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

                        -----------------------------

                                  FORM 10-K/A
                              (AMENDMENT NO. 2)

(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, 2004

                                     OR

[ ]   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 001-08568

                        -----------------------------

                                  IGI, Inc.
           (Exact name of registrant as specified in its charter)

                Delaware                                     01-0355758
    (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                     Identification No.)

      105 Lincoln Ave., Buena, NJ                             08310
(Address of principal executive offices)                    (Zip Code)

     Registrant's telephone number, including area code: (856) 697-1441

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

     Title of each class          Name of each exchange on which registered
     -------------------          -----------------------------------------
Common Stock-$0.01 Par Value              American Stock Exchange

      Securities registered pursuant to Section 12(g) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not 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-K or any 
amendment to this Form 10-K.    [ ]

Indicate by check mark whether the registrant is an accelerated filer (as 
defined in Rule 12b-2 of the Act).    Yes  [ ]    No  [X]

The aggregate market value of the registrant's common stock held by non-
affiliates on June 30, 2004 (based on the closing stock price on the 
American Stock Exchange) on such date was approximately $17,490,000.

As of March 15, 2005, there were 11,732,880 shares of common stock 
outstanding.

                 Documents Incorporated By Reference
Certain information contained in the definitive Proxy Statement for the 
Company's Annual Meeting of Stockholders to be held on May 23, 2005 is 
incorporated by reference into Part III hereof.





Explanatory Note

      We are filing this Amendment No. 2 (this "Amendment") to our Annual 
Report on Form 10-K for the fiscal year ended December 31, 2004 as filed with 
the Securities and Exchange Commission ("SEC") on April 12, 2005 (the "Form 
10-K"), in order to correct Item 9A. Controls and Procedures of our Form 10-K 
in response to comments by the staff of the SEC in connection with its review 
of our Form 10-K.

      This Amendment does not reflect events occurring after the filing of the 
Form 10-K or modify or update those disclosures affected by subsequent 
events. Except for the items described above or contained in this Amendment, 
this Amendment continues to speak as of the date of the Form 10-K, and does 
not modify, amend or update in any way the financial statements or any 
other item or disclosures in the Form 10-K.


  


                                   PART I

ITEM 1. BUSINESS

Overview

      IGI, Inc. ("IGI" or the "Company") was incorporated in Delaware in 
1977.  Its executive offices are at 105 Lincoln Avenue, Buena, New Jersey.  
The Company is currently engaged in the production and marketing of 
cosmetics and skin care (consumer) products.  Beginning in the first 
quarter of 2005, the Company will also be engaged in the metal finishing 
business, specifically nickel boride, using the UltraCem technology (refer 
to Item 7 for more detail).

      In December 1995, IGI distributed its ownership of its majority-owned 
subsidiary, Novavax, Inc. ("Novavax"), in the form of a tax-free stock 
dividend, to IGI stockholders.  Novavax had comprised the biotechnology 
business segment of IGI.  In connection with the distribution, the Company 
paid Novavax $5,000,000 in return for a ten-year license (the "IGI License 
Agreement") entitling IGI to the exclusive use of the Novasome(R) lipid 
vesicle encapsulation and certain other technologies ("Microencapsulation 
Technologies" or collectively the "Technologies") in the fields of (i) 
animal pharmaceuticals, biologicals and other animal health products; (ii) 
foods, food applications, nutrients and flavorings; (iii) cosmetics, 
consumer products and dermatological over-the-counter and prescription 
products (excluding certain topically delivered hormones); (iv) fragrances; 
and (v) chemicals, including herbicides, insecticides, pesticides, paints 
and coatings, photographic chemicals and other specialty chemicals, and the 
processes for making the same (collectively, the "IGI Field").  IGI has the 
option, exercisable within the last year of the ten-year term, to extend 
the exclusive license for an additional ten-year period for $1,000,000.  
Novavax has retained the right to use the Technologies for applications 
outside the IGI Field, mainly human vaccines and pharmaceuticals.

      Consumer Products Business  IGI's Consumer Products business is 
primarily focused on the continued commercialization of the 
Microencapsulation Technologies for skin care applications.  These efforts 
have been directed toward the development of high quality skin care 
products that the Company markets through collaborative arrangements with 
major cosmetic and consumer products companies.  IGI plans to continue to 
work with cosmetics, food, personal care products and over-the-counter 
("OTC") pharmaceutical companies for commercial applications of the 
Microencapsulation Technologies.  Because of their ability to encapsulate 
skin protective agents, oils, moisturizers, shampoos, conditioners, skin 
cleansers and fragrances and to provide both a controlled and a sustained 
release of the encapsulated materials, Novasome(R) lipid vesicles are well-
suited to cosmetics and consumer product applications.  For example, 
Novasome(R) lipid vesicles may be used to deliver moisturizers and other 
active ingredients to the deeper layers of the skin or hair follicles for a 
prolonged period; to deliver or preserve ingredients which impart favorable 
cosmetic characteristics described in the cosmetics industry as "feel," 
"substantivity," "texture" or "fragrance" and to deliver normally 
incompatible ingredients in the same preparation, with one ingredient being 
shielded or protected from the other by encapsulation within the 
Novasome(R) vesicle.

      The Company produces Novasome(R) vesicles for various skin care 
products. Pursuant to the Company's agreement with Estee Lauder, Estee Lauder 
utilizes the Novasome technology in their products such as "All You Need," 
"Re-Nutriv," "Virtual Skin," "100% Time Release Moisturizer," "Resilience," 
"Surface Optimizing," "Vibrant" and others.  Sales to Estee Lauder 
accounted for $1,248,000 or 35% of 2004 revenues $1,812,000 or 51% of 2003 
revenues and $2,629,000 or 60% of 2002 revenues. Also, the Company 
received $184,000 and $28,000 of royalty income in 2004 and 2003, 
respectively, from Estee Lauder pursuant to the Company's agreement with 
Estee Lauder for various Novasome(R) vesicles skin care products produced 
by Estee Lauder.

      In February 2001, the Company signed a new manufacturing and supply 
agreement and an assignment of trademark agreement for the WellSkin(tm) 
line of skin care products with Genesis Pharmaceutical, Inc.  The 
manufacturing and supply agreement expires on December 13, 2005 and 
contains two ten-year renewal options.  The Company received a lump sum 
payment of $525,000 for the assignment of the trademark, which is being 
recognized ratably over the term of the arrangement.  The Company 
recognized $105,000 of income related to this agreement in each of the 
years ended December 31, 2004, 2003 and 2002.

      The Company entered into a sublicense agreement with Johnson & 
Johnson Consumer Products, Inc. ("J&J") in 1995.  The agreement provided 
J&J with a sublicense to produce and sell Novasome(R) microencapsulated 
retinoid products and provides for the payment of royalties on net sales of 
such products.  J&J began selling such products and making royalty payments 
in the first quarter of 1998.  The Company recognized $385,000, $488,000 
and $714,000 of royalty income related to this agreement for the years 
ended December 31, 2004, 2003 and 2002, respectively.  As noted above, 
royalties are calculated on net sales of microencapsulated retinoid 
products.  The sales of these products have been declining; we anticipate 
this trend will continue in the future.

      In August 1998, the Company granted Johnson & Johnson Medical 
("JJM"), a division of Ethicon, Inc., worldwide sublicense rights for the 
use of the Novasome(R) technology for certain products and distribution 
channels.  The agreement provided for JJM to pay the Company $300,000 as 
well as future royalty payments based on JJM's sales of sublicensed 
products.  The Company 


  2


recognized $30,000, $35,000 and $32,000 of royalty income in 2004, 2003 and 
2002, respectively, related to the agreement. In March of 2002, the 
agreement between the Company and JJM was amended stating that JJM is no 
longer required to make minimum payments and the sublicense has been 
converted to a non-exclusive worldwide sublicense with the exception of 
Japan, which will remain exclusive.  If the amount of royalties paid by JJM 
equals or exceeds $200,000 in any year, the following calendar year will 
become an exclusive worldwide agreement and will remain so until royalties 
fall below that amount.

      In July 2001, the Company entered into a Research, Development and 
Manufacturing Agreement with Apollo Pharmaceutical (Canada), Inc. 
("Apollo"), previously known as Prime Pharmaceutical Corporation. The 
purpose of the agreement was to develop a facial lotion, a facial creme and 
scalp application for the treatment of psoriasis. The project has been 
completed in stages with amounts being paid to the Company with the 
successful completion of each stage. In addition, the Company has agreed to 
rebate $3.60 per kilogram for the first 12,500 kilograms of product 
manufactured for and sold to Apollo. During 2002 and 2003, there was no 
activity between the Company and Apollo due to a change in management at 
Apollo.  In 2004, the Company resumed activity with Apollo and recognized 
$137,000 of product sales.

      In November 2002, the Company entered into a Manufacturing Service 
Agreement with Desert Whale Jojoba Company, Inc.  The purpose of this 
agreement was to develop and manufacture jojobasomes to be used as a 
personal care product.  This project was in a developmental stage through 
2002. The Company recognized $7,000 of product sales related to this project 
in 2003.  The Company is no longer doing business with Desert Whale Jojoba 
Company, Inc.

      In July 2004, the Company, in order to allow growth and new business 
opportunities, renegotiated its contract with Estee Lauder, a significant 
customer.  The goal of the Company was to lift the exclusivity it had under 
the prior agreement with Estee Lauder that did not allow the Company to do 
business with competitors of Estee Lauder.  The exclusivity provision was 
removed from the agreement, the terms of which are as follows: Estee Lauder 
is manufacturing all Novasome(R) and non-Novasome(R) products at their 
facility and is paying the Company a royalty per kilogram on all 
Novasome(R) products manufactured by Estee Lauder, including all new 
products developed, plus they paid to the Company a one time payment of 
$100,000, which was paid in 2004 for the use of the Novamix machine.  The 
Company's contract manufacturing of Estee Lauder non-Novasome(R) products, 
which accounted for $559,000 of the $1,248,000 (i.e., 45%) in revenues in 
2004, terminated contractually on June 30, 2004, without any required 
future royalties or other payments to be received by the Company on any 
non-Novasome(R) products manufactured by Estee Lauder.  However, Estee 
Lauder may from time to time require the assistance of IGI to manufacture 
Novasome(R) and non-Novasome(R) products at Estee Lauder's request.  In 
addition, during the six month period from January through June 2004, the 
Company agreed to provide Estee Lauder's contract manufacturing services at 
a reduced price of $2.00 per kilo, as compared to the prior rate of $3.03 
per kilo.

      Metal Plating Business  In February 2004, the Company signed a 
license agreement with Universal Chemical Technologies, Inc. ("UCT") to 
utilize its patented technology for an electroless nickel boride metal 
finishing process. This is a new venture for the Company and the Company 
has had initial capital expenditures of approximately $782,000 in order to 
set up the operations.   The Company has also hired two new employees to 
oversee the facility operations and for sales and marketing of the product.  
The Company has an exclusive license within a 150 mile radius of its 
facility for commercial and military applications. The Company believes 
there is the possibility of revenue and profit growth using this 
application, but there is no guarantee that it will materialize.  Frank 
Gerardi, the Company's Chairman and Chief Executive Officer, as well as a 
major IGI stockholder, has personally invested $350,000 in UCT, which 
represents less than a 1% ownership interest in UCT.  We anticipate 
additional capital expendirures of approximately $120,000 in 2005.

Other Novasome(R) Lipid Vesicles Developments

      On July 23, 2003, Dr. Michael F. Holick, a professor of Medicine, 
Dermatology, Physiology and Biophysics at the Boston University School of 
Medicine, was appointed to head IGI's newly formed Scientific Advisory 
Board. Dr. Holick's many accomplishments, including the discovery of the 
active form of Vitamin D, and his extensive research in dermatology, 
combined with IGI's exclusive use of the patented Novasome( technologies in 
its delivery systems, should enable the Company to further advance IGI's 
position in the topical dermatologics market.

      On August 11, 2003, researchers at Boston University Medical Center, 
led by Dr. Holick, reported the first successful development of a topical 
peptide drug for the treatment of psoriasis. The parathyroid hormone analog 
PTH (1-34) was successfully encapsulated in Novasome(R) A cream, which 
enhanced the absorption of this peptide drug into human skin.  This study 
appeared in the August 2003 issue of the British Journal of Dermatology.  
The study conducted a randomized, self-controlled double-blinded trial of 
15 adult patients with chronic plaque psoriasis.  Each patient applied to 
one lesion Novasome(R) A cream and a comparable lesion with Novasome(R) A 
cream that contained PTH (1-34).  The psoriatic lesions treated with PTH 
(1-34) showed marked improvement in scaling, erythema and in duration. 
There was a 67.3% improvement in the global severity score for the lesion 
treated with Novasome(R) A cream containing PTH (1-34) compared to the 
placebo-treated lesion, which only showed a 17.8% improvement. In an open 
trial, ten patients topically applied PTH (1-34) in Novasome(R) A cream on 
all of their lesions in a step wise manner.  A Psoriasis Area and Severity 
Index score analysis of all patients revealed an improvement of 42.6% 
(p < 0.02). None of the patients experienced 


  3


hypercalcemia or hypercalciuria or developed any side effects with the 
medication. The study concluded that patients who were resistant to at 
least one standard therapy for psoriasis had an improvement in their 
psoriasis when they applied PTH (1-34) in Novasome(R) A cream to their 
lesion. No patients experienced any significant adverse events.  This 
pilot study suggests that topical PTH (1-34) encapsulated in Novasome(R) A 
cream is a safe and effective novel therapy for psoriasis.  This was the 
first demonstration for the successful encapsulation of a peptide drug for 
the treatment of a skin disease.

      On August 26, 2003, Dr. Holick and his team of scientists at Boston 
University Medical Center reported that in animal studies a parathyroid 
hormone related peptide antagonist [PTH (7-34)] stimulated epidermal 
proliferation and hair growth in mice. The biologic action of parathyroid 
hormone (PTH) related peptide (PTHrP) in normal skin was investigated in 
cultured human keratinocytes and in SKH-1 hairless mice. The results 
indicated that the PTHrP receptor antagonist PTH (7-34) stimulated 
epidermal DNA synthesis in SKH-1 hairless mice by 144%.  In addition, these 
hairless mice had marked increase in the number (146%) and length (80%) of 
hair shafts, respectively. They also found that the PTHrP receptor agonist 
[PTH (1-34)] was effective in inhibiting DNA synthesis in the epidermis 
(Holick, M.F., Ray, S., Chen, T.C., Tian, X., and Persons, K.S., A 
Parathyroid Hormone Antagonist Stimulates Epidermal Proliferation and Hair 
Growth in Mice, Proc. Nat'l. Acad. Sci, Vol. 91, 8014-8016 (1994)). These 
results provide evidence that PTHrP may be an important regulator in normal 
skin physiology and that its receptor agonists and antagonists have 
potentially wide therapeutic applications in the treatment of 
hyperproliferative skin disorders and aging skin and could also be 
effective in stimulating and maintaining hair growth.

      Chemotherapy-induced alopecia is one of the fundamental unsolved 
problems of clinical oncology, which is driven in part by abnormalities 
induced by the chemotherapy on the hair follicle cycle.  Dr. Holick and his 
team have explored the therapeutic potential of PTHrP receptor agonists and 
antagonists in a mouse model of chemotherapy (cyclophosphamide) induced 
alopecia. Mice that received PTH (7-34) significantly mitigated the hair 
follicular response to cyclophosphamide. Furthermore, there was more rapid 
hair regrowth of more robust hair follicles, compared to the animals that 
received  placebo and chemotherapy (Peters, Eva, M.J., Foitzik, K., Paus, 
R., Ray, S., and Holick, M.F.,  A New Strategy for Modulating Chemotherapy-
Induced Alopecia, Using PTH/PTHrP Receptor Agonist and Antagonist, J. 
Invest. Dermatol. 117:173-178; 2001).

      This study is an established animal model for chemotherapy-induced 
alopecia, which closely mimics human chemotherapy induced alopecia, 
suggests the possibility that PTHrP receptor agonists and antagonists can 
be developed as novel therapeutic agents in chemotherapy-induced alopecia. 
Based on these findings, a study is planned to determine whether topical 
PTH (7-34) formulated in Novasome(R) cream will be effective in mitigating 
chemotherapy induced alopecia in breast cancer patients and help accelerate 
more robust hair regrowth.

      On September 26, 2003, the Company entered into an employment 
agreement with Dr. Holick where he will serve as the Company's Vice 
President of Research and Development and Chief Scientific Officer for a 
term of three years.

      On December 24, 2003, the Company entered into a License Agreement 
with Dr. Holick and A&D Bioscience, Inc., a Massachusetts corporation 
wholly owned by Dr. Holick (collectively referred to as "Holick"), whereby 
Holick granted an exclusive license to the Company to all his rights to the 
parathyroid hormone related peptide technologies and the glycoside 
technologies (referred to as "PTH Technologies" and "Glycoside 
Technologies", respectively) that he developed for various clinical usages, 
including treatment of psoriasis, hair loss and other skin disorders. In 
consideration for entering into the License Agreement, Holick received up-
front a $50,000 non-refundable payment from the Company. He also received a 
grant of 300,000 stock options under the Company's authorized stock option 
plans.  Holick was also entitled to receive a $236,000 milestone payment 
that was contingent on the execution of a sublicense agreement between the 
Company and a third-party for the licensed technology.


