FORTH MANAGEMENT'S INTENTIONS, PLANS, BELIEFS, EXPECTATIONS OR PREDICTIONS OF THE FUTURE BASED ON CURRENT FACTS AND ANALYSES. WHEN WE USE THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "ESTIMATE," "INTEND" OR SIMILAR EXPRESSIONS, WE INTEND TO IDENTIFY FORWARD-LOOKING STATEMENTS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH STATEMENT, DUE TO A VARIETY OF FACTORS, RISKS AND UNCERTAINTIES. POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, COMPETITIVE PRESSURES FROM OTHER COMPANIES WITHIN THE BIOTECH AGRICULTURE AND AQUACULTURE INDUSTRIES, ECONOMIC CONDITIONS IN THE COMPANY'S PRIMARY MARKETS, EXCHANGE RATE FLUCTUATIONS, REDUCED PRODUCT DEMAND, INCREASED COMPETITION, INABILITY TO PRODUCE REQUIRED CAPACITY, UNAVAILABILITY OF FINANCING, GOVERNMENT ACTION, WEATHER CONDITIONS AND OTHER UNCERTAINTIES, INCLUDING THOSE DETAILED IN "RISK FACTORS" THAT ARE INCLUDED FROM TIME-TO-TIME IN THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS. THE COMPANY ASSUMES NO DUTY TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.

The following discussion should be read in conjunction with our unaudited consolidated interim financial statements and related notes thereto included in this quarterly report and in our audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contained in our Form 10-KSB for the year ended December 31, 2007. Certain statements in the following MD&A are "forward-looking" statements. Words such as "expects", "anticipates", "estimates" and similar expressions are intended to identify "forward-looking" statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Sales and other revenue

As part of the Joint Venture Agreement, all sales of AstaXin(R) prior to October 31, 2007 were recognized through the Joint Venture. Therefore, Igene recorded no sales during 2006 or in 2007 prior to October 31, 2007. For the quarter ended June 30, 2008, Igene recorded sales in the amount of $1,656,167. For the six months ended June 30, 2008, Igene recorded sales in the amount of $4,527,669. As a result of the Joint Venture termination, Igene is not currently producing astaxanthin products, and is researching several alternatives for a potential new source of production. Sales have been limited due to insufficient production quantity and are expected to decline to zero sometime during the fourth quarter of 2008 and remain negligible until a source of production can be identified and production begins. Igene expects to be out of the market for an uncertain period of time until a new source of production can be identified, commence operations and yield salable product. Igene is currently researching various alternatives for future production but has not yet engaged any new source of production. Management believes that this decision is of fundamental importance to Igene and continues to seek an appropriate production partner.

IGENE Biotechnology, Inc. and Subsidiary

Management's Discussion and Analysis of Financial Condition and Results of Operations

(Continued)

Cost of sales and gross profit

As with sales revenue, beginning July 2003 through October 31, 2007, cost of sales and gross profit were recognized through the Joint Venture. Therefore, Igene recorded no cost of sales or gross profit during 2006 or in 2007 prior to October 31, 2007. For the quarter ended June 30, 2008, Igene recorded cost of sales in the amount of $1,230,096. For the six months ended June 30, 2008 Igene recorded cost of sales in the amount of $3,597,506. This resulted in a gross profit for the quarter ended June 30, 2008 of $426,071 or 26%. For the six months ended June 30, 2008, this resulted in a gross profit of $930,163 or 21%. The increase in gross profit is due mainly to the discount on the product that was purchased at the conclusion of the Joint Venture. With the termination of the Joint Venture, there can be no assurance of the continued dependability of production. As a result, future cost of sales is expected to increase through the remainder of 2008, whereupon sales, and cost of sales, are expected to be negligible until a source of production can be identified and production begins. Commencement of production cannot be predicted. Igene is currently researching various alternatives for future production. No assurances can be provided with regard to a new source of production.