      On April 19, 2004, IGI signed a sublicense agreement with Tarpan 
Therapeutics, Inc. ("Tarpan") for the PTH (1-34) technology under which the 
third party will be obligated at its sole cost and expense to develop and 
bring the PTH (1-34) technology to market as timely and efficiently as 
possible, which includes its sole responsibility for the cost of 
preclinical and clinical development, research and development, 
manufacturing, laboratory and clinical testing and trials and marketing of 
products. In addition, the sublicense agreement calls for various payments 
to IGI throughout the term. IGI was paid a lump sum sublicense fee of 
$300,000, from which amount IGI paid the sum of $232,000 to Dr. Holick, 
representing the $236,000 payment due to Dr. Holick in accordance with the 
terms of his License Agreement with the Company, net of $4,000 of additional 
legal fees. Certain subsequent royalty payments received by the Company under 
the sublicense agreement will be shared with Holick after the Company has 
recovered any payments previously made to Holick under the License 
Agreement and an amount equal to the value of the options received 
by Holick under the License Agreement. The Company is responsible for any 
and all costs, fees and expenses for the prosecution and oversight of any 
intellectual property rights related to the licensed technologies.  The 
term of the License Agreement is the longer of twenty (20) years or the 
life of each of the patents thereunder.  The License Agreement, however, 
granted Holick the right to terminate the Company's license to (i) the 
Glycoside Technologies if the Company did not sublicense the Glycoside 
Technologies within 90 days of the effective date of the License Agreement, 
and (ii) the PTH Technologies if the Company did not sublicense the PTH 
Technologies within 90 days of the effective date of the License Agreement.  
As noted above, the Company entered into a sublicense agreement for the PTH 
Technologies on April 19, 2004.  The Company did not, however, sublicense 
the Glycoside Technologies within the 90 day period.  


  4


As a result, Holick terminated the Company's license to the Glycoside 
Technologies on April 5, 2004.  The Company is engaged in discussions with 
the same third party entity for a similar sublicense for the PTH (7-34) 
technology.

      The $50,000 payment to Holick was expensed in the third quarter of 
2003 and the $236,000 payment to Holick was expensed in the second quarter 
of 2004 because the PTH Technologies are in a preliminary development phase 
and do not have any readily determinable alternative future use. The other 
consideration called for under the License Agreement, such as amounts 
advanced for the prosecution and oversight of any intellectual property 
rights related to the licensed technologies which amounted to $27,500 and 
the fair value of the 300,000 stock options granted to Holick, which 
amounted to $520,000, was also expensed by the Company in the second 
quarter of 2004 (included in product development and research expenses in 
the consolidated statement of operations), when the sublicense agreement 
with Tarpan was executed and Holick could no longer terminate the license 
agreement as it relates to the PTH Technologies and the options became 
fully vested.  The fair value of the stock options was calculated under 
SFAS No. 123 using the Black -Scholes model.

      On July 27, 2004, the Company signed an exclusive license agreement 
with the University of Massachusetts Medical School (University) for the 
patented invention entitled "The Treatment of Skin with Adenosine or 
Adenosine Analogs."  The Company intends to encapsulate adenosine or 
adenosine analogs in Novasome(R) for use in the skin care field.  As 
consideration of the rights granted in this agreement, the Company made 
nonrefundable payments of $25,000 upon the execution of this agreement and 
$25,000 in September 2004.  Both of these payments were expensed during the 
third quarter of 2004 and are included in product development and research 
expenses.  The agreement also calls for minimum royalty payments of $25,000 
per year commencing on July 27, 2007.  If the Company enters into a sublicense 
agreement with a third party, the Company must pay the University 50% of all 
sublicense income.

Discontinued Operations

      On May 31, 2002, the stockholders of the Company approved, and the 
Company consummated, the sale of the assets and transfer of the liabilities 
of the Companion Pet Products division, which marketed companion pet care 
related products. The buyer assumed liabilities of approximately $986,000, 
and paid the Company cash in the amount of $16,254,000. The Company's 
results reflect a $12,433,000 gain on the sale of the Companion Pet 
Products division for the year ended December 31, 2002.  The gain is net of 
direct costs incurred by the Company in connection with the sale and the 
reduction in the purchase price resulting from post-closing adjustments. 
For the year ended December 31, 2003, the Company had a gain on the 
disposal of discontinued operations of $435,000, which primarily consisted 
of a net gain of $169,000 for an insurance settlement, net of legal costs, 
for damages incurred by the Company as a result of a heating oil leak at 
the Companion Pet Products manufacturing site and a net gain of $288,000 on 
the sale of the former Companion Pet Products manufacturing site land and 
building on December 18, 2003. The Companion Pet Products division incurred 
a loss of $523,000 for the year ended December 31, 2002.  The results for 
the year ended December 31, 2002 included an impairment charge of $630,000 
related to the Companion Pet Products warehouse.  Upon the sale of the 
Companion Pet Products division, the Company paid all of its debt and 
interest owed to Fleet Capital Corporation ("Fleet") and American Capital 
Strategies, Ltd. ("ACS").  As a result, the Company incurred a $2,654,000 
loss from early extinguishment of debt in connection with the prepayment 
fees paid to Fleet and ACS and the write-off of the ACS debt discount.

      During 2001, the Company recorded non-recurring charges related to 
the cessation and shutdown of the manufacturing operations at the Companion 
Pet Products facility. The Company applied to the New Jersey Economic 
Development Authority and the New Jersey Department of Environmental 
Protection for a grant and loan to provide partial funding for the costs of 
investigation and remediation of the environmental contamination discovered 
at the Companion Pet Products facility.  On June 26, 2001, the Company was 
awarded an $81,000 grant and a $246,000 loan.  The $81,000 grant was 
received in the third quarter of 2001.  The loan, which required monthly 
principal payments, had a term of ten years at a rate of interest of 5%.  
The Company received funding of $45,000 and $182,000 from the loan during 
2003 and 2002, respectively. On December 18, 2003, the loan was paid in 
full upon the sale of the former Companion Pet Products facility, which had 
served as collateral for the loan.

Manufacturing

      The Company's manufacturing operations include bulk manufacturing and 
testing of cosmetics, dermatologics, emulsions and shampoos.  The raw 
materials included in these products are available from several suppliers.  
The Company produces quantities of Novasome(R) lipid vesicles adequate to 
meet its current and foreseeable needs.


  5


Research and Development

      The Company's consumer products development efforts are directed 
toward Novasome(R) encapsulation to improve performance and efficacy of 
pesticides, specialty and other chemicals, biocides, cosmetics, consumer 
products, flavors and dermatologic products.  Total product development and 
research expenses were $1,727,000, $762,000 and $549,000 in 2004, 2003 and 
2002, respectively.

Patents

      All of the names of the Company's major products are registered in 
the United States and all significant markets in which the Company sells 
its products.  The Company maintains patents in various countries covering 
certain of its products.  Under the terms of the 1995 IGI License 
Agreement, the Company has an exclusive ten-year license to use the 
Technologies licensed from Novavax in the IGI Field.  Novavax holds 44 U.S. 
patents and a number of foreign patents covering the Technologies licensed 
to IGI.

Government Regulation and Regulatory Proceedings

Government Regulations

      In the United States, pharmaceuticals, including over-the-counter 
products that are manufactured by the Company are subject to rigorous Food 
and Drug Administration ("FDA") regulations, including pre-clinical and 
clinical testing.  The process of completing clinical trials and obtaining 
FDA approvals for a new drug often takes a number of years, requires the 
expenditure of substantial resources and is often subject to unanticipated 
delays.  There can be no assurance that any product will receive such 
approval on a timely basis, or at all.

      In addition to product approval, the Company may be required to 
obtain a satisfactory inspection by the FDA covering its manufacturing 
facilities before a product can be marketed in the United States.  The FDA 
will review the manufacturing procedures and inspect the facilities and 
equipment for compliance with applicable rules and regulations.  Any 
material change by the Company in the manufacturing process, equipment or 
location would necessitate additional review and approval.

      Whether or not FDA approval has been obtained, approval of a 
pharmaceutical product by comparable governmental authorities in foreign 
countries must be obtained prior to the commencement of clinical trials and 
subsequent marketing of such product in such countries.  The approval 
procedure varies from country to country, and the time required may be 
longer or shorter than that for FDA approval.  Although there are some 
procedures for unified filing for certain European countries, in general, 
each country has its own procedures and requirements.

      In addition to regulations enforced by the FDA, the Company also is 
subject to regulation under the Occupational Safety and Health Act, the 
Toxic Substances Control Act, the Resource Conservation and Recovery Act 
and other present and potential future federal, state or local regulations.  
The Company's product development and research involves the controlled use 
of hazardous materials and chemicals.  Although the Company believes that 
its safety procedures for handling and disposing of such materials comply 
with the standards prescribed by state and federal regulations, the risk of 
accidental contamination or injury from these materials cannot be 
completely eliminated.  In the event of such an accident, the Company could 
be held liable for any damages that result and any such liability could 
exceed the resources of the Company.

Intense Competition in Consumer Products Business

      The Company's Consumer Products business competes with large, well-
financed cosmetics and consumer products companies with development and 
marketing groups that are experienced in the industry and possess far 
greater resources than those available to the Company.  There is no 
assurance that the Company's consumer products can compete successfully 
against its competitors or that it can develop and market new products that 
will be favorably received in the marketplace.  In addition, certain of the 
Company's customers that use the Company's Novasome(R) lipid vesicles in 
their products may decide to reduce their purchases from the Company or 
shift their business to other suppliers.

Employees

      At March 15, 2005, the Company had 20 full-time employees.  Two of 
these employees were in marketing, distribution and customer support, five 
were in manufacturing, seven were in research and development, four were in 
executive, finance and administrative functions, and two were in the metal 
plating operations.  The Company has no collective bargaining agreement 
with its employees, and believes that its employee relations are good.


  6


Executive Officers of the Company

      The following table sets forth (i) the name and age of each executive 
officer of the Company as of March 30, 2005, (ii) the position with the 
Company held by each such executive officer and (iii) the principal 
occupation held by each executive officer for at least the past five years.



                                   Officer      Principal Occupation and Other Business
Name                       Age      Since          Experience During Past Five Years
----                       ---     -------      ---------------------------------------

                                       
Frank Gerardi              60        2003       Appointed Chief Executive Officer on 
                                                September 5, 2003 and Chairman on June 27, 
                                                2003. President of Univest Management, Inc., 
                                                a management consulting company since 1986; 
                                                member of the New York Stock Exchange from 
                                                1969 to 1986.

Dr. Michael F. Holick      59        2003       Appointed Vice President of Research and 
                                                Development and Chief Scientific Officer in 
                                                September 2003.  Dr. Holick has been a 
                                                Professor of Medicine, Physiology and 
                                                Biophysics at Boston University School of 
                                                Medicine since 1987.

Nadya Lawrence             36        1995       Appointed Vice President of Operations in 
                                                2001.  Prior to that, Ms. Lawrence served
                                                as the Company's R&D Technical Director and 
                                                R&D Manger from 1995 to 2001.

Carlene Lloyd              32        2004       Appointed Vice President of Finance in July 
                                                2004.  Prior to that, Ms. Lloyd served as 
                                                the Company's Controller and Senior 
                                                Accountant from 1998 to 2004.


ITEM 2.  PROPERTIES

      The Company's executive administrative offices are located in Buena, 
New Jersey, in a 25,000 square foot facility built in 1995, which the 
Company owns.  This facility is also used for production, product 
development, marketing and warehousing for the Company's cosmetic, 
dermatologic and personal care products.

ITEM 3. LEGAL PROCEEDINGS

Gallo Matter

      As previously reported by the Company in its historical filings with 
the Securities and Exchange Commission ("SEC"), including without 
limitation its Form 10-K for the year ending December 31, 1999, for most of 
1997 and 1998 the Company was subject to intensive government regulatory 
scrutiny by the U.S. Departments of Justice, Treasury and Agriculture.  In 
June 1997, the Company was advised by the Animal and Plant Health 
Inspection Service ("APHIS") of the United States Department of Agriculture 
("USDA") that the Company had shipped quantities of some of its poultry 
vaccine products without complying with certain regulatory and record 
keeping requirements.  The USDA subsequently issued an order that the 
Company stop shipment of certain of its products.  Shortly thereafter, in 
July 1997, the Company was advised that the USDA's Office of Inspector 
General had commenced an investigation into possible violations of the 
Virus Serum Toxin Act of 1914 and alleged false statements made to APHIS.  
In April 1998, the SEC advised the Company that it was conducting an 
informal inquiry and requested information and documents from the Company, 
which the Company voluntarily provided to the SEC.

      Based upon these events, the Board of Directors caused an immediate 
and thorough investigation of the facts and circumstances of the alleged 
violations to be undertaken by independent counsel.  The Company continued 
to refine and strengthen its regulatory programs with the adoption of a 
series of compliance and enforcement policies, the addition of new managers 
of Production and Quality Control and a new Senior Vice President and 
General Counsel.  At the instruction of the Board of Directors, the 
Company's General Counsel established and oversaw a comprehensive employee 
training program, designated in writing a Regulatory Compliance Officer, 
and established a fraud detection program, as well as an employee 
"hotline."  The Company continued to cooperate with the USDA and SEC in all 
aspects of their investigation and regulatory activities.  On March 13, 
2002, the Company reached a settlement with the staff of the SEC to resolve 
matters arising with respect to the investigation of the Company.  Under 
the settlement, the Company neither admitted nor denied that the Company 
violated the financial reporting and record-keeping requirements of Section 
13 of the Securities and Exchange Act of 1934, as amended, for the three 
years ended December 31, 1997.  Further, the Company agreed to the entry of 
an order to cease and desist from any such violation in the future.  No 
monetary penalty was assessed.

      As a result of its internal investigation, in November 1997, the 
Company terminated the employment of John P. Gallo as President and Chief 
Operating Officer for willful misconduct.  On April 21, 1998, the Company 
instituted a lawsuit against Mr. Gallo in the New Jersey Superior Court.  
The lawsuit alleged willful misconduct and malfeasance in office, as well 
as embezzlement and


  7


related claims (referred to as the "IGI Action").  On April 28, 1998, Mr. 
Gallo instituted a separate action against the Company and two of its 
Directors, Edward Hager, M.D. and Constantine Hampers, M.D., alleging that 
he had been wrongfully terminated from employment and further alleging 
wrongdoings by the two Directors (referred to as the "Gallo Action").  The 
Court subsequently ordered the consolidation of the IGI Action and the 
Gallo Action (collectively referred to as the "Consolidated Action").

      In response to these allegations, the Company instituted an 
investigation of the two Directors by an independent committee 
("Independent Committee") of the Board assisted by the Company's General 
Counsel.  The investigation included a series of interviews of the 
Directors, both of whom cooperated with the Company, and a review of 
certain records and documents.  The Company also requested an interview 
with Mr. Gallo who, through his counsel, declined to cooperate.  In 
September 1998, the Independent Committee reported to the Board that it had 
found no credible evidence to support Mr. Gallo's claims and allegations 
and recommended no further action.  The Board adopted the recommendation.

      The Company denied all allegations plead in the Gallo Action and 
asserted all claims in the Gallo Action to be without merit.  The Company 
did not reserve any amount relating to such claims.  The Company tendered 
the claim to its insurance carriers, but was denied insurance coverage for 
both defense and indemnity of the Gallo Action.

      In July 1998, the Company sought to depose Mr. Gallo in connection 
with the Consolidated Action.  Through his counsel, Mr. Gallo asserted his 
Fifth Amendment privilege against self-incrimination and advised that he 
would not participate in the discovery process until such time as a federal 
grand jury investigation, in which he was a target, was concluded.  In 
January 1999, at the suggestion of the Court, the Company and Mr. Gallo 
agreed to a voluntary dismissal without prejudice of the Consolidated 
Action, with the understanding that the statute of limitations was tolled 
for all parties and all claims, and that the Company and Mr. Gallo were 
free to reinstate their suits against each other at a later date, with each 
party reserving all of their rights and remedies against the other.

      As of the date hereof, neither the Company nor Mr. Gallo have filed 
suit against each other in the Superior Court of New Jersey or any other 
court of competent jurisdiction to reinstitute the claims, in whole or 
part, previously at issue in the Consolidated Action, and pursuant to the 
previous order of dismissal entered in the Consolidated Action, the statute 
of limitation on all claims and defenses continues to be tolled as to both 
parties.  However, the Company did receive a letter dated November 21, 2003 
from Mr. Gallo's attorneys seeking to reach a settlement of the claims 
asserted against IGI in the Gallo Action without further resort to the 
courts.  The letter provides a general description of Mr. Gallo's claims 
and a calculation of damages allegedly sustained by Mr. Gallo relative 
thereto.  The letter states that Mr. Gallo's damages are calculated to be 
in the range of $3,400,000 to $5,100,000.  The Company denies liability for 
the claims and damages alleged in the letter from Mr. Gallo's counsel dated 
November 21, 2003, and as such, the Company did not make any formal 
response thereto.  Mr. Gallo has contacted the Company's Chief Executive 
Officer & Chairman, Frank Gerardi, in a continued effort to initiate 
settlement discussions.  As of the present date, the Company continues to 
deny any merit and/or liability for the claims alleged by Mr. Gallo and has 
not engaged in any formal settlement discussions with either Mr. Gallo or 
his attorneys.

      On December 8, 2003, Mr. Gallo filed suit against Novavax, Inc. in 
the Superior Court of New Jersey, Law Division, Atlantic County, docket no. 
ATL-L-3388-03, asserting claims under seven counts for damages allegedly 
sustained as a result of the cancellation of certain Novavax stock options 
held by Mr. Gallo due to his termination from IGI in November 1997 for 
willful misconduct (referred to as the "Novavax Action").

      On March 5, 2004, Novavax filed an Answer denying the allegations 
asserted by Mr. Gallo in his First Amended Complaint.  In addition, while 
denying any liability under the First Amended Complaint, Novavax also filed 
a Third Party Complaint in the Novavax Action against the Company for 
contribution and indemnification, alleging that if liability for Mr. 
Gallo's claims is found, the Company has primary liability for any and all 
such damages sustained.

      IGI has been notified by its insurance carriers that coverage is not 
afforded under their respective policies of insurance for defense and/or 
indemnification of the claims alleged by the Third Party Complaint.  After 
IGI was notified of the foregoing, but prior to IGI's filing of any 
responsive pleading, the Third Party Complaint against IGI was voluntarily 
dismissed without prejudice by Novavax on June 30, 2004.  Novavax may at 
any time pursuant to the rules of court re-file its Third Party Complaint 
against IGI.