Marketing and selling expenses

For the quarters ended June 30, 2008 and 2007, Igene recorded marketing and selling expense in the amount of $163,697 and $37,433, respectively, an increase of $126,264 or 337%. For the six months ended June 30, 2008 and 2007, Igene recorded marketing and selling expense in the amount of $461,995 and $39,325, respectively, an increase of $422,670. With the termination of the Joint Venture, Igene has reassumed responsibility for the marketing and selling function that was being done by the Joint Venture. It is expected that this level of marketing and selling expense will be constant as Igene has reassumed the activities of the Chilean subsidiary and looks to maintain its customer base through the period in which it engages a new source of production. However, no assurances can be made with regard to a new source of production or maintenance of the customer base. Prior to October 2007, all marketing and selling expenses incurred by Igene as part of the Joint Venture had been reimbursed by the Joint Venture. Since October 2007, these expenses have been funded by cash flows from operations, to the extent available for such purposes. However, we do not expect cash flows from operations to continue beyond the fourth quarter of 2008 unless and until a source of production is identified and production begins.

Research, development and pilot plant expenses

For the quarters ended June 30, 2008 and 2007, Igene recorded research and development costs in the amount of $439,434 and $245,172, respectively, an increase of $194,262 or 79%. For the six months ended June 30, 2008 and 2007, Igene recorded research and development costs in the amount of $789,538 and $497,286, respectively, an increase of $292,252 or 59%. Research and development costs have increased as Igene works to develop new uses for its product. It is expected these costs will remain at current increased levels in support of increasing the efficiency of the manufacturing process through experimentation in the Company's pilot plant, developing higher yielding strains of yeast and other improvements in the Company's AstaXin(R) technology. Prior to October 2007, all research and development expenses incurred by Igene as part of the Joint Venture were reimbursed by the Joint Venture. Since October 2007 these expenses have been funded by cash flows from operations, to the extent available for such purposes. However, we do not expect cash flows from operations to continue beyond the fourth quarter of 2008 unless and until a source of production is identified and production begins.

IGENE Biotechnology, Inc. and Subsidiary

Management's Discussion and Analysis of Financial Condition and Results of Operations

(Continued)

General and administrative expenses

General and administrative expenses for the quarter ended June 30, 2008 and 2007 were $227,685 and $275,149, respectively, a decrease of $47,464 or 17%. General and administrative expenses for the six months ended June 30, 2008 and 2007 were $404,795 and $478,062 respectively, a decrease of $73,267 or 15%. These costs are expected to remain constant. Igene works to reduce overhead costs and spend funds on research and development efforts. Prior to October 2007, all general and administrative expenses incurred related to research and sales of product by Igene as part of the Joint Venture had been reimbursed by the Joint Venture. Since October 2007 these expenses have been funded by cash flows from operations, to the extent available for such purposes. However, we do not expect cash flows from operations to continue beyond the fourth quarter of 2008 unless and until a source of production is identified and production begins.

Expenses reimbursement by Joint Venture

As part of the Joint Venture Agreement, costs incurred by Igene related to production, research and development, as well as those related to the marketing of AstaXin(R), and most of the general and administrative expenses, were considered costs of the Joint Venture and therefore were reimbursed by the Joint Venture. For the six months ended June 30, 2007, costs reimbursed by the Joint Venture totaled $960,486. The costs covered $39,325 of marketing costs, $497,286 of research and development costs and $423,875 of general and administrative costs.

Interest expense

Interest expense for the quarters ended June 30, 2008 and 2007 was $550,897 and $574,244, respectively, an decrease of $23,347 or 4%. This includes amortization of discount on Igene's notes and debentures of $351,695 for the quarters ended June 30, 2008 and 2007. For the six months ended June 30, 2008 and 2007, interest expense was $1,101,749 and $1,105,116, respectively, a decrease of $3,367 or less than 1%. This includes amortization of discount on Igene's notes and debentures of $703,390 for the six months ended June 30, 2008 and $703,389 for the six months ended June 30, 2007. The interest expense was almost entirely composed of interest on the Company's long term financing from its directors and other stockholders, and interest on the Company's subordinated debentures in both periods.

Equity in earnings of unconsolidated Joint Venture

Prior to the October 31, 2007 termination of the Joint Venture, the production, sales and marketing of astaxanthin took place in the unconsolidated Joint Venture. From inception on March 18, 2003 through June 30, 2007, Igene's portion of the Joint Venture's net loss was $20,532,070. The loss was a result of a 50% interest in the negative gross profit from inception of $20,570,606 on sales of $34,836,739, less manufacturing cost of $55,407,345, selling and general and administrative expenses of $15,521,283, and interest expense of $4,972,250. The total resulting loss was $41,064,139, of which 50% was Igene's portion.