      In July 2004, Novavax filed a motion for summary judgment on all 
claims asserted under Gallo's First Amended Complaint (referred to as the 
"SJ Motion").  Gallo filed in opposition to the SJ Motion contesting all 
relief sought thereunder.  In August 2004, the Court held a hearing on the 
SJ Motion and denied without prejudice the relief sought by the motion for 
dismissal of Gallo's First Amended Complaint.  Upon information and belief, 
the parties are currently proceeding with discovery in the Novavax Action.  
The Company, as a non-party witness in the Novavax Action, was recently 
served by counsel for Gallo with a subpoena for the production of documents 
as responsive thereto.

      As of the date hereof, Novavax has not sought to re-file its Third 
Party Complaint against IGI for which coverage was previously denied by its 
insurance carriers, but Novavax is not precluded from doing so and may seek to 
do so in the future.


  8


Other Matters

      On April 6, 2000, officials of the New Jersey Department of 
Environmental Protection inspected the Company's storage site in Buena, New 
Jersey, and issued Notices of Violation ("NOV") relating to the storage of 
waste materials in a number of trailers at the site.  The Company 
established a disposal and cleanup schedule and completed the removal of 
materials from the site.  The Company continues to discuss with the 
authorities a resolution of any potential assessment under the NOV and has 
accrued the estimated penalties related to such NOV.

      On March 2, 2001, the Company discovered the presence of 
environmental contamination resulting from an unknown heating oil leak at 
its Companion Pet Products manufacturing site.  The Company immediately 
notified the New Jersey Department of Environmental Protection and the 
local authorities, and hired a certified environmental contractor to assess 
the exposure and required clean up.  Based on the initial information from 
the contractor, the Company originally estimated the cost for the cleanup 
and remediation to be $310,000.  In September 2001, the contractor updated 
the estimated total cost for the cleanup and remediation to be $550,000.  A 
further update was performed in December 2002 and the final estimated cost 
was increased to $620,000, of which $82,000 remains accrued as of December 
31, 2004. The remediation was completed by September 30, 2003. There will 
be periodic testing and removal performed, which is projected to span over 
the next four years.  The estimated cost of the monitoring is included in 
the accrual.

      This contamination also spread to the property adjacent to the 
manufacturing facility and the Company is currently involved in a lawsuit 
with the owner of that property, Ted Borz.  Mr. Borz runs a business on 
that property and he seeking remuneration for loss of income and the 
reduction in his property value from IGI as a result of the oil spill.  IGI 
believes that it has performed all the necessary tasks required to properly 
decontaminate Mr. Borz's property.  Management does not, however, feel that 
it is possible to estimate the outcome of this case at this date.

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

      No matters were submitted to a vote of the Company's stockholders 
during the last quarter of 2004.


  9


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER 
         MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

      The Company has never paid cash dividends on its Common Stock.  (See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations - Liquidity and Capital Resources.")

      The principal market for the Company's Common Stock ($.01 par value) 
(the "Common Stock") is the American Stock Exchange ("AMEX") (symbol: 
"IG").  On March 28, 2002, the Company was notified by AMEX that it was 
below certain of the Exchange's continuing listing standards. Specifically, 
the Company was required to reflect income from continuing operations and 
net income for 2002 and a minimum of $4,000,000 in stockholders' equity by 
December 31, 2002 in order to remain listed.  On April 25, 2002, the 
Company submitted a plan of compliance to AMEX.  On June 12, 2002, AMEX 
notified the Company that it had accepted the Company's plan of compliance 
and had granted the Company an extension of time to regain compliance with 
the continued listing standards by December 31, 2002.  In February 2003, 
the Company contacted AMEX after release of the Company's 2002 year-end 
results. On April 14, 2003, the Company received formal notification from 
AMEX that the Company was deemed to be in compliance with all AMEX 
requirements for continued listing on AMEX. This determination is subject 
to the Company's favorable progress in satisfying the AMEX guidelines for 
continued listing and to AMEX's routine periodic reviews of the Company's 
SEC filings.  Based on the Company's 2004 year-end results, the Company is 
not in compliance with the AMEX requirement for reporting income from 
continuing operations and net income for the year ended December 31, 2004. 
As of the date of the filing of the Form 10-K, the Company has not been 
contacted by AMEX concerning the Company's non-compliance with the AMEX 
requirements. While as of this date, the Company has not received any 
notification of non-compliance from AMEX, the Company has no knowledge of 
nor can it predict whether AMEX shall at any time hereafter issue formal 
notification to the Company of its non-compliance with the requirements for 
continued listing on AMEX, which could result in the Company's delisting 
from AMEX or otherwise adversely affect the Company.

      The following table shows the range of high and low closing sale 
prices on the AMEX for the periods indicated:

                            High       Low
                            ----       ---

2003
----
First quarter              $ .78      $ .54
Second quarter              1.78        .75
Third quarter               2.87        .98
Fourth quarter              2.39       1.25

2004
----
First quarter              $2.35      $1.40
Second quarter              2.54       2.05
Third quarter               2.33       1.30
Fourth quarter              1.58       1.16

      The approximate number of holders of record of the Company's Common 
Stock at March 15, 2005 was 667 (not including stockholders for whom shares 
are held in a "nominee" or "street" name).


  10


                                   PART II

ITEM 6.  SELECTED FINANCIAL DATA

      Five-Year Summary of Selected Financial Data (in thousands, except 
earnings per share information):



                                                                    Year ended December 31,
                                                  -----------------------------------------------------------
                                                    2004         2003         2002         2001         2000
                                                    ----         ----         ----         ----         ----

                                                                                       
Statement of Operating Results
Revenues                                          $ 3,558      $ 3,557      $ 4,364      $ 4,294      $  6,552
Operating profit (loss)                            (1,220)        (972)          79         (752)         (993)
Loss from continuing operations                      (892)        (757)      (3,130)      (1,303)       (8,824)
Loss from discontinued operations *                     -            -         (523)        (720)       (2,559)
Gain on disposal of discontinued operations             -          435       12,433          283           114
Cumulative effect of accounting change                  -            -            -            -          (168)
Net income (loss)                                    (892)        (322)       8,780       (1,740)      (11,437)
                                                  =======      =======      =======      =======      ========
Income (loss) per share-basic and diluted:
  Continuing operations                           $  (.08)     $  (.07)     $  (.28)     $  (.11)     $   (.86)
  Discontinued operations                               -            -         (.05)        (.07)         (.25)
  Gain on disposal of discontinued operations           -          .04         1.09          .03           .01
  Cumulative effect of accounting change                -            -            -            -          (.02)
                                                  -------      -------      -------      -------      --------
  Net income (loss)                               $  (.08)     $  (.03)     $   .76      $  (.15)     $  (1.12)
                                                  =======      =======      =======      =======      ========



                                                                       As of December 31,
                                                  -----------------------------------------------------------
                                                    2004         2003         2002         2001         2000
                                                    ----         ----         ----         ----         ----

                                                                                       
Balance Sheet Data
Working capital                                   $   922      $ 1,710      $ 2,064      $(6,733)     $ (6,917)
Total assets                                        4,730        5,024        5,929       10,539        12,387
Short-term debt and notes payable                       -           -            18        9,804         9,785
Long-term debt and notes payable
 (excluding current maturities)**                       -           -           164            -             -
Stockholders' equity (deficit)                      4,008       4,166         4,509       (4,185)       (3,275)
Average number of common and
 common equivalent shares:
  Basic and diluted                                11,548      11,374        11,430       10,957        10,205


*     On September 15, 2000, the stockholders of the Company approved, and 
      the Company consummated, the sale of the assets and transfer of the 
      liabilities of the Vineland division.  On May 31, 2002, the 
      stockholders of the Company approved and the Company consummated the 
      sale of the assets and transfer of the liabilities of the Companion 
      Pet Products division.  The Consolidated Financial Statements present 
      these segments as discontinued operations.

**    In connection with certain amendments to the Company's debt 
      agreements, the Company reflected certain debt as short-term debt as 
      of December 31, 2001 and 2000.



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

Forward-Looking Statements

      This "Management's Discussion and Analysis of Financial Condition and 
Results of Operations" section and other sections of this Annual Report on 
Form 10-K contain forward-looking statements that are based on current 
expectations, estimates, forecasts and projections about the industry and 
markets in which the Company operates and on management's beliefs and 
assumptions.  In addition, other written or oral statements, which 
constitute forward-looking statements, may be made by or on behalf of the 
Company.  Words such as "expects," "anticipates," "intends," "plans," 
"believes," "seeks," "estimates," variations of such words and similar 
expressions are intended to identify such forward-looking statements.  
These statements are not guarantees of future performance, and involve 
certain risks, uncertainties and assumptions, which are difficult to 
predict.  (See "Factors Which May Affect Future Results" below.)  
Therefore, actual outcomes and results may differ materially from what is 
expressed or forecasted in such forward-looking statements.  The Company 
undertakes no obligation to update publicly any forward-looking statements, 
whether as a result of new information, future events or otherwise.


  11


Overview

      In 2003, the three goals in place for management were a reduction of 
general and administration expenses, an expansion of research and 
development expenditures and to lay the foundation for revenue growth.  In 
2004, with these goals having been achieved, the Company's focus was on 
growth.  Management feels that the decisions that were made during this 
past year will open up new doors and provide new opportunities for the 
Company in the very near future.  One of the decisions made was to change 
the way the Company did business with Estee Lauder.  Estee Lauder's 
agreement contained an exclusivity clause that did not allow the Company to 
sell its technology to any of Estee Lauder's competitors.  In July 2004, 
the Company signed an amendment to the contract with Estee Lauder which (i) 
removed the exclusivity clause, (ii) moved the production of Estee Lauder's 
Novasome(R) products to their facility, and (iii) obligates Estee Lauder to 
pay IGI a royalty of $5.00 per kilogram produced, up to $2 million, and 
then $2.00 per kilogram thereafter.  With the exclusivity removed, IGI may 
now offer its technology to other cosmetics companies that it once could 
not.

      Realizing that the renegotiation of the Estee Lauder contract would 
leave a void in revenues, management decided to fill the void with a new 
technology, unrelated to cosmetics, while we develop our relationships with 
new cosmetic companies, which can sometimes take several years.  The new 
technology is UltraCem metal finishing.  In February 2004, the Company 
signed a license agreement with Universal Chemical Technologies, Inc. 
("UCT") to utilize its patented technology for an electroless nickel boride 
metal finishing process.  This is a new venture for the Company and the 
Company has had initial capital expenditures of approximately $782,000 in 
order to set up the operations.  The Company has also hired two new 
employees to oversee the facility operations and for sales and marketing of 
the product.  The Company has an exclusive license within a 150 mile radius 
of its facility for commercial and military applications.  The Company 
believes there is the possibility of revenue and profit growth using this 
application, but there is no guarantee that it will materialize.

      As an additional cost saving measure, the Company authorized a 
reduction in the size of its Board of Directors to four members.  In 
furtherance of this purpose, Dr. Constantine Hampers and Earl Lewis 
voluntarily tendered their resignations from the Board, effective January 
4, 2004.  In April of 2004, the Vice President of Business Development left 
the Company and management decided not to fill the position but rather 
delegate those responsibilities primarily to outside distributors who work 
on a contingency basis.  In June of 2004, the Company also decided not to 
renew the employment contract with its Chief Financial Officer, Domenic 
Golato, which resulted in additional cost savings for the Company.

      In 2004, product and developmental expenses increased. Through such 
product development efforts, the Company gained two new customers for 
Novasome(R) encapsulated products.  Our existing customers are beginning to 
incorporate Novasomes(R) into additional product lines.  Genesis 
Pharmaceutical, Inc., a division of Pierre-Fabre, has approved a new line 
of products utilizing the patented Novasome(R) delivery system.  Chattem, 
Inc., makers of Gold Bond and Icy Hot, launched a new Novasome(R) based 
product with an advertising campaign that will be sold in mass markets and 
other outlets, and we are currently working on another new product for 
them.

      IGI will continue its efforts to identify new opportunities in 
dermatologics, cosmetics, pharmaceuticals and nutrients for topical 
delivery.  The Company will also seek to expand the use of its Novasome(R) 
encapsulation technology for flavors and fragrances, as well as fuel 
additives. The Company has a Joint Development Agreement with Pure Energy 
Corporation ("PEC). The goal of the Joint Development Agreement is to 
develop a new class of cleaner burning alternative fuel formulations based 
on PEC's proprietary fuel formulations and IGI's microencapsulation 
technology or a new class of high performance fuel additives based on PEC's 
proprietary fuel additives and IGI's microencapsulation technology. Stephen 
J. Morris, a Director and a major stockholder of the Company, is the sole 
shareholder of PEC and a member of the PEC Board of Directors.


  12


Results of Operations

      2004 Compared to 2003

      The Company had a net loss of $892,000, or $(.08) per share, in 2004 
compared to a net loss of $322,000, or $(.03) per share, in 2003.

      Total revenues for 2004 were $3,558,000, which represented an 
increase of $1,000 from revenues of $3,557,000 in 2003.  Licensing and 
royalty income of $1,007,000 in 2004 increased by $351,000 compared to 
2003, primarily as a result of a $300,000 payment from Tarpan Therapeutics 
and royalties from Estee Lauder.  A significant portion of the Company's 
product sales are attributable to a single customer.  In addition, 
licensing and royalty income is primarily generated from arrangements with 
three customers.

      Product sales of $2,551,000 in 2004 decreased $350,000, or 12%, 
compared to 2003 due mainly to lower product sales to Estee Lauder, the 
Company's major customer, but were partially offset by higher sales to 
Genesis, Vetoquinol USA and new customers.  Vetoquinol USA, the company 
that purchased our Companion Pet Care Division, became a new customer for 
the Company in 2002 as a result of the sale of the Companion Pet Care 
Division. The Company continues to manufacture several of the pet care 
shampoos and lotions for Vetoquinol USA.

      Cost of sales decreased by $92,000, or 7%, in 2004 as compared to 
2003.  As a percentage of product sales, cost of sales increased from 46% 
in 2003 to 49% in 2004.  The decrease in gross profit from 54% in 2003 to 
51% in 2004, as a percent of product sales, was the result of the change in 
mix to lower gross profit products sold.

      Selling, general and administrative expenses decreased by $624,000, 
or 26%, from $2,422,000 in 2003 to $1,798,000 in 2004. These expenses were 
68% of revenues for 2003 compared to 51% in 2004.  The decrease is 
primarily due to a reduction of salaries in 2004, which was a goal of 
management in 2004.

      Product development and research expenses increased by $965,000 in 
2004, or 127%, compared to 2003. The increase is a result of the Company 
recording a $545,000 non cash expense related to the SFAS No. 123 value of 
300,000 stock options granted to Dr. Holick under his license agreement and 
25,000 stock options granted to Dr. Holick for his service on the 
Scientific Advisory Board, plus a cash payment of $232,000 made to Dr. 
Holick in accordance with his license agreement.  The Company has also made 
a $50,000 cash payment to the University of Massachusetts in accordance 
with the license agreement between the Company and the University.  There 
are many new projects being undertaken by the research and development 
department as a result of new agreements signed in 2004.

      Interest income amounted to $25,000 in 2004 compared to interest 
income (net of expense) of $7,000 in 2003. The Company had no interest 
expense in 2004 and only recorded income related to marketable securities 
and overnight investments of our daily cash balance.

      The tax benefit of $290,000 in 2004 was a result of the sale of a 
portion of the Company's state tax operating loss carryforwards in exchange 
for proceeds of $298,000, offset by the current year's state tax expense of 
$82,000.  The tax benefit increased by $82,000 from 2003 to 2004.

      2003 Compared to 2002

      The Company had a net loss of $322,000, or $(.03) per share, in 2003 
compared to net income attributable to common stockholders of $8,647,000, 
or $.76 per share, in 2002.  The majority of the change from 2002 to 2003 
is the result of the gain on the sale of the Companion Pet Products 
division in 2002.

      Total revenues for 2003 were $3,557,000, which represented a decrease 
of $807,000, or 18%, from revenues of $4,364,000 in 2002. The decreased 
revenues were due mainly to lower product sales. Licensing and royalty 
income of $656,000 in 2003 decreased by $195,000 compared to 2002, 
primarily as a result of decreased licensing revenues from Johnson & 
Johnson offset by royalty revenue from Estee Lauder. Licensing revenues 
from Johnson & Johnson are based on its sales.  A significant portion of 
the Company's product sales are attributable to a single customer.  In 
addition, licensing and royalty income is primarily generated from 
arrangements with two customers.

      Product sales of $2,901,000 in 2003 decreased $612,000, or 17%, 
compared to 2002 due mainly to lower product sales to Estee Lauder, the 
Company's major customer, but were partially offset by higher sales to 
Genesis, Vetoquinol USA and new customers.  


  13


Vetoquinol USA, the company that purchased our Companion Pet Care Division, 
became a new customer for the Company in 2002 as a result of the sale of 
the Companion Pet Care Division.  The Company continues to manufacture 
several of the pet care shampoos and lotions for Vetoquinol USA.

      Cost of sales decreased by $33,000, or 2%, in 2003 as compared to 
2002.  As a percentage of product sales, cost of sales increased from 39% 
in 2002 to 46% in 2003.  The decrease in gross profit from 61% in 2002 to 
54% in 2003, as a percentage of product sales, was the result of the change 
in mix to lower gross profit products sold and underabsorbed fixed costs.

      Selling, general and administrative expenses increased by $64,000, or 
3%, from $2,358,000 in 2002 to $2,422,000 in 2003. These expenses were 54% 
of revenues for 2002 compared to 68% in 2003.  The increase is primarily 
due to a $202,000 charge in the second quarter of 2003 for the cost of 
benefits provided by the Company under a severance package to one of the 
Company's executives, offset by a decline in salary expense due to staff 
reductions after the sale of the Companion Pet Products division.

      Product development and research expenses increased by $213,000 in 
2003, or 39%, compared to 2002. The increase is a result of additional 
projects undertaken by the Company for existing and potential new customers 
and the $50,000 payment made to Dr. Holick related to the licensing of the 
PTH and Glycoside Technologies.

      Interest income (expense) went from a net interest expense of 
$283,000 in 2002 to a net interest income of $7,000 in 2003. The change is 
due to lower interest rates and the payment of debt on May 31, 2002 using 
the proceeds from the sale of the Companion Pet Products division.

      The loss on the early extinguishment of debt of $2,654,000 in 2002 
related to the write off of the deferred financing costs and the 
unamortized debt discount in connection with the repayment of the Company's 
senior debt and the subordinated debt.

      The tax benefit of $208,000 in 2003 was a result of the sale of a 
portion of the Company's state tax operating loss carryforwards in exchange 
for proceeds of $224,000, offset by the current year's state tax expense of 
$16,000. Tax expense in 2002 was a result of a New Jersey change in the tax 
law in July 2002 that was retroactive to January 1, 2002.  The change 
suspended the use of net operating losses for a two year period.  
Therefore, the gain from the sale of the Companion Pet Products division 
could not be offset against prior net operating losses, resulting in tax 
expense for 2002.  The effect of this change was required to be reflected 
as a component of continuing operations.  The Company sold some of its 
state tax operating loss carryforwards in exchange for proceeds of $249,000 
in 2002.  The 2002 proceeds partially offset the effect of the tax law 
change.

      The $435,000 of income from discontinued operations in 2003 consisted 
of a $169,000 insurance settlement, net of legal costs, received for 
damages incurred by the Company as a result of a heating oil leak at the 
Company's Companion Pet Products site and a $288,000 gain on the sale of 
the Company's Companion Pet Products facility offset by $15,000 of 
regulatory expenses and $7,000 of other expenses. In 2002, discontinued 
operations consisted of the gain on the sale of the Companion Pet Products 
division and the loss from operations of that division.

Liquidity and Capital Resources

      The Company's operating activities used $235,000 of cash during 2004, 
compared to $468,000 used in 2003.

      The Company used $427,000 of cash in 2004 for investing activities 
compared to $452,000 used 2003. The majority of the 2004 investing 
activities were for the machinery and equipment purchases to set up the 
metal plating line, which was offset by proceeds from the sale of marketable 
securities.  In 2003, the cash was primarily used to purchase marketable 
securities offset by proceeds from the sale of property.

      The Company's financing activities provided $221,000 of cash in 2004 
compared to $258,000 used in 2003. The cash provided in 2004 was from the 
exercise of stock options by a former director of the Company and in 2003 
cash was used primarily to pay off the loan from the New Jersey Economic 
Development Authority.

      The Company's principal sources of liquidity are cash from 
operations, cash and cash equivalents and marketable securities.  The 
Company has undergone many changes within the past year, including the 
release of the exclusivity on the Estee Lauder contract and the expansion 
of the facility to house the metal plating line.  These changes have made 
it necessary for the Company to utilize its cash.  However, these changes 
were made in an effort to position the Company for future growth and 
expansion.  Management was aware of the impact these changes would have on 
the cash balance and management believes that existing cash and cash 
equivalents and cash flows from operations will be sufficient to meet the 
Company's foreseeable cash needs for at least the next year.  If these 
funds are not sufficient to meet the Company's needs, two stockholders of 
the Company have agreed to loan the Company up to $500,000 each, if 
necessary, to fund the Company's commitment to Novavax due December 13, 2005 
or to fund the deficit through December 31, 2005.  There may be acquisition 
and other growth opportunities that may require additional external 
financing.  


  14


Management may, from time to time, seek additional funds from the public or 
private issuances of equity or debt securities.  There can be no assurance 
that such financing will be available or available on terms acceptable to 
the Company.

      The total contractual obligations over the next five years and beyond 
are as follows:

                       Expected Cash Payments By Year
                               (in thousands)



                                                                         2009 and
Contractual Commitments           2005      2006      2007      2008      beyond      Total
-----------------------           ----      ----      ----      ----     --------     -----

                                                                     
Operating lease obligations       $34       $25       $22       $22        $22         $125


      In February 2004, the Company signed a license agreement with UCT to 
utilize their patented technology for an electroless nickel boride metal 
finishing process. The Company spent $782,000 in capital expenditures on 
this new venture in order to set up the operations.

      The Company has an option, which is exercisable on December 13, 2005, 
to extend its exclusive license for the use of the Technologies in the IGI 
Field for an additional ten-year term in exchange for a $1,000,000 cash 
payment.

Factors Which May Affect Future Results

      The industry segments in which the Company competes are subject to 
intense competitive pressures.  The following sets forth some of the risks 
which the Company faces.

Intense Competition in Consumer Products Business
-------------------------------------------------

      The Company's Consumer Products business competes with large, well-
financed cosmetics and consumer products companies with development and 
marketing groups that are experienced in the industry and possess far 
greater resources than those available to the Company.  There is no 
assurance that the Company's consumer products can compete successfully 
against its competitors or that it can develop and market new products that 
will be favorably received in the marketplace.  In addition, certain of the 
Company's customers that use the Company's Novasome(R) lipid vesicles in 
their products may decide to reduce their purchases from the Company or 
shift their business to other suppliers.

Effect of Rapidly Changing Technologies
---------------------------------------

      The Company expects to sublicense its technologies to third parties, 
which would manufacture and market products incorporating the technologies.  
However, if its competitors develop new and improved technologies that are 
superior to the Company's technologies, its technologies could be less 
acceptable in the marketplace and therefore the Company's planned 
technology sublicensing could be materially adversely affected.

Revision of Current Contract with Estee Lauder
----------------------------------------------

      As noted above, in 2004, the Company renegotiated its agreement 
with Estee Lauder. The Company will no longer manufacture products for 
Estee Lauder.  Estee Lauder now manufactures all products in house and pays 
the Company $5.00 per kilogram produced, up to $2 million, and then $2.00 per 
kilogram thereafter.  In addition, the exclusivity clause was removed from 
the Estee Lauder agreement and, consequently, the Company may now sell its 
products in department and specialty stores. Although it is the Company's 
belief that this will increase business and revenue in the future, there is 
no guarantee that it will occur.

Licensing Agreement with Universal Chemical Technologies, Inc.
--------------------------------------------------------------

      In February 2004, the Company signed a license agreement with UCT to 
utilize their patented technology for an electroless nickel boride metal 
finishing process. This is a new venture for the Company that required 
$782,000 to be spent to date to set up the operations at our facility.  The 
Company has an exclusive license within a 150 mile radius of its facility 
for commercial and military applications. The Company believes there is the 
possibility of major revenue and profit growth using this application, but 
there is no guarantee that it will materialize.


  16


American Stock Exchange (AMEX) Continuing Listing Standards
-----------------------------------------------------------

      On March 28, 2002, the Company was notified by AMEX that it was below 
certain of the Exchange's continuing listing standards.  Specifically, the 
Company was required to reflect income from continuing operations and net 
income for 2002 and a minimum of $4,000,000 in stockholders' equity by 
December 31, 2002 in order to remain listed.

      On April 25, 2002, the Company submitted a plan of compliance to 
AMEX.  On June 12, 2002, AMEX notified the Company that it had accepted the 
Company's plan of compliance and had granted the Company an extension of 
time to regain compliance with the continued listing standards by December 
31, 2002. The Company was subject to periodic review by the AMEX staff 
during the extension period.  Based on the Company's reported results for 
2002, the Company was not in compliance with the AMEX listing standards for 
income from continuing operations. On April 14, 2003, the Company received 
formal notification from AMEX that the Company was deemed to be in 
compliance with all AMEX requirements for continued listing on AMEX. This 
determination is subject to the Company's favorable progress in satisfying 
the AMEX guidelines for continued listing and to AMEX's routine periodic 
reviews of the Company's SEC filings. Based on the Company's 2004 year-end 
results, the Company is not in compliance with the AMEX requirement for 
reporting income from continuing operations and net income for the year 
ended December 31, 2004. As of the date of the filing of the Form 10-K, the 
Company has not been contacted by AMEX concerning the Company's non-
compliance with the AMEX requirements. While as of this date, the Company 
has not received any notification of non-compliance from AMEX, the Company 
has no knowledge of nor can it predict whether AMEX shall at any time 
hereafter issue formal notification to the Company of its non-compliance 
with the requirements for continued listing on AMEX, which could result in 
the Company's delisting from AMEX or otherwise adversely affect the 
Company.

Recent Pronouncements

      In January 2003, the Financial Accounting Standards Board ("FASB") 
issued Interpretation No. 46, "Consolidation of Variable Interest Entities" 
(FIN 46), which addresses consolidation by business enterprises of variable 
interest entities ("VIEs").   FIN 46 is applicable immediately for VIEs 
created after January 31, 2003 and is effective for reporting periods ending 
after December 15, 2003, for VIEs created prior to February 1, 2003. In 
December 2003, the FASB published a revision to FIN 46 ("FIN 46R") to clarify 
some of the provisions of the interpretation and to defer the effective date 
of implementation for certain entities. Under the guidance of FIN 46R, public 
companies that have interests in VIE's that are commonly referred to as 
special purpose entities are required to apply the provisions of FIN 46R for 
periods ending after December 15, 2003. A public company that does not have 
any interests in special purpose entities but does have a variable interest 
in a VIE created before February 1, 2003, must apply the provisions of FIN 
46R by the end of the first interim or annual reporting period ending after 
March 14, 2004. The adoption of FIN 46 had no impact on the financial 
condition or results of operations since the Company does not have investments 
in VIEs.

      In November 2004, the FASB issued SFAS No. 151, "Inventory Costs," 
which clarifies the accounting for abnormal amounts of idle facility 
expense, freight, handling costs, and wasted material (spoilage).  The 
provisions of this Statement shall be effective for inventory costs 
incurred during the fiscal years beginning after June 15, 2005.  The 
Company is currently evaluating the effects the adoption of this statement 
will have on the Company's financial statements.

      In December 2004, the FASB issued SFAS No. 123R, "Share-Based 
Payment." SFAS No. 123R requires employee stock options and rights to 
purchase shares under stock participation plans to be accounted for under 
the fair value method, and eliminates the ability to account for these 
instruments under the intrinsic value method prescribed by Accounting 
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees", 
and allowed under the original provisions of SFAS No. 123. SFAS No. 123R 
requires the use of an option-pricing model for estimating fair value, 
which is amortized to expense over the service periods. The requirements of 
SFAS No. 123R are effective for fiscal periods beginning after June 15, 
2005. The Company is currently evaluating the transition methods.

Critical Accounting Policies and Estimates

      In December 2001, the SEC issued disclosure guidance for "critical 
accounting policies."  The SEC defines "critical accounting policies" as 
those that require application of management's most difficult, subjective 
or complex judgments, often as a result of the need to make estimates about 
the effect of matters that are inherently uncertain and may change in 
subsequent periods.

      Our significant accounting policies are described in Note 1 in the 
Notes to Consolidated Financial Statements.  Not all of these significant 
accounting policies require management to make difficult, subjective or 
complex judgements or estimates.  However, the following policies could be 
deemed to be critical within the SEC definition.


  16


Environmental Remediation Liability
-----------------------------------

      On March 2, 2001, the Company became aware of environmental 
contamination resulting from an unknown heating oil leak at its Companion 
Pet Products manufacturing facility.  The Company immediately notified the 
New Jersey Department of Environmental Protection and the local 
authorities, and hired a contractor to assess the exposure and required 
clean up.  Based on the initial information from the contractor, the 
Company originally estimated the cost for the cleanup and remediation to be 
$310,000.  In September 2001, the contractor updated the estimated total 
cost for the cleanup and remediation to be $550,000.  In December 2002, a 
further update was performed and the final estimated costs were increased 
to $620,000, of which $82,000 remains accrued as of December 31, 2004. 
Based on information provided to the Company from its environmental 
consultant and what is known to date, the Company believes the reserve is 
sufficient for the remediation of the environmental contamination. There is 
a possibility, however, that the remediation costs may exceed the Company's 
estimates.

Long-Lived Assets
-----------------

      The Company's long-lived assets are reviewed for impairment whenever 
events or changes in circumstances indicate that the carrying amount of the 
asset may not be recoverable.  The recoverability of assets to be held and 
used is measured by a comparison of the carrying amount of the asset to 
future net undiscounted cash flows expected to be generated by the asset.  
Based on available information, management believes that the carrying value 
of its long-lived assets are currently recoverable from future net 
undiscounted cash flows expected to be generated from such assets.  There 
is a possibility, however, that changes could occur in the future (e.g., 
the loss of a significant customer) which would negatively impact the 
Company's ability to recover the carrying amount of its long-lived assets.  
The occurrence of such an event might result in the Company having to 
record an impairment charge.

Deferred Tax Valuation Allowance
--------------------------------

      Deferred taxes arise due to temporary differences in the bases of 
assets and liabilities and from net operating losses and credit 
carryforwards. In general, deferred tax assets represent future tax 
benefits to be received when certain expenses previously recognized in the 
Company's statement of operations become deductible expenses under 
applicable income tax laws or loss or credit carryforwards are utilized. 
Accordingly, realization of deferred tax assets is dependent on future 
taxable income against which these deductions, losses and credits can be 
utilized. In assessing the realizability of deferred tax assets, management 
considers whether it is more likely than not that some portion or all of 
the deferred tax assets will not be realized. Management considers 
historical operating losses, scheduled reversals of deferred tax 
liabilities, projected future taxable income and tax planning strategies in 
making this assessment. As a result, the Company concluded that it was more 
likely than not that it will be unable to realize the gross deferred tax 
assets in the foreseeable future and established a valuation reserve for 
all such deferred tax assets.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Market risk represents the risk of loss that may impact the financial 
position, results of operations, or cash flow of the Company due to adverse 
changes in market prices and interest rates. The Company is exposed to 
market risk because of changes in interest rates and changes in the fair 
market value of its marketable securities portfolio.

      The Company does not use derivative instruments in its marketable 
securities portfolio. The Company classifies its investments in its 
marketable securities portfolio as available-for-sale and records them at 
fair value. The securities unrealized holding gains and losses are excluded 
from income (loss) and are recorded directly to stockholders' equity in 
accumulated other comprehensive income (loss). Changes in interest rates are 
not expected to have an adverse effect on the Company's financial condition or 
results of operations.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The consolidated financial statements and notes thereto listed in the 
accompanying index to financial statements (Item 15) are filed as part of 
this Annual Report and incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

      None.


  17


ITEM 9A.  CONTROLS AND PROCEDURES

      Under the supervision and with the participation of certain members 
of the Company's management, including the Chief Executive Officer and Vice 
President of Finance, the Company completed an evaluation of the 
effectiveness of the design and operation of its disclosure controls and 
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 
Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on 
this evaluation, the Company's Chief Executive Officer and Vice President 
of Finance believe that the disclosure controls and procedures were 
ineffective because of material weaknesses in our internal controls as of 
the end of the period covered by this report with respect to timely 
communicating to them and other members of management responsible for 
preparing periodic reports all material information required to be 
disclosed in this report as it relates to the Company and its consolidated 
subsidiaries.  These weaknesses, which are disclosed below, were identified 
during our fiscal 2004 evaluation of internal control over financial 
reporting.

      In a report to the Audit Committee of our Board of Directors and 
management of the Company, delivered by our independent audit firm, Amper, 
Politziner & Mattia P.C. on March 24, 2005 in connection with their audit 
of our financial results for the year ended December 31, 2004, two items 
were identified to be material weaknesses in our internal controls.  A 
"material weakness" is a reportable condition in which the design or 
operation of one or more of the internal control components does not reduce 
to a relatively low level the risk that misstatements caused by error or 
fraud in amounts that would be material in relation to the financial 
statements being audited may occur and not be detected within a timely 
period by employees in the normal course of performing their assigned 
functions. Our material weaknesses are insufficient resources and 
administrative support in the accounting department and an unreliable 
accounting software package.  As a result of these material weaknesses, our 
internal control over financial reporting is ineffective.  We have begun to 
take steps to alleviate these material weaknesses.  We hired an outside 
consulting firm to assist us in implementing a new accounting/manufacturing 
software package that we began installing in January 2005.  In addition, we 
will be hiring an additional support person for the accounting department.  
The impact of the above conditions did not affect the results of this 
period or any prior period.

      There were no significant changes in our internal control over 
financial reporting that occurred during the last fiscal period that have 
materially affected, or were reasonably likely to materially affect, the 
Company's internal control over financial reporting.

      Based in part on the steps listed above, our Chief Executive Officer 
and Vice President of Finance have concluded that our disclosure controls 
and procedures are ineffective to ensure that the information that we are 
required to disclose in reports that we file or submit under the Securities 
Exchange Act of 1934 is recorded, processed, summarized and reported 
accurately within the time period specified in Securities and Exchange 
Commission rules and forms.  

      The Company's management cannot assure that its disclosure controls 
and procedures or its internal control over financial reporting will 
prevent all errors and all 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. Because of 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, within the Company have been 
detected. These inherent limitations include the realities that judgments 
in decision-making can be faulty, and breakdowns can occur because of 
simple errors or mistakes. Additionally, controls can be circumvented by 
the individual acts of some person or by collusion of two or more people. 
The design of any system of controls also is based in part upon certain 
assumptions about the likelihood of future events, and there can be no 
assurance that any design will succeed in achieving its stated goals under 
all potential future conditions; over time, controls may become inadequate 
because of changes in conditions, or the degree of compliance with the 
policies or procedures may deteriorate. Because of the inherent limitations 
in a cost-effective control system, misstatements due to error or fraud may 
occur and not be detected. Accordingly, the Company's disclosure controls 
and procedures are designed to provide reasonable, not absolute, assurance 
that the objectives of its disclosure control system are met and, as set 
forth above. 