Because the Company accounted for its investment in the Joint Venture under the equity method of accounting, it would ordinarily recognize a loss representing its 50% equity interest in the loss of the Joint Venture or the amount that is guaranteed by the Company, if any. However, losses in the Joint Venture were recognized only to the extent of the investment in and advances to the Joint Venture. Losses in excess of this amount were suspended from recognition in the financial statements.

IGENE Biotechnology, Inc. and Subsidiary

Management's Discussion and Analysis of Financial Condition and Results of Operations

(Continued)

At June 30, 2007, prior to the recognition of its portion of the Joint Venture loss, Igene's investment in the Joint Venture consisted of $322,869 and its net advances to the Joint Venture amounted to $910,484, for a total of $1,233,353. Through December 31, 2006, Igene recognized $1,491,981 of the $15,922,400 loss which existed as part of the Joint Venture. In the first quarter of 2007, the balances of the funds due to Igene were reduced by a net repayment of $58,956, resulting in the March 31, 2007 balance of $1,433,025. For the three months ended June 30, 2007, Igene recognized a gain for the repayment of the advance for that period of $199,672. This repayment increased the suspended loss in addition to the $2,753,602 loss for the quarter. The cumulative suspended loss at June 30, 2007 was $19,298,717 and it was carried forward to offset Igene's share of earnings from the Joint Venture, if any. The balance in the Advances to and Investment in Joint Venture account on the Company's financial statements was zero at June 30, 2007.

Net loss and basic and diluted net loss per common share

As a result of the foregoing, the Company reported comprehensive losses of $1,127,522 and $415,729, respectively, for the quarters ended June 30, 2008 and 2007, an increase in the loss of $711,793 or 171%. This represents a loss of $0.01 and $0.00 per basic and diluted common share in each of the quarters ended June 30, 2008 and 2007, respectively. The Company reported comprehensive losses of $1,777,898 and $893,138, respectively, for the six months ended June 30, 2008 and 2007, an increase in the loss of $884,760 or 99%. This represents a loss of $0.02 and $0.01 per basic and diluted common share in each of the six months ended June 30, 2008 and 2007, respectively. The weighted average number of shares of common stock outstanding of 110,337,072 and 109,337,072 for the quarters and six months ended June 30, 2008 and 2007, respectively, has increased by 1,000,000 shares. The increase in outstanding shares resulted from the issuance of 1,000,000 shares of common stock to the Company's Director of Manufacturing in October of 2007.

Financial Position

During the six months ended June 30, 2008 and 2007, in addition to the matters previously discussed, the following actions also materially affected the Company's financial position:

o Decreases in accounts receivables, inventory and prepaid expense for the six months ended June 30, 2008 of $4,595,233 were a source of cash, offset by funds used to decrease accounts payable and accrued expenses by $3,211,107; and

o The carrying value of redeemable preferred stock was increased and interest expense recorded in the amount of $3,566 in 2008, reflecting cumulative unpaid dividends on redeemable preferred stock.

In December 1988, as part of an overall effort to contain costs and conserve working capital, Igene 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 June 30, 2008, total dividends in arrears on Igene's preferred stock total $140,734 ($12.64 per share) and are included in the carrying value of the redeemable preferred stock.

IGENE Biotechnology, Inc. and Subsidiary

Management's Discussion and Analysis of Financial Condition and Results of Operations

(Continued)

Historically, Igene has been funded primarily by equity contributions and loans from stockholders. As of June 30, 2008, Igene had working capital of $3,185,742, and cash and cash equivalents of $1,260,728.

Cash provided by operating activities during the six-month period ended June 30, 2008 equaled $405,582 as compared to cash used by operating activities of $143,751 for the six-month period ended June 30, 2007.

Cash used by investing activities during the six-month period ended June 30, 2008 equaled $219,180 resulting from the purchase of equipment, as compared to cash provided by investing activities of $258,628, which was a recoupment of payment to the Joint Venture for the six-month period ended June 30, 2007.

No cash was used or provided by financing activities during the first six months of 2008. Cash provided by financing activities was $57,000 during the six-months ended June 30, 2007, and was used in connection with the settlement of the convertible debentures and payment of interest on those notes.

Over the next twelve months, Igene believes it will need additional working capital. Part of this funding is expected to be received from sales of AstaXin(R), resulting in increased cash through the fourth quarter of 2008. Thereafter sales are expected to decline to zero and remain negligible until a source of production is identified and production begins. There will be additional delay between the commencement of production and the receipt of proceeds from any sale of such product. There can be no assurance that projected cash from sales, or additional funding, will be sufficient for Igene to fund its continued operations.