ITEM 9B.  OTHER INFORMATION

      None.


  18


                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      A portion of the information required by this item is contained in 
part under the caption "Executive Officers of the Registrant" in Part I 
hereof, and the remainder is contained in the Company's Proxy Statement for 
the Company's 2005 Annual Meeting of Stockholders (the "2005 Proxy 
Statement") under the captions "PROPOSAL 1 - Election of Directors - 
Nominees for Election as Directors," "Committees of the Board - Audit 
Committee" and "Section 16(a) Beneficial Ownership Reporting Compliance" 
which are incorporated herein by this reference.  Officers are elected on 
an annual basis and serve at the discretion of the Board of Directors. The 
Company expects to file the 2005 Proxy Statement no later than April 29, 
2005.

      The Company has adopted a code of ethics that applies to all 
directors, officers and employees of the Company and its subsidiaries. The 
Company's code of ethics is available at its web site at www.askigi.com.

ITEM 11.  EXECUTIVE COMPENSATION

      The information required by this item is contained in the Company's 
2005 Proxy Statement under the captions "EXECUTIVE COMPENSATION," "OPTION 
GRANTS IN LAST FISCAL YEAR", "AGGREGATED OPTION EXERCISES IN FISCAL YEAR 
2004 AND YEAR END 2004 OPTION VALUES," "Compensation Committee Interlocks 
and Insider Participation," and "Director Compensation and Stock Options" 
and is incorporated herein by this reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 
          AND RELATED STOCKHOLDER MATTERS

      A portion of the information required by this item is contained in 
the Company's 2005 Proxy Statement under the caption "Beneficial Ownership 
of Common Stock" and is incorporated herein by this reference.

Securities Authorized For Issuance Under Equity Compensation Plans

      The following table includes information as of December 31, 2004 
relating to the Company's 1989 Stock Incentive Plan, 1991 Stock Incentive, 
1999 Stock Incentive Plan and 1999 Director Stock Option Plan, which 
comprise all of the equity compensation plans of the Company.  The table 
provides the number of securities to be issued upon the exercise of 
outstanding options under such plans, the weighted-average exercise price 
of such outstanding options and the number of securities remaining 
available for future issuance under such equity compensation plans:




-----------------------------------------------------------------------------------------------------------
                                                                                     Number of securities
                                                                                    remaining available for
                                                                                     future issuance under
                                  Number of securities to     Weighted-average       equity compensation
                                  be issued upon exercise     exercise price of        plans (excluding
                                  of outstanding options,    outstanding options,    securities reflected
Plan category                      warrants and  rights      warrants and rights         in column(a))
-----------------------------------------------------------------------------------------------------------
                                            (a)                      (b)                       (c)
-----------------------------------------------------------------------------------------------------------

                                                                                   
Equity compensation plans
 approved by security holders            2,588,048                  $1.85                   940,902
-----------------------------------------------------------------------------------------------------------
Equity compensation plans
 not approved by security
 holders                                         -                      -                         -
-----------------------------------------------------------------------------------------------------------
Total                                    2,588,048                  $1.85                   940,902
-----------------------------------------------------------------------------------------------------------


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required by this item is contained in the Company's 
2005 Proxy Statement under the caption "Certain Relationships and Related 
Transactions" and is incorporated herein by this reference.


  19


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The information required by this item is contained in the Company's 
2005 Proxy Statement under the caption "Relationship with Independent 
Public Accountants" and is incorporated herein by this reference.

                                   PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)   (1)   Financial Statements:

            Report of Independent Registered Public Accounting Firm

            Report of Independent Registered Public Accounting Firm

            Consolidated Balance Sheets, December 31, 2004 and 2003

            Consolidated Statements of Operations for the years ended 
            December 31, 2004, 2003 and 2002

            Consolidated Statements of Cash Flows for the years ended 
            December 31, 2004, 2003 and 2002

            Consolidated Statements of Stockholders' Equity (Deficit) and 
            Comprehensive Income (Loss) for the years ended December 31, 
            2004, 2003 and 2002

            Notes to Consolidated Financial Statements

      (2)   Financial Statement Schedules:

            Schedule II. Valuation and Qualifying Accounts and Reserves

            Schedules other than those listed above are omitted for the 
            reason that they are either not applicable or not required or 
            because the information required is contained in the financial 
            statements or notes thereto.

            Condensed financial information of the Registrant is omitted 
            since there are no substantial amounts of "restricted net 
            assets" applicable to the Company's consolidated subsidiaries.

      (3)   Exhibits Required to be Filed by Item 601 of Regulation S-K:

            The exhibits listed in the Exhibit Index immediately preceding 
            such exhibits are filed as part of this Annual Report on Form 
            10-K unless incorporated by reference as indicated.


  20


                                 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.


Date:  December 22, 2005               IGI, Inc.

                                       By:  /s/Frank Gerardi
                                            -------------------------------
                                            Frank Gerardi
                                            Chairman and Chief Executive 
                                            Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the 
registrant in the capacity and on the dates indicated.



Signatures                               Title                          Date
----------                               -----                          ----

                                                             
/s/Frank Gerardi          Chairman and Chief Executive Officer     December 22, 2005
   Frank Gerardi

/s/Carlene A. Lloyd       Vice President of Finance                December 22, 2005
   Carlene A. Lloyd

/s/Stephen J. Morris      Director                                 December 22, 2005
   Stephen J. Morris

/s/Terrence O'Donnell     Director                                 December 22, 2005
   Terrence O'Donnell

/s/Donald W. Joseph       Director                                 December 22, 2005
   Donald W. Joseph



  21


           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
IGI, Inc.:

We have audited the accompanying consolidated balance sheet of IGI, Inc. 
and subsidiaries as of December 31, 2003 and the related consolidated 
statements of operations, cash flows and stockholders' equity (deficit) and 
comprehensive income (loss) for each of the years in the two-year period 
ended December 31, 2003.  In connection with our audits of the consolidated 
financial statements, we also have audited the financial statement schedule 
for the years ended December 31, 2003 and 2002.  These consolidated financial 
statements and financial statement schedule are the responsibility of the 
Company's management.  Our responsibility is to express an opinion on these 
consolidated financial statements and financial statement schedule based on 
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  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 consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of IGI, 
Inc. and subsidiaries as of December 31, 2003, and the results of their 
operations and their cash flows for each of the years in the two-year period 
ended December 31, 2003, in conformity with U.S. generally accepted accounting 
principles.  Also in our opinion, the related financial statement schedule, 
when considered in relation to the basic consolidated financial statements 
taken as a whole, presents fairly, in all material respects, the information 
set forth therein.

As discussed in Note 1 to the consolidated financial statements, the 
Company adopted the provisions of Statement of Financial Accounting 
Standards No. 145, Rescission of FASB Statements No. 4, 44, and 64, 
Amendment of FASB Statement No. 13, and Technical Corrections, relating to 
the classification of losses from the extinguishment of debt in 2003.


                                       /s/ KPMG LLP

Philadelphia, Pennsylvania
April 7, 2004


  22


           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
IGI, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of IGI, Inc. 
and Subsidiaries as of December 31, 2004, and the related consolidated 
statements of operations, cash flows, and stockholders' equity (deficit) and 
comprehensive income (loss) for the year then ended.  These consolidated 
financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these consolidated financial 
statements based on our audit. 

We conducted our audit in accordance with the standards of the Public 
Company Accounting Oversight Board (United States).  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 audit provides a reasonable basis for 
our opinion.

In our opinion, the 2004 consolidated financial statements referred to 
above present fairly, in all material respects, the financial position of 
IGI, Inc. and Subsidiaries as of December 31, 2004, and the results of 
its operations and its cash flows for the year ended December 31, 2004, in 
conformity with U.S generally accepted accounting principles.

In connection with our audit of the consolidated financial statements 
referred to above, we audited Schedule II - Valuation and Qualifying 
Accounts. In our opinion, this financial schedule, when considered in 
relation to the consolidated financial statements taken as a whole, 
presents fairly, in all material respects, the information stated therein.


                                       /s/ AMPER, POLITZINER & MATTIA P.C.

March 30, 2005
Edison, New Jersey


  23


                         IGI, INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS
                         December 31, 2004 and 2003
           (in thousands, except share and per share information)



                                                         2004          2003
                                                         ----          ----

                                                               
ASSETS
Current assets:
  Cash and cash equivalents                            $    380      $    821
  Restricted cash                                            50            50
  Marketable securities                                     377           800
  Accounts receivable, less allowance for doubtful
   accounts of $10 and $16 in 2004 and 2003,
   respectively                                             306           350
  Licensing and royalty income receivable                   155            17
  Inventories                                               247           192
  Prepaid expenses and other current assets                   8           133
                                                       --------      --------
      Total current assets                                1,523         2,363
Property, plant and equipment, net                        3,168         2,607
Other assets                                                 39            54
                                                       --------      --------
      Total assets                                     $  4,730      $  5,024
                                                       ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                          157           105
  Accrued payroll                                            16            75
  Other accrued expenses                                    243           301
  Income taxes payable                                        5             7
  Deferred income                                           180           165
                                                       --------      --------
      Total current liabilities                             601           653
Deferred income                                             121           205
                                                       --------      --------
      Total liabilities                                     722           858
                                                       --------      --------

Commitments and contingencies (Notes 13 and 14)

Stockholders' equity:
  Common stock, $.01 par value, 50,000,000 shares
   authorized; 13,547,520 and 13,351,237 shares
   issued in 2004 and 2003, respectively                    135           134
  Additional paid-in capital                             24,467        23,702
  Accumulated other comprehensive loss                      (32)            -
  Accumulated deficit                                   (19,167)      (18,275)
  Less treasury stock, 1,965,740 shares at cost
   in 2004 and 2003                                      (1,395)       (1,395)
                                                       --------      --------
      Total stockholders' equity                          4,008         4,166
                                                       --------      --------
      Total liabilities and stockholders' equity       $  4,730      $  5,024
                                                       ========      ========


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


  24


                         IGI, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
            for the years ended December 31, 2004, 2003 and 2002
           (in thousands, except share and per share information)



                                                         2004           2003           2002
                                                         ----           ----           ----

                                                                          
Revenues:
  Sales, net                                           $  2,551       $  2,901       $  3,513
  Licensing and royalty income                            1,007            656            851
                                                       --------       --------       --------
      Total revenues                                      3,558          3,557          4,364

Costs and Expenses:
  Cost of sales                                           1,253          1,345          1,378
  Selling, general and administrative expenses            1,798          2,422          2,358
  Product development and research expenses               1,727            762            549
                                                       --------       --------       --------
Operating profit (loss)                                  (1,220)          (972)            79
Interest income (expense), net                               25              7           (283)
Other income, net                                            13              -             58
Loss on early extinguishment of debt                          -              -         (2,654)
                                                       --------       --------       --------

Loss from continuing operations before
 provision (benefit) for income taxes                    (1,182)          (965)        (2,800)
Provision (benefit) for income taxes                       (290)          (208)           330
                                                       --------       --------       --------

Loss from continuing operations                            (892)          (757)        (3,130)

Discontinued operations:
  Loss from operations of discontinued businesses             -              -           (523)
  Gain on disposal of discontinued businesses                 -            435         12,433
                                                       --------       --------       --------
Net income (loss)                                          (892)          (322)         8,780

Mark to market for detachable stock warrants                  -              -           (133)
                                                       --------       --------       --------
Net income (loss) attributable to common
 stockholders                                          $   (892)      $   (322)      $  8,647
                                                       ========       ========       ========

Basic and Diluted Earnings (Loss) Per Common Share
 Continued operations                                  $   (.08)      $   (.07)      $   (.28)
  Discontinued operations                                     -            .04           1.04
                                                       --------       --------       --------
  Net income (loss) per share                          $   (.08)      $   (.03)      $    .76
                                                       ========       ========       ========

Weighted average of common stock outstanding
  Basic and diluted                                  11,547,791     11,373,952     11,429,978
                                                     ==========     ==========     ==========


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


  25


                          IGI, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
            for the years ended December 31, 2004, 2003 and 2002
                               (in thousands)



                                                                 2004          2003          2002
                                                                 ----          ----          ----

                                                                                  
Cash flows from operating activities:
  Net income (loss)                                            $   (892)     $   (322)     $  8,780
  Reconciliation of net income (loss) to net cash used in
   operating activities:
    Gain on disposal of discontinued operations                       -          (435)      (12,433)
    Proceeds from insurance settlement, net of expenses
     related to discontinued operations                               -           147             -
    Depreciation and amortization                                   271           269           306
    Amortization of deferred financing costs and debt
     discount                                                         -             -           275
    Loss on early extinguishment of debt                              -             -         2,654
    Impairment of property, plant and equipment                       -             -           630
    Loss (gain) on sale of marketable securities                      1             -           (58)
    Provision for accounts and notes receivable and
     inventories                                                      7            11            23
    Recognition of deferred income                                 (169)         (135)         (135)
    Interest expense related to subordinated note agreement           -             -            41
    Stock-based compensation expense                                545            55            48
  Changes in operating assets and liabilities:
    Restricted cash                                                   -           (50)            -
    Accounts receivable                                              43           128          (177)
    Inventories                                                     (61)            8          (140)
    Licensing and royalty income receivable                        (138)          149            89
    Prepaid expenses and other assets                               125             6            12
    Accounts payable and accrued expenses                           (65)         (290)         (986)
    Deferred income                                                 100             -             -
    Income taxes payable                                             (2)           (9)            4
    Discontinued operations - working capital changes and
     non-cash charges                                                 -             -           343
                                                               --------     ---------     ---------
Net cash used in operating activities                              (235)         (468)         (724)
                                                               --------     ---------     ---------
Cash flows from investing activities:
  Capital expenditures                                             (817)          (99)         (104)
  Proceeds from sale of property, plant and equipment                 -           450           550
  Increase in other assets                                            -            (3)          (33)
  Proceeds from sale of marketable securities                       500             -            58
  Purchase of marketable securities                                (110)         (800)            -
  Discontinued operations - other investing activities                -             -            (8)
  Proceeds from sale of discontinued operations, net of
   direct costs                                                       -             -        15,462
                                                               --------     ---------     ---------
Net cash provided by (used in) investing activities                (427)         (452)       15,925
                                                               --------     ---------     ---------
Cash flows from financing activities:
  Borrowings under revolving credit agreement                         -             -         5,958
  Repayment of revolving credit agreement                             -             -        (8,284)
  Repayment of debt                                                   -             -        (9,516)
  Payment of deferred financing costs                                 -             -          (273)
  Repayment of EDA loan                                               -          (227)          (15)
  Borrowings under EDA loan                                           -            45           197
  Proceeds from exercise of common stock options
   and purchase of common stock                                     221             4            36
  Purchase of treasury shares                                         -           (80)       (1,315)
                                                               --------     ---------     ---------
Net cash provided by (used in) financing activities                 221          (258)      (13,212)
                                                               --------     ---------     ---------
Net increase (decrease) in cash and cash equivalents               (441)       (1,178)        1,989
Cash and cash equivalents at beginning of year                      821         1,999            10
                                                               --------     ---------     ---------
Cash and cash equivalents at end of year                       $    380     $     821     $   1,999
                                                               ========     =========     =========

Supplemental cash flow information:

  Cash payments for interest                                   $      -     $      10     $     507
  Cash payment (receipt) for taxes                                 (288)         (199)          328


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


  26


                         IGI, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                       AND COMPREHENSIVE INCOME (LOSS)
            for the years ended December 31, 2004, 2003 and 2002
                  (in thousands, except share information)



                                                              Accumulated
                                                 Additional      Other                                                 Total
                                Common  Stock     Paid-In    Comprehensive  Comprehensive  Accumulated  Treasury   Stockholders'
                               Shares    Amount   Capital         Loss      Income (Loss)    Deficit     Stock    Equity (Deficit)
                               ------    ------  ----------  -------------  -------------  -----------  --------  -----------------

                                                                                              
Balance, January 1, 2002     11,243,720   $112    $22,436        $  -                       $(26,733)    $    -       $(4,185)

Issuance of stock pursuant
 to Directors' Stock Plan        70,322      1         47                                                                  48
Stock options exercised          39,000      1         20                                                                  21
Employee stock purchase plan     30,975                15                                                                  15
Adjustment of detachable
 stock warrants                                      (133)                                                               (133)
Detachable stock warrant
 exercised                    1,878,640     19      1,259                                                               1,278
Buyback of stock                                                                                         (1,315)       (1,315)
Net income                                                                      $8,780         8,780                    8,780
                             ----------   ----    -------        ----           ======      --------     ---------    -------

Balance, December 31, 2002   13,262,657    133     23,644                                    (17,953)    (1,315)        4,509

Issuance of stock pursuant
 to Directors' Stock Plan        79,327      1         54                                                                  55
Employee stock purchase plan      9,253                 4                                                                   4
Buyback of stock                                                                                            (80)          (80)
Net loss                                                                        $ (322)         (322)                    (322)
                             ----------   ----    -------        ----           ======      --------     ---------    -------

Balance, December 31, 2003   13,351,237    134     23,702                                    (18,275)    (1,395)        4,166

Stock options exercised         176,666      1        212                                                                 213
Employee stock purchase plan     19,617                 8                                                                   8
Issuance of stock option to
 non-employee                                         545                                                                 545
Comprehensive Income
  Net loss                                                                      $(892)          (892)                    (892)
  Unrealized loss on 
   marketable securities                                          (32)            (32)                                     (32)
                                                                                -----
Comprehensive loss                                                              $(924)
                             ----------   ----    -------        ----           =====       --------     ---------    -------

Balance, December 31, 2004   13,547,520   $135    $24,467        $(32)                      $(19,167)    $  (1,395)   $ 4,008
                             ==========   ====    =======        ====                       ========     =========    =======


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


  27


                         IGI, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

      Nature of the Business

      IGI, Inc. ("IGI" or the "Company"), a Delaware corporation, operating 
in the State of New Jersey, is primarily engaged in the production and 
marketing of cosmetics and skin care products. During 2002, the Company 
sold its Companion Pet Products division, which manufactured and sold 
companion pet care products. Beginning in the first quarter of 2005, the 
Company will also be engaged in the metal finishing business, specifically 
nickel boride, using the UltraCem technology.

      IGI's Consumer Products business is primarily focused on the 
continued commercial use of the Novasome(R) microencapsulation technologies 
for skin care applications.  These efforts have been directed toward the 
development of high quality skin care products marketed by the Company or 
through collaborative arrangements with cosmetic and consumer products 
companies.

      Estee Lauder, a significant customer, accounted for $1,248,000, or 
35%, of 2004 revenues, $1,812,000, or 51%, of 2003 revenues, and 
$2,629,000, or 60%, of 2002 revenues.  In July 2004, the Company amended 
its agreement with Estee Lauder.  Estee Lauder is now manufacturing all 
Novasome(R) and non Novasome(R) products in house and must pay the Company 
a royalty per kilogram on all Novasome(R) products they manufacture, 
including all new products developed.  In addition, Estee Lauder paid to 
the Company a one time payment of $100,000 in connection with the amendment 
of the agreement.  The Company's contract manufacturing of Estee Lauder 
non-Novasome(R) products, which accounted for $559,000 of the $1,248,000 in 
revenues in 2004, terminated contractually on June 30, 2004, without any 
required future royalties or other payments to be received by the Company 
on any non-Novasome(R) products manufactured by Estee Lauder.

      Vetoquinol USA, a significant customer, accounted for $442,000 or 12% 
of 2004 revenues, $523,000, or 15%, of 2003 revenues, and $361,000, or 7%, of 
2002 revenues.

      Johnson & Johnson, a significant customer, accounted for $385,000 or 
11% of 2004 revenues, $488,000, or 14%, of 2003 revenues, and $714,000, or 
16%, of 2002 revenues.

      Principles of Consolidation

      The consolidated financial statements include the accounts of IGI, 
Inc. and its wholly-owned and majority-owned subsidiaries.  All 
intercompany accounts and transactions have been eliminated.

      Cash Equivalents

      Cash equivalents consist of short-term investments which have 
original maturities of 90 days or less.

      Accounts Receivable and Allowance for Doubtful Accounts

      The Company extends credit to its customers, based upon credit 
evaluations, in the normal course of business, primarily with 30- day 
terms. The Company does not require collateral from its customers. Bad 
debts are provided for on the allowance method based on historical experience 
and management's evaluation of outstanding accounts receivable. The Company 
charges off uncollectible receivables when the likelihood of collection is 
remote.

      Concentration of Credit Risk

      Financial instruments which potentially subject the Company to 
concentrations of credit risk are cash, cash equivalents and accounts 
receivable.  The Company limits credit risk associated with cash and cash 
equivalents by placing its cash and cash equivalents with one high credit 
quality financial institution. The Company's cash and cash equivalents, at 
times, may exceed federally insured limits.  The Company has not experienced 
any losses in such accounts.  The Company believes it is not exposed to any 
credit risk on cash and cash equivalents.

      Marketable Securities

      Realized gains and losses are determined using the specific-
identification method.

      Inventories

      Inventories are valued at the lower of cost, using the first-in, 
first-out ("FIFO") method, or market.


  28


      Property, Plant and Equipment

      Depreciation of property, plant and equipment is provided for under 
the straight-line method over the assets' estimated useful lives as 
follows:

                                                              Useful Lives
                                                              ------------

      Buildings and improvements                             10 - 30 years
      Machinery and equipment                                 3 - 10 years

      Repair and maintenance costs are charged to operations as incurred 
while major improvements are capitalized.  When assets are retired or 
disposed, the cost and accumulated depreciation thereon are removed from 
the accounts and any gains or losses are included in operating results.

      Long-Lived Assets

      In accordance with the provisions of Statement of Financial 
Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or 
Disposal of Long-Lived Assets," the Company reviews its long-lived assets 
for impairment whenever events or changes in circumstances indicate that 
the carrying amount of the assets may not be recoverable.  In performing 
such review for recoverability, the Company compares expected future cash 
flows of assets to the carrying value of the long-lived assets and related 
identifiable intangibles. If the expected future cash flows (undiscounted) 
are less than the carrying amount of such assets, the Company recognizes an 
impairment loss for the difference between the carrying value of the assets 
and their estimated fair value, with fair values being determined using 
projected discounted cash flows at the lowest level of cash flows 
identifiable in relation to the assets being reviewed.

      Accounting for Environmental Costs

      Accruals for environmental remediation are recorded when it is 
probable a liability has been incurred and costs are reasonably estimable.  
The estimated liabilities are recorded at undiscounted amounts. 
Environmental insurance recoveries are included in the statement of 
operations in the year in which the issue is resolved through settlement or 
other appropriate legal process.

      Income Taxes

      The Company records income taxes in accordance with SFAS No. 109, 
"Accounting for Income Taxes," under the asset and liability method of 
accounting for income taxes.  Under the asset and liability method, 
deferred income taxes are recognized for the tax consequences of temporary 
differences by applying enacted statutory tax rates applicable to future 
years to operating loss and tax credit carryforwards and differences 
between the financial statement carrying amounts and the tax bases of 
existing assets and liabilities.  The effect on deferred taxes of a change 
in tax rates is recognized in income in the period that includes the 
enactment date.  A valuation allowance is recorded based on a determination 
of the ultimate realizability of future deferred tax assets.

      Revenue Recognition

      Sales, net of appropriate cash discounts, product returns and sales 
reserves, are recorded upon shipment of products.  Revenues earned under 
research contracts or sublicensing and supply agreements are either 
recognized when the related contract provisions are met, or, if under such 
contracts or agreements the Company has continuing obligations, the revenue 
is initially deferred and then recognized over the life of the agreement.

      Stock-Based Compensation

       As permitted by SFAS No. 123, "Accounting for Stock-Based 
Compensation", which establishes a fair value based method of accounting 
for stock-based compensation plans, the Company had elected to follow 
Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock 
Issued to Employees" for recognizing stock-based compensation expense for 
financial statement purposes.  For companies that choose to continue applying 
the intrinsic value method, SFAS No. 123 mandates certain pro forma disclosures
as if the fair value method had been utilized.  The Company accounts for 
stock based compensation to consultants in accordance with EITF Issue No. 
96-18, "Accounting for Equity Instruments That Are Issued to Other Than 
Employees for Acquiring, or in Conjunction with Selling, Goods or Services" 
and SFAS No. 123.


  29


      The following table illustrates the effect on income (loss) 
attributable to common stockholders and earnings (loss) per share if the 
Company had applied the fair value recognition provisions of SFAS No. 123 
to stock-based employee compensation:



                                                     2004         2003        2002
                                                     ----         ----        ----
                                             (in thousands, except per share information)

                                                                    
Net income (loss) attributable to common 
 stockholders - as reported                        $  (892)      $(322)      $8,647
Deduct: Total stock-based employee
 compensation expense determined
 under the fair value based method                    (193)       (129)        (496)
                                                   -------       -----       ------
Net income (loss) attributable to 
 common stockholders - pro forma                   $(1,085)      $(451)      $8,151
                                                   =======       =====       ======
Income (loss) per share - as reported
  Basic and diluted                                $  (.08)      $(.03)      $  .76
                                                   =======       =====       ======
Income (loss) per share - pro forma
  Basic and diluted                                $  (.09)      $(.04)      $  .71
                                                   =======       =====       ======


      The pro forma information has been determined as if the Company had 
accounted for its employee and director stock options under the fair value 
method.  The fair value for these options was estimated at the grant date 
using the Black-Scholes option-pricing model with the following assumptions 
for 2004, 2003 and 2002:



               Assumptions                   2004             2003              2002
               -----------                   ----             ----              ----

                                                                  
      Dividend yield                          0%              0%                0%
      Risk free interest rate            3.59%-4.27%     2.89%-3.62%       3.53%-4.97%
      Estimated volatility factor            88%            176%              176%
      Expected life                        7 years         7 years           7 years


      Product Development and Research

      The Company's research and development costs are expensed as 
incurred.

      Advertising Costs

      Advertising costs are expensed as incurred.  Such expenses for the 
years ended December 31, 2004, 2003, and 2002 were $39,000, $60,000 and 
$17,000, respectively.

      Shipping and Handling Costs

      Costs related to shipping and handling are comprised of outbound and 
inbound freight and the associated labor.  These costs are recorded in 
costs of sales.

      Net Income (Loss) per Common Share

      Basic net income (loss) per share of common stock is computed based 
on the weighted average number of shares of common stock outstanding during 
the period.  Diluted net income (loss) per share of common stock is 
computed using the weighted average number of shares of common stock and 
potential dilutive common stock equivalents outstanding during the period.  
Potential dilutive common stock equivalents include shares issuable upon 
the exercise of options and warrants.  Due to the Company's net loss from 
continuing operations for the years ended December 31, 2004, 2003 and 2002, 
the effect of the Company's potential dilutive common stock equivalents was 
anti-dilutive for each year; as a result, the basic and diluted weighted 
average number of common shares outstanding and net income (loss) per 
common share are the same.  Potentially dilutive common stock equivalents 
which were excluded from the net income (loss) per share calculations due 
to their anti-dilutive effect amounted to 1,140,379 for 2004, 2,550,000 for 
2003, and 2,852,000 for 2002.

      Comprehensive Income (Loss)

      The Company has adopted SFAS No. 130, "Reporting Comprehensive 
Income," which establishes standards for the reporting and display of 
comprehensive income (loss) and its components.  Comprehensive income (loss) 
is defined to include all changes in stockholders' equity during a period 
except those resulting from investments by owners and distributions to owners.
Comprehensive income (loss) is the sum of net income (loss) and unrealized 
gains (losses) on marketable securities.  Unrealized gains (losses) on 
investments are excluded from net income (loss) and are reported in 
accumulated other comprehensive loss in the accompanying consolidated 
financial statements.


  30


      Use of Estimates

      The preparation of financial statements in conformity with accounting 
principles generally accepted in the United States of America 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.  Significant 
estimates include allowances for excess and obsolete inventories, 
allowances for doubtful accounts, provisions for income taxes and related 
deferred tax asset valuation allowances, and accruals for environmental 
cleanup and remediation costs.  Actual results could differ from those 
estimates.

      Effect of Recent Accounting Pronouncements

      In April 2002, the Financial Accounting Standards Board ("FASB") 
issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, 
Amendment of FASB Statement No. 13 and Technical Corrections," which is 
effective for fiscal years beginning after May 15, 2002 for provisions 
related to SFAS No. 4, effective for all transactions occurring after May 
15, 2002 for provisions related to SFAS No. 13 and effective for all 
financial statements issued on or after May 15, 2002 for all other 
provisions of SFAS No. 145. The Company's loss from early extinguishment 
of debt realized in the second quarter of 2002 has been presented within 
continuing operations, rather than presented as an extraordinary item, in 
accordance with SFAS No. 145.

      In January 2003, FASB issued Interpretation 46, "Consolidation of 
Variable Interest Entities" (FIN 46), which addresses consolidation by 
business enterprises of variable interest entities ("VIEs").   FIN No.46 
is applicable immediately for VIEs created after January 31, 2003 and are 
effective for reporting periods ending after December 15, 2003, for VIEs 
created prior to February 1, 2003. In December 2003, the FASB published a 
revision to FIN 46 ("FIN 46R") to clarify some of the provisions of the 
interpretation and to defer the effective date of implementation for certain 
entities. Under the guidance of FIN 46R, public companies that have interests 
in VIE's that are commonly referred to as special purpose entities are 
required to apply the provisions of FIN 46R for periods ending after December 
15, 2003. A public company that does not have any interests in special purpose 
entities but does have a variable interest in a VIE created before February 
1, 2003, must apply the provisions of FIN 46R by the end of the first interim 
or annual reporting period ending after March 14, 2004. The adoption of FIN 46 
has no impact on the financial condition or results of operations since the 
Company does not have investments in VIE's.

      In November 2004, the FASB issued SFAS No. 151, "Inventory Costs," 
which clarifies the accounting for abnormal amounts of idle facility 
expense, freight, handling costs, and wasted material (spoilage).  The 
provisions of this statement shall be effective for inventory costs 
incurred during the fiscal years beginning after June 15, 2005.  The 
Company is currently evaluating the effects that adoption of this statement 
will have on the Company's consolidated financial statements.

      In December 2004, the FASB issued SFAS No. 123R, "Share-Based 
Payment." SFAS No. 123R requires employee stock options and rights to 
purchase shares under stock participation plans to be accounted for under 
the fair value method, and eliminates the ability to account for these 
instruments under the intrinsic value method prescribed by APB Opinion 
No. 25 "Accounting for Stock Issued to Employees," and allowed under the 
original provisions of SFAS No. 123. SFAS No. 123R requires the use of an 
option-pricing model for estimating fair value, which is amortized to expense 
over the service periods. The requirements of SFAS No. 123R are effective for 
fiscal periods beginning after June 15, 2005. The Company is currently 
evaluating the transition methods.

2.    Liquidity

      The Company's principal sources of liquidity are cash, cash 
equivalents and marketable securities of approximately $757,000 and cash 
from operations.  Management believes that existing cash, cash equivalents, 
marketable securities and cash flows from operations will be sufficient to 
meet the Company's foreseeable operating cash needs for at least the next 
year.  In addition, two stockholders of the Company have agreed to loan the 
Company up to $500,000 each, if necessary, to help fund the Company's 
commitment to Novavax due on December 13, 2005 or to fund the Company's 
deficit through December 31, 2005. There may be acquisition and other 
growth opportunities, however, that require additional external financing.  
Several of the board members have voiced their willingness to exercise 
stock options should the need for additional cash arise.  Management may, 
from time to time, seek to obtain additional funds from public or private 
issuances of equity or debt securities.  There can be no assurance that 
such additional financings will be available or available on terms 
acceptable to the Company.

3.    Marketable Securities

      Marketable securities at December 31, 2004 and 2003 consist of an 
investment in a short-term bond mutual fund and an investment in stock. 
The Company currently classifies all marketable securities as available-
for-sale in accordance with SFAS No. 115, "Accounting for Certain Investments 
in Debt and Equity Securities."  Securities classified as available-for-
sale are required to be reported at fair value with unrealized gains and 
losses, net of taxes, excluded from operations and shown separately as a 
component of accumulated other comprehensive loss within stockholders' 
equity.  Realized gains and losses on the sale of available-for-sale 
securities are determined using the specific-identification method.


  31


      The amortized cost, gross unrealized gains and losses and fair value 
of the available-for-sale marketable securities as of December 31, 2004 and 
2003 are as follows (amounts in thousands):




                                       Gross         Gross
                        Amortized    Unrealized    Unrealized    Fair    Carrying
2004                       Cost        Gains         Losses      Value    Amount
----                    ---------    ----------    ----------    -----   --------

                                                            
Mutual funds              $ 299         $ -          $ (4)       $ 295     $ 295
Securities                  110           -           (28)          82        82
                          -----         ---          ----        -----     -----
                          $ 409         $ -          $(32)       $ 377     $ 377
                          =====         ===          ====        =====     =====



                                       Gross         Gross
                        Amortized    Unrealized    Unrealized    Fair    Carrying
2003                       Cost        Gains         Losses      Value    Amount
----                    ---------    ----------    ----------    -----   --------

                                                            
Mutual funds              $ 800         $ -          $  -        $ 800     $ 800
                          =====         ===          ====        =====     =====


      Sales of available-for-sale securities for the year ended December 
31, 2004, 2003, and 2002 were as follows (amounts in thousands):



                                     2004      2003      2002
                                     ----      ----      ----

                                                 
Proceeds from sales                  $500        -        $58
Gross realized gains                    -        -         58
Gross realized losses                  (1)       -          -


      The increase in net unrealized holding losses on available-for-sale 
securities in the amount of $32,000 was recorded directly to stockholders' 
equity as of December 31, 2004. 

4.    Discontinued Operations

      On May 31, 2002, the stockholders of the Company approved, and the 
Company consummated, the sale of the assets and transfer of the liabilities 
of the Companion Pet Products division, which marketed companion pet care 
related products. The buyer assumed liabilities of approximately $986,000, 
and paid the Company cash in the amount of $16,254,000. The Company's 
results reflect a $12,433,000 gain on the sale of the Companion Pet 
Products division for the year ended December 31, 2002.  The gain is net of 
direct costs incurred by the Company in connection with the sale and the 
reduction in the purchase price resulting from post-closing adjustments. 
For the year ended December 31, 2003, the Company had a gain on the 
disposal of discontinued operations of $435,000 which primarily consisted 
of a net gain of $169,000 for an insurance settlement, net of legal costs, 
for damages incurred by the Company as a result of a heating oil leak at 
the Companion Pet Products manufacturing site and a net gain of $288,000 on 
the sale of the former Companion Pet Products manufacturing site land and 
building on December 18, 2003. The Companion Pet Products division incurred 
losses of $523,000 in the year ended December 31, 2002. The results for the 
year ended December 31, 2002 included an impairment charge of $630,000 
related to the Companion Pet Products warehouse. Upon the sale of the 
Companion Pet Products division, the Company paid all of its debt and 
interest owed to Fleet Capital Corporation ("Fleet") and American Capital 
Strategies, Ltd. ("ACS").  As a result, the Company incurred a $2,654,000 
loss from early extinguishment of debt in connection with the prepayment 
fees paid to Fleet and ACS and the write-off of the ACS debt discount.