The Company does not believe that inflation had a significant impact on its operations during the six-month periods ended June 30, 2008 and 2007.

There have been no material changes in the risks related to off-balance sheet arrangements since the Company's disclosure in its Annual Report on Form 10-KSB for the year ended December 31, 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and is not required to provide the information required under this item.

IGENE Biotechnology, Inc. and Subsidiary
Controls and Procedures

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act (defined below)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

(b) Changes in internal control - There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

IGENE Biotechnology, Inc. and Subsidiary

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which Igene is a party or to which any of Igene's properties are subject; nor are there pending material bankruptcy, receivership or similar proceedings with respect to Igene; nor are there material proceedings pending or known to be contemplated by any governmental authority; nor are there material proceedings known to Igene, pending or contemplated, in which any of Igene's directors, officers, affiliates or any principal security holders, or any associate of any of the foregoing, is a party or has an interest adverse to us.

Item 1A. Risk Factors

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

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 August 4, 2008, total dividends in arrears on the Company's Series A Convertible Preferred Stock total $140,734 ($12.64 per share) and are included in the carrying value of the redeemable preferred stock.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

EXHIBIT DESCRIPTION
NO.
3.1 Articles of Incorporation of the Registrant, as

amended as of November 17, 1997, constituting Exhibit 3.1 to the Registration Statement No. 333- 41581 on Form SB-2 filed with the SEC on December 5, 1997, are hereby incorporated by reference.

3.2 Articles of Amendment to Articles of Incorporation of the Registrant, constituting Exhibit 3.1(b) to the Registration Statement No. 333-76616 on Form S- 8 filed with the SEC on January 11, 2002, are hereby incorporated by reference.

3.3 By-Laws of the Registrant, constituting Exhibit 3.2 to the Registration Statement No. 33-5441 on Form S- 1 filed with the SEC on May 6, 1986, are hereby incorporated by reference.

31.1 Rule 13a-14(a) or 15d-14(a) Certification of the Registrant's principal executive officer.*

31.2 Rule 13a-14(a) or 15d-14(a) Certification of the Registrant's principal financial officer.*

32.1 Rule 13a-14(b) or 15d-14(b) Certification of the Registrant's principal executive officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Rule 906 of the Sarbanes-Oxley Act of 2002.*

32.2 Rule 13a-14(b) or 15d-14(b) Certification of the Registrant's principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Rule 906 of the Sarbanes-Oxley Act of 2002.*

*Filed herewith.

SIGNATURES

Pursuant to the requirements 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.

Date August 7, 2008 By /S/ STEPHEN F. HIU
 ______________ _________________________________
 STEPHEN F. HIU
 President
 (principal executive officer)




Date August 7, 2008 By /S/ EDWARD J. WEISBERGER
 ______________ _________________________________
 EDWARD J. WEISBERGER
 Chief Financial Officer
 (principal financial officer)

EXHIBIT DESCRIPTION
NO.
3.1 Articles of Incorporation of the Registrant, as

amended as of November 17, 1997, constituting Exhibit 3.1 to the Registration Statement No. 333- 41581 on Form SB-2 filed with the SEC on December 5, 1997, are hereby incorporated by reference.

3.2 Articles of Amendment to Articles of Incorporation of the Registrant, constituting Exhibit 3.1(b) to the Registration Statement No. 333-76616 on Form S- 8 filed with the SEC on January 11, 2002, are hereby incorporated by reference.

3.3 By-Laws of the Registrant, constituting Exhibit 3.2 to the Registration Statement No. 33-5441 on Form S- 1 filed with the SEC on May 6, 1986, are hereby incorporated by reference.

31.1 Rule 13a-14(a) or 15d-14(a) Certification of the Registrant's principal executive officer.*

31.2 Rule 13a-14(a) or 15d-14(a) Certification of the Registrant's principal financial officer.*

32.1 Rule 13a-14(b) or 15d-14(b) Certification of the Registrant's principal executive officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Rule 906 of the Sarbanes-Oxley Act of 2002.*

32.2 Rule 13a-14(b) or 15d-14(b) Certification of the Registrant's principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Rule 906 of the Sarbanes-Oxley Act of 2002.*

*Filed herewith.

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