      During 2001, the Company recorded non-recurring charges related to 
the cessation and shutdown of the manufacturing operations at the Companion 
Pet Products facility. The Company applied to the New Jersey Economic 
Development Authority (NJEDA) and the New Jersey Department of 
Environmental Protection for a grant and loan to provide partial funding 
for the costs of investigation and remediation of the environmental 
contamination discovered at the Companion Pet Products facility.  On June 
26, 2001, the Company was awarded an $81,000 grant and a $246,000 loan.  
The $81,000 grant was received in the third quarter of 2001.  The loan, 
which required monthly principal payments, had a term of ten years at a 
rate of interest of 5%.  The Company received funding of $45,000 and 
$182,000 from the loan during 2003 and 2002, respectively. On December 18, 
2003, the loan was paid in full upon the sale of the Companion Pet Products 
facility, which had served as the collateral for the loan.

      The activity in 2004 related to the environmental clean up costs is as 
follows (amounts in thousands):



                              Net accrual at         Cash          Net accrual at
Description                  December 31, 2003    expenditures    December 31, 2004
-----------                  -----------------    ------------    -----------------

                                                                
Environmental cleanup costs        $102              $(20)               $82
                                   ====              ====                ===



  32


5.    Supply and Sublicensing Agreements

      In February 2001, the Company signed a new manufacturing and supply 
agreement and an assignment of trademark agreement for the WellSkin(tm) 
line of skin care products with Genesis Pharmaceutical, Inc. The 
manufacturing and supply agreement expires on December 13, 2005 and 
contains two ten-year renewal options.  The Company received a lump sum 
payment of $525,000 for the assignment of the trademark, which is being 
recognized ratably over the term of the arrangement.  The Company 
recognized $105,000 of income related to this agreement in each of the 
years ended December 31, 2004, 2003 and 2002.

      The Company entered into a sublicense agreement with Johnson & 
Johnson Consumer Products, Inc. ("J&J") in 1995.  The agreement provided 
J&J with a sublicense to produce and sell Novasome(R) microencapsulated 
retinoid products and provides for the payment of royalties on net sales of 
such products.  J&J began selling such products and making royalty payments 
in the first quarter of 1998.  The Company recognized $385,000, $488,000 
and $714,000 of royalty income related to this agreement for the years 
ended December 31, 2004, 2003 and 2002, respectively.

      In August 1998, the Company granted Johnson & Johnson Medical 
("JJM"), a division of Ethicon, Inc., worldwide rights for the use of the 
Novasome(R) technology for certain products and distribution channels. The 
agreement provided for JJM to pay the Company $300,000 as well as future 
royalty payments based on JJM's sales of sublicensed products. The Company 
recognized $30,000, $35,000 and $32,000 of royalty income in 2004, 2003 and 
2002, respectively, related to the agreement.  In March of 2002, the 
agreement between the Company and JJM was amended stating that JJM is no 
longer required to make minimum payments and the license has been converted 
to a non-exclusive worldwide license with the exception of Japan, which 
will remain exclusive.  If the amount of royalties paid by JJM equals or 
exceeds $200,000 in any year, the following calendar year will become an 
exclusive worldwide agreement and will remain so until royalties fall below 
that amount.

      In July 2001, the Company entered into a Research, Development and 
Manufacturing Agreement with Apollo Pharmaceutical (Canada), Inc. 
("Apollo"), previously known as Prime Pharmaceutical Corporation. The 
purpose of the agreement was to develop a facial lotion, a facial creme and 
scalp application for the treatment of psoriasis. The project has been 
completed in stages with amounts being paid to the Company with the 
successful completion of each stage. In addition, the Company has agreed to 
rebate $3.60 per kilogram for the first 12,500 kilograms of product 
manufactured for and sold to Apollo. During 2002 and 2003, there was no 
activity between the Company and Apollo due to a change in management at 
Apollo. In 2004, the Company recognized $137,000 of product sales from 
Apollo.

      In November 2002, the Company entered into a Manufacturing Service 
Agreement with Desert Whale Jojoba Company, Inc.  The purpose of this 
agreement is to develop and manufacture jojobasomes to be used as a 
personal care product.  This project was in a developmental stage through 
2002. The Company recognized $7,000 of product sales related to this project 
in 2003. The Company is no longer doing business with Desert Whale Jojoba 
Company, Inc.

      In July 2004, the Company, in order to allow growth and new business 
opportunities, renegotiated its contract with Estee Lauder, a significant 
customer.   Estee Lauder is manufacturing all Novasome(R) and non-Novasome(R) 
products in house and is paying the Company a royalty per kilo on all 
Novasome(R) products manufactured by Estee Lauder, including all new 
products developed plus a one time payment of $100,000 per the contract.  
The Company's contract manufacturing of Estee Lauder non-Novasome(R) 
products, which accounted for $559,000 of the $1,248,000 in revenues in 2004, 
terminated contractually on June 30, 2004, without any required future 
royalties or other payments to be received by the Company on any non-
Novasome(R) products manufactured by Estee Lauder. However, Estee Lauder 
may from time to time require the assistance of IGI to manufacture 
Novasome(R) and non Novasome(R) products at Estee Lauder's request.  In 
addition, during the six month period from January through June 2004, the 
Company agreed to provide Estee Lauder's contract manufacturing services at 
a reduced price of $2.00 per kilo, as compared to the prior rate of $3.03 
per kilo.  The Company received $184,000 in 2004 and $28,000 in 2003 of 
royalty income from Estee Lauder pursuant to the Company's agreement with 
Estee Lauder for various Novasome(R) vesicles skin care products produced 
by Estee Lauder.

      On July 27, 2004, the Company signed an exclusive license agreement 
with the University of Massachusetts Medical School (University) for the 
patented invention entitled "The Treatment of Skin with Adenosine or 
Adenosine Analogs."  The Company intends to encapsulate adenosine or 
adenosine analogs in Novasome(R) for use in the skin care field.  As 
consideration of the rights granted in this agreement, the Company made 
nonrefundable payments of $25,000 upon the execution of this agreement and 
$25,000 in September 2004.  Both of these payments were expensed during the 
third quarter of 2004 and are included in the product development and 
research expenses.  The agreement also calls for minimum royalty payments 
of $25,000 per year commencing on July 27, 2007.  If the Company enters 
into a sublicense agreement with a third-party entity, which it will 
attempt to do, the Company must pay the University 50% of all sublicense 
income.


  33


6.    Supplemental Cash Flow Information

      During the years ended December 31, 2004, 2003 and 2002, the Company 
had the following non-cash financing and investing activities:



                                                          2004     2003      2002
                                                          ----     ----      ----
                                                               (in thousands)

                                                                   
Mark to market adjustment on warrants                       $-      $-      $(133)
Issuance of stock pursuant to Directors' Stock Plan          -       55        48


7.    Inventories

      Inventories as of December 31, 2004 and 2003 consisted of:



                                                 2004       2003
                                                 ----       ----
                                                 (in thousands)

                                                     
Finished goods                                  $  42      $  15
Raw materials                                     205        177
                                                -----      -----
                                                $ 247      $ 192
                                                =====      =====


      The above amounts are net of reserves for obsolete and slow moving 
inventory of $21,000 and $15,000 as of December 31, 2004 and 2003, 
respectively.

8.    Property, Plant and Equipment

      Property, plant and equipment, at cost, as of December 31, 2004 and 
2003 consisted of:



                                                2004         2003
                                                ----         ----
                                                 (in thousands)

                                                     
Land                                          $   257      $   257
Buildings                                       2,695        2,695
Machinery and equipment                         1,635        1,600
Construction in progress                          782            -
                                              -------      -------
                                                5,369        4,552
      Less accumulated depreciation            (2,201)      (1,945)
                                              -------      -------
      Property, plant and equipment, net      $ 3,168      $ 2,607
                                              =======      =======


      The Company recorded depreciation expense related to continuing 
operations of $256,000, $254,000 and $268,000 in 2004, 2003 and 2002, 
respectively.

9.    Debt

      On May 31, 2002, the stockholders of the Company approved, and the 
Company consummated, the sale of the assets and transfer of the liabilities 
of the Companion Pet Products division.  Upon the sale, the Company paid 
all of its debt and interest owed to Fleet and ACS.  As a result, the 
Company incurred a $2,654,000 loss from early extinguishment of debt in 
connection with the prepayment fees paid to Fleet and ACS and the write-off 
of the ACS debt discount.

      The Company received a $246,000 loan to provide partial funding for 
the costs of investigating and remediating the environmental contamination 
discovered at the Companion Pet Products facility.  The loan required 
monthly principal payments over a term of ten years at a rate of interest 
of 5%. The Company received funding of $45,000 and $197,000 under the loan 
during 2003 and 2002, respectively. On December 18, 2003, the loan was paid 
in full upon the sale of the former Companion Pet Products facility, which 
served as collateral for the loan.

10.   Stock Warrants

      In connection with the $7,000,000 borrowing from American Capital 
Strategies (ACS), the Company issued a warrant to purchase 1,907,543 shares 
of IGI common stock at an exercise price of $.01 per share to ACS.


  34


      The warrant issued to ACS was valued at issuance date utilizing the 
Black-Scholes model and initially recorded as a liability, due to the 
presence of a put right which required the Company to repurchase the 
warrant or underlying common stock under certain circumstances.  The 
liability was marked-to-market, based on changes in the value of the 
underlying common stock, with the change in market value recognized as a 
component of interest expense in the period of change.

      On April 12, 2000, ACS and the Company amended the debt agreement 
and the put provision associated with the original warrant was replaced by 
a make-whole feature.  The make-whole feature required the Company to 
compensate ACS, in either common stock or cash, at the option of the 
Company, in the event that ACS ultimately realized proceeds from the sale 
of the common stock obtained upon exercise of its warrant that were less 
than the fair value of the common stock upon exercise of such warrant.  
Fair value of the common stock upon exercise was defined as the 30-day 
average value prior to notice of intent to sell.  ACS was required to 
exercise reasonable effort to sell or place its shares in the marketplace 
over a 180-day period, beginning with the date of notice by ACS, before it 
could invoke the make-whole provision.

      As noted above, the make-whole feature required the Company to 
compensate ACS for any decrease in value between the date that ACS notified 
the Company that they intended to sell some or all of the stock and the 
date that ACS ultimately disposed of the underlying stock, assuming that 
such disposition occurred in an orderly fashion over a period of not more 
than 180 days.  The shortfall could be paid using either cash or shares of 
the Company's common stock, at the option of the Company.  Based on 
accounting guidance that was issued in September 2000, the Company 
reflected the detachable stock warrant outside of stockholders' equity 
(deficit), since the ability to satisfy the make-whole obligation using 
shares of the Company's common stock was not totally within the Company's 
control.

      On June 26, 2002, the Company received notice from ACS that it was 
exercising the warrant. ACS opted to satisfy payment of the exercise price 
through the use of the cashless exercise provisions of the warrant. The 
Company issued 1,878,640 fully paid up shares of common stock to ACS on 
July 7, 2002. Based on the provisions of the make-whole feature, the fair 
value of the common stock was $.67 per share as of the notification date.  
On July 19, 2002, the Company's Board of Directors approved the purchase of 
the 1,878,640 shares from ACS for $.70 per share. The Company completed the 
purchase on July 29, 2002 for $1,315,000 and classified the shares as 
treasury shares.

      In February 1999, the Company granted a warrant to purchase 270,000 
shares of common stock, with an exercise price of $2.00 per share. The 
warrant expired on January 31, 2004.

11.   Stock Options and Common Stock

      In October 1998, the Company adopted the 1998 Directors Stock Plan. 
Under this plan, 200,000 shares of the Company's common stock are reserved 
for issuance to non-employee directors, in lieu of payment of directors' 
fees in cash.  In 2002, 70,011  shares of common stock were issued as 
consideration for directors' fees. In 2003 and 2002, the Company issued 
79,318 and 311 shares of common stock as consideration for directors' fees 
under the 1999 Stock Incentive Plan ("1999 Plan").  The Company did not 
issue any shares as consideration for directors' fees in 2004.  The Company 
recognized $24,000, $55,000 and $48,000 of expense related to shares issued 
to directors during the years ended December 31, 2004, 2003 and 2002, 
respectively.  The amount related to 2004 remains in accrued expenses until 
the shares are issued.

      In December 1998, the Company's Board of Directors adopted the 1999 
Employee Stock Purchase Plan ("ESPP").  An aggregate of 300,000 shares of 
common stock may be issued pursuant to the ESPP.  All employees of the 
Company and its subsidiaries, including officers or directors who are also 
an employee, are eligible to participate in the ESPP.  Shares under this 
plan are available for purchase at 85% of the fair market value of the 
Company's stock on the first or last day of the offering period, whichever 
is lower. The Company issued 19,617, 9,253 and 30,975 shares in 2004, 2003 
and 2002, respectively, under the ESPP.

      In March 1999, the Company's Board of Directors approved the 1999 
Stock Incentive Plan ("1999 Plan"). The 1999 Plan replaced all previously 
authorized stock option plans, and no additional options may be granted 
under those plans. Under the 1999 Plan, options or stock awards may be 
granted to all of the Company's employees, officers, directors, consultants 
and advisors to purchase a maximum of 1,200,000 shares of common stock.  In 
May 2002, the Company's stockholders approved an increase in the maximum 
amount of shares to be granted by 800,000, for a total of 2,000,000 shares 
available for grant. A total of 1,335,916 options (net of cancellations), 
having a maximum term of ten years, have been granted at 100% of the fair 
market value of the Company's stock at the time of grant. Options 
outstanding under the 1999 Plan are generally exercisable in cumulative 
increments over four years commencing one year from date of grant. In 
addition, as noted above, 79,629 stock awards have been granted under the 
1999 Plan.

      In September 1999, the Company's Board of Directors approved the 1999 
Director Stock Option Plan.  The 1999 Director Stock Option Plan provides 
for the grant of stock options to non-employee directors of the Company at 
an exercise price equal to the fair market value per share on the date of 
the grant.  An aggregate of 675,000 shares have been approved and 
authorized for issuance 


  35


pursuant to this plan.  In May 2001, an additional 800,000 shares were 
approved for issuance under this plan, bringing the total to 1,475,000 
available for issue under this plan.  A total of 1,111,048 options (net of 
cancellations) have been granted to non-employee directors through December 
31, 2004.  The options granted under the 1999 Director Stock Option Plan 
vest in full one year after their respective grant dates and have a maximum 
term of ten years.

      Stock option transactions in each of the past three years under the 
aforementioned plans in total were:



                                              1999 Plan
                              ---------------------------------------------
                                                                Weighted
                               Shares      Price Per Share    Average Price
                               ------      ---------------    -------------

                                                        
January  1, 2002 shares
  Under option                2,703,000     $ .50 - $8.58        $2.30
  Granted                       280,000       .53 -   .70          .67
  Exercised                     (39,000)      .50 -   .56          .53
  Cancelled                    (362,000)      .50 -  8.25         2.50
                              ---------
December 31, 2002 shares
  Under option                2,582,000       .50 -  8.58         2.12
  Granted                       290,000       .55 -  1.07          .82
  Exercised                           -           -                  -
  Cancelled                    (592,000)      .52 -  7.61         1.53
                              ---------
December 31, 2003 shares
  Under option                2,280,000       .50 -  8.58         2.03
  Granted                       618,048      1.05 -  2.25         1.74
  Exercised                    (176,666)      .55 -  1.94         1.21
  Expired                      (100,000)     5.59 -  8.58         7.77
  Cancelled                     (33,334)         .85               .85
                              ---------
December 31, 2004
  Under option                2,588,048       .50 -  8.25         1.85
                              =========
Exercisable options at:
  December 31, 2002           2,454,398                          $2.19
                              =========                          =====
  December 31, 2003           2,019,252                          $2.24
                              =========                          =====
  December 31, 2004           2,320,001                          $1.92
                              =========                          =====


      The Company uses the intrinsic value method to account for stock 
options issued to employees and to directors. The Company uses the fair 
value method to account for stock options issued to non-employee 
consultants. No options were granted to consultants in 2002.  The Company 
granted 300,000 and 25,000 options in 2004 and 2003, respectively, to a 
consultant. The expense related to such options, which amounted to 
$545,000 in 2004 was recorded in product development and research expense.

      The following table summarizes information concerning outstanding and 
exercisable options as of December 31, 2004:



                            Options Outstanding              Options Exercisable
                   -------------------------------------    ---------------------
                                  Weighted      Weighted                 Weighted
                                  Average       Average                  Average
   Range of        Number of     Remaining      Exercise    Number of    Exercise
Exercise Price      Options     Life (Years)     Price       Options      Price
--------------     ---------    ------------    --------    ---------    --------

                                                           
$ .50 to $1.00       800,500        6.79         $ .65       800,500      $ .65
 1.01 to  2.00     1,097,798        6.45          1.52       829,751       1.60
 2.01 to  3.00       419,750        7.61          2.32       419,750       2.32
 3.01 to  4.00        50,000        3.00          3.75        50,000       3.75
 5.01 to  6.00        90,000        1.91          5.81        90,000       5.81
 6.01 to  7.00       100,000        1.47          6.69       100,000       6.69
 8.01 to  8.25        30,000        0.99          8.25        30,000       8.25
                   ---------                               ---------

$ .50 to $8.25     2,588,048        6.25         $1.85     2,320,001      $1.92
                   =========                               =========



  36


12.   Income Taxes

      The provision (benefit) for income taxes attributable to loss from 
continuing operations before provision (benefit) for income taxes for the 
years ended December 31, 2004, 2003 and 2002 is as follows:



                                                 2004       2003       2002
                                                 ----       ----       ----
                                                      (in thousands)

                                                             
Current tax expense (benefit):
  Federal                                       $   -      $   -      $   -
  State and local                                (290)      (208)       330
                                                -----      -----      -----

Total current tax expense (benefit)              (290)      (208)       330
                                                -----      -----      -----

Deferred tax expense
  Federal                                           -          -          -
  State and local                                   -          -          -
                                                -----      -----      -----
Total deferred tax expense                          -          -          -
                                                -----      -----      -----
  Total expense (benefit) for income taxes      $(290)     $(208)     $ 330
                                                =====      =====      =====


      The Company sold some of its New Jersey operating loss carryforwards 
in exchange for net proceeds of $298,000, $224,000 and $249,000 in 2004, 
2003 and 2002, respectively.  During the year ended December 31, 2002, the 
Company paid $558,000 to purchase some New Jersey operating loss 
carryforwards.

      The provision (benefit) for income taxes differed from the amount of 
income taxes determined by applying the applicable Federal tax rate (34%) 
to pretax loss from continuing operations as a result of the following:



                                                      2004       2003       2002
                                                      ----       ----       ----
                                                            (in thousands)

                                                                  
Statutory benefit                                    $(405)     $(328)     $(952)
Other non-deductible expenses                            1         25         16
State income taxes, net of valuation allowance        (191)      (137)       330
Increase in Federal valuation allowance                305        234        936
Other, net                                               -         (2)         -
                                                     -----      -----      -----
                                                     $(290)     $(208)     $ 330
                                                     =====      =====      =====


      Deferred tax assets included in the Consolidated Balance Sheets as of 
December 31, 2004 and 2003 consisted of the following:



                                                    2004         2003
                                                    ----         ----
                                                     (in thousands)

                                                         
Property, plant and equipment                     $    67      $    52
Prepaid license agreement                             202          402
Deferred royalty payments                             121          149
Tax operating loss carryforwards                    5,978        5,349
Tax credit carryforwards                              666          691
Reserves                                               15            6
Inventory                                              31           16
Non-employee stock options                            394          177
Other future deductible temporary differences          33           41
Other future taxable temporary differences            (16)         (21)
                                                  -------      -------
                                                    7,491        6,862

Less:  valuation allowance                         (7,491)      (6,862)
                                                  -------      -------

Deferred taxes, net                               $     -      $     -
                                                  =======      =======


      The Company evaluates the recoverability of its deferred tax assets 
based on its history of operating earnings, its plan to sell the benefit of 
certain state net operating loss carryforwards, its expectations for the 
future, and the expiration dates of the net operating loss carryforwards.  
The Company has concluded that it is more likely than not that it will be 
unable to realize the gross deferred tax assets in the foreseeable future 
and has established a valuation reserve for all such deferred tax assets.


  37


      Operating loss and tax credit carryforwards for tax reporting 
purposes as of December 31, 2004 were as follows:



                                                             (in thousands)

                                                             
Federal:
  Operating losses (expiring through 2024)                      $ 13,722
  Research tax credits (expiring through 2020)                       551
  Alternative minimum tax credits (available without
   expiration)                                                        28
State:
  Net operating losses - New Jersey (expiring through 2012)       13,715
  Research tax credits - New Jersey (expiring through 2010)           58
  Alternative minimum assessment - New Jersey (available
   without expiration)                                                29


      Federal net operating loss carryforwards that expire through 2024 
have significant components expiring in 2018 (15%), 2019 (15%), 2020 (53%), 
and 2021 (9%).

13.   Commitments and Contingencies

      The Company leases machinery and equipment under non-cancelable 
operating lease agreements expiring at various dates in the future.  Rental 
expense aggregated approximately $42,000 in 2004, $44,000 in 2003, and 
$70,000 in 2002.  Future minimum rental commitments under non-cancelable 
operating leases as of December 31, 2004 are as follows:



            Year          (in thousands)
            ----          --------------

                            
            2005               $ 34
            2006                 25
            2007                 22
            2008                 22
            2009                 22
            Thereafter            -
                               ----
            Total              $125
                               ====


      The Company has an option, which is exercisable on December 13, 2005, 
to extend its exclusive license for the use of the Novasome(R) 
microencapsulation technologies in certain specific fields for an 
additional ten-year term in exchange for a $1,000,000 cash payment.

14.   Legal and U.S. Regulatory Proceedings

      Gallo Matter

      As previously reported by the Company in its historical filings with 
the Securities and Exchange Commission ("SEC"), including, without 
limitation, its Form 10-K for the year ending December 31, 1999, for most 
of 1997 and 1998 the Company was subject to intensive government regulatory 
scrutiny by the U.S. Departments of Justice, Treasury and Agriculture.  In 
June 1997, the Company was advised by the Animal and Plant Health 
Inspection Service ("APHIS") of the United States Department of Agriculture 
("USDA") that the Company had shipped quantities of some of its poultry 
vaccine products without complying with certain regulatory and record 
keeping requirements.  The USDA subsequently issued an order that the 
Company stop shipment of certain of its products.  Shortly thereafter, in 
July 1997, the Company was advised that the USDA's Office of Inspector 
General had commenced an investigation into possible violations of the 
Virus Serum Toxin Act of 1914 and alleged false statements made to APHIS.  
In April 1998, the SEC advised the Company that it was conducting an 
informal inquiry and requested information and documents from the Company, 
which the Company voluntarily provided to the SEC.

      Based upon these events, the Board of Directors caused an immediate 
and thorough investigation of the facts and circumstances of the alleged 
violations to be undertaken by independent counsel.  The Company continued 
to refine and strengthen its regulatory programs with the adoption of a 
series of compliance and enforcement policies, the addition of new managers 
of Production and Quality Control and a new Senior Vice President and 
General Counsel.  At the instruction of the Board of Directors, the 
Company's General Counsel established and oversaw a comprehensive employee 
training program, designated in writing a Regulatory Compliance Officer, 
and established a fraud detection program, as well as an employee 
"hotline."  The Company continued to cooperate with the USDA and SEC in all 
aspects of their investigation and regulatory activities.  On March 13, 
2002, the Company reached a settlement with the staff of the SEC to resolve 
matters arising with respect to the investigation of the Company.  Under 
the settlement, the Company neither admitted nor denied that the Company 
violated the financial reporting and record-keeping requirements of Section 
13 of the Securities and Exchange Act of 1934, as amended, for the three 
years ended December 31, 1997.  


  38


Further, the Company agreed to the entry of an order to cease and desist 
from any such violation in the future.  No monetary penalty was assessed.

      As a result of its internal investigation, in November 1997, the 
Company terminated the employment of John P. Gallo as President and Chief 
Operating Officer for willful misconduct.  On April 21, 1998, the Company 
instituted a lawsuit against Mr. Gallo in the New Jersey Superior Court.  
The lawsuit alleged willful misconduct and malfeasance in office, as well 
as embezzlement and related claims (referred to as the "IGI Action").  On 
April 28, 1998, Mr. Gallo instituted a separate action against the Company 
and two of its Directors, Edward Hager, M.D. and Constantine Hampers, M.D., 
alleging that he had been wrongfully  terminated  from employment and 
further alleging wrongdoings by the two Directors (referred to as the 
"Gallo Action").  The Court subsequently ordered the consolidation of the 
IGI Action and the Gallo Action (collectively referred to as the 
"Consolidated Action").

      In response to these allegations, the Company instituted an 
investigation of the two Directors by an independent committee 
("Independent Committee") of the Board assisted by the Company's General 
Counsel.  The investigation included a series of interviews of the 
Directors, both of whom cooperated with the Company, and a review of 
certain records and documents.  The Company also requested an interview 
with Mr. Gallo who, through his counsel, declined to cooperate.  In 
September 1998, the Independent Committee reported to the Board that it had 
found no credible evidence to support Mr. Gallo's claims and allegations 
and recommended no further action.  The Board adopted the recommendation.

      The Company denied all allegations plead in the Gallo Action and 
asserted all claims in the Gallo Action to be without merit.  The Company 
did not reserve any amount relating to such claims.  The Company tendered 
the claim to its insurance carriers, but was denied insurance coverage for 
both defense and indemnity of the Gallo Action.

      In July 1998, the Company sought to depose Mr. Gallo in connection 
with the Consolidated Action.  Through his counsel, Mr. Gallo asserted his 
Fifth Amendment privilege against self-incrimination and advised that he 
would not participate in the discovery process until such time as a federal 
grand jury investigation, in which he was a target, was concluded.  In 
January 1999, at the suggestion of the Court, the Company and Mr. Gallo 
agreed to a voluntary dismissal without prejudice of the Consolidated 
Action, with the understanding that the statute of limitations was tolled 
for all parties and all claims, and that the Company and Mr. Gallo were 
free to reinstate their suits against each other at a later date, with each 
party reserving all of their rights and remedies against the other.

      As of the date hereof, neither the Company nor Mr. Gallo have filed 
suit against each other in the Superior Court of New Jersey or any other 
court of competent jurisdiction to reinstitute the claims, in whole or 
part, previously at issue in the Consolidated Action, and pursuant to the 
previous order of dismissal entered in the Consolidated Action, the statute 
of limitation on all claims and defenses continues to be tolled as to both 
parties.  However, the Company did receive a letter dated November 21, 2003 
from Mr. Gallo's attorneys seeking to reach a settlement of the claims 
asserted against IGI in the Gallo Action without further resort to the 
courts.  The letter provides a general description of Mr. Gallo's claims 
and a calculation of damages allegedly sustained by Mr. Gallo relative 
thereto.  The letter states that Mr. Gallo's damages are calculated to be 
in the range of $3,400,000 to $5,100,000.  The Company denies liability for 
the claims and damages alleged in the letter from Mr. Gallo's counsel dated 
November 21, 2003, and as such, the Company did not make any formal 
response thereto. Mr. Gallo has contacted the Company's Chief Executive 
Officer & Chairman, Frank Gerardi, in a continued effort to initiate 
settlement discussions.  As of the present date, the Company continues to 
deny any merit and/or liability for the claims alleged by Mr. Gallo and has 
not engaged in any formal settlement discussions with either Mr. Gallo or 
his attorneys.

      On December 8, 2003, Mr.  Gallo filed suit against Novavax, Inc. in 
the Superior Court of New Jersey, Law Division, Atlantic County, docket no. 
ATL-L-3388-03, asserting claims under seven counts for damages allegedly 
sustained as a result of the cancellation of certain Novavax stock options 
held by Mr. Gallo due to his termination from IGI in November 1997 for 
willful misconduct (referred to as the "Novavax Action").

      On March 5, 2004, Novavax filed an Answer denying the allegations 
asserted by Mr. Gallo in his First Amended Complaint.  In addition, while 
denying any liability under the First Amended Complaint, Novavax also filed 
a Third Party Complaint in the Novavax Action against the Company for 
contribution and indemnification, alleging that if liability for Mr. 
Gallo's claims is found, the Company has primary liability for any and all 
such damages sustained.

      IGI has been notified by its insurance carriers that coverage is not 
afforded under their respective policies of insurance for defense and/or 
indemnification of the claims alleged by the Third Party Complaint.  After 
IGI was notified of the foregoing, but prior to IGI's filing of any 
responsive pleading, the Third Party Complaint against IGI was voluntarily 
dismissed without prejudice by Novavax on June 30, 2004.  Novavax may at 
any time pursuant to the rules of court re-file its Third Party Complaint 
against IGI.

      In July 2004, Novavax filed a motion for summary judgment on all 
claims asserted under Gallo's First Amended Complaint (referred to as "the 
SJ Motion").  Gallo filed in opposition to the SJ Motion contesting all 
relief sought thereunder.  In August 2004, the Court held a hearing on the 
SJ Motion and denied without prejudice the relief sought by the motion for 
dismissal of Gallo's First 


  39


Amended Complaint.  Upon information and belief, the parties are currently 
proceeding with discovery in the Novavax Action.  The Company, as a non-
party witness in the Novavax Action, was recently served by counsel for 
Gallo with a subpoena for the production of documents as responsive 
thereto.

      As of the date hereof, Novavax has not sought to re-file its Third 
Party Complaint against IGI for which coverage was previously denied by its 
insurance carriers, Novavax is not precluded from doing so and may seek to 
do so in the future.

      Other Matters

      On April 6, 2000, officials of the New Jersey Department of 
Environmental Protection inspected the Company's storage site in Buena, New 
Jersey and issued Notices of Violation relating to the storage of waste 
materials in a number of trailers at the site.  The Company established a 
disposal and cleanup schedule and completed the removal of materials from 
the site.  The Company continues to discuss with the authorities a 
resolution of any potential assessment under the NOV's and has accrued the 
estimated penalties related to such NOV's.

      On March 2, 2001, the Company discovered the presence of 
environmental contamination resulting from an unknown heating oil leak at 
its Companion Pet Products manufacturing site.  The Company immediately 
notified the New Jersey Department of Environmental Protection and the 
local authorities, and hired a certified environmental contractor to assess 
the exposure and required clean up.  Based on the initial information from 
the contractor, the Company originally estimated the cost for the cleanup 
and remediation to be $310,000.  In September 2001, the contractor updated 
the estimated total cost for the cleanup and remediation to be $550,000.  A 
further update was performed in December 2002 and the final estimated cost 
was increased to $620,000, of which $82,000 remains accrued as of December 
31, 2004. The remediation was completed by September 30, 2003. There will 
be periodic testing and removal performed, which is projected to span over 
the next five years.  The estimated cost of the monitoring is included in 
the accrual.

      This contamination also spread to the property adjacent to the 
manufacturing facility and the Company is currently involved in a lawsuit 
with the owner of that property, Ted Borz.  Mr. Borz runs a business on 
that property and he seeking remuneration for loss of income and the 
reduction in his property value from IGI as a result of the oil spill.  IGI 
believes that it has performed all the necessary tasks required to properly 
decontaminate Mr. Borz's property.  Management does not feel that it is 
possible to estimate the outcome of this case at this date.

      The Company's common stock is listed on the American Stock Exchange 
("AMEX"). Based on the Company's 2004 results, the Company is not in 
compliance with the AMEX requirement for reporting income from continuing 
operations and net income for the year ended December 31, 2004 which could 
subject it to potentially being delisted from AMEX. As of March 15, 2005, 
the Company has not been contacted by AMEX concerning the Company's non-
compliance with the AMEX requirements.

15.   Employee Benefits

      The Company has a 401(k) contribution plan, pursuant to which 
employees who have completed six months of employment with the Company or 
its subsidiaries as of specified dates, may elect to contribute to the 
plan, in whole percentages, up to 18% of compensation. Employees' 
contributions are subject to a minimum contribution by participants of 1% 
of compensation and a maximum contribution of $13,000 for 2004 and $12,000 
for 2003.  The Company matches 25% of the first 5% of compensation 
contributed by participants and contributes, on behalf of each participant, 
$4 per week of employment during the year.  The Company contribution is in 
the form of either common stock or cash, which is vested immediately.  The 
Company has recorded charges to expense related to this plan of 
approximately $ 8,000, $15,000 and $23,000 in 2004, 2003 and 2002, 
respectively.

16.   License Agreement with Dr. Michael Holick

      On December 24, 2003, the Company entered into a License Agreement 
with Dr. Holick and A&D Bioscience, Inc., a Massachusetts corporation 
wholly owned by Dr. Holick (collectively referred to as "Holick"), whereby 
Holick granted an exclusive license to the Company to all his rights to the 
parathyroid hormone related peptide technologies and the glycoside 
technologies (referred to as "PTH Technologies" and "Glycoside 
Technologies", respectively) that he developed for various clinical usages 
including treatment of psoriasis, hair loss and other skin disorders. In 
consideration for entering into the License Agreement, Holick received up-
front a $50,000 non-refundable payment from the Company. He also received a 
grant of 300,000 stock options under the Company's authorized stock option 
plans. Holick was also entitled to receive a $236,000 milestone payment 
that was contingent on the execution of a sublicense agreement between the 
Company and a third-party for the licensed technology.


  40


      On April 19, 2004, IGI signed a sublicense agreement with Tarpan 
Therapeutics, Inc. ("Tarpan") for the PTH (1-34) technology under which the 
third-party will be obligated at its sole cost and expense to develop and 
bring the PTH (1-34) technology to market as timely and efficiently as 
possible, which includes its sole responsibility for the cost of 
preclinical and clinical development, research and development, 
manufacturing, laboratory and clinical testing and trials and marketing of 
products. In addition, the sublicense agreement calls for various payments 
to IGI throughout the term. IGI was paid a lump sum sublicense fee of 
$300,000, from which amount IGI paid the sum of $232,000 to Dr. Holick, 
representing the $236,000 payment due to Dr. Holick in accordance with the 
terms of his License Agreement with the Company, net of $4,000 of additional 
legal fees. Certain subsequent royalty payments received by the Company under 
the sublicense agreement will be shared with Holick after the Company has 
recovered any payments previously made to Holick under the License 
Agreement and an amount equal to the value of the options received by 
Holick under the License Agreement. The Company is responsible for any and 
all costs, fees and expenses for the prosecution and oversight of any 
intellectual property rights related to the licensed technologies.  The 
term of the License Agreement is the longer of twenty (20) years or the 
life of each of the patents thereunder.  The License Agreement, however, 
granted Holick the right to terminate the Company's license to (i) the 
Glycoside Technologies if the Company did not sublicense the Glycoside 
Technologies within 90 days of the effective date of the License Agreement, 
and (ii) the PTH Technologies if the Company did not sublicense the PTH 
Technologies within 90 days of the effective date of the License Agreement.  
As noted above, the Company entered into a sublicense agreement for the PTH 
Technologies on April 19, 2004.  The Company did not, however, sublicense 
the Glycoside Technologies within the 90 day period.  As a result, Holick 
terminated the Company's license to the Glycoside Technologies on April 5, 
2004.  The Company is engaged in discussions with the same third-party 
entity for a similar sublicense for the PTH (7-34) technology.

      The $50,000 payment to Holick was expensed in the third quarter of 
2003 and the $236,000 payment to Holick was expensed in the second quarter 
of 2004 because the PTH Technologies are in a preliminary development phase 
and do not have any readily determinable alternative future use. The other 
consideration called for under the License Agreement, such as amounts 
advanced for the prosecution and oversight of any intellectual property 
rights related to the licensed technologies which amounted to $27,500 and 
the fair value of the 300,000 stock options granted to Holick, which 
amounted to $520,000, was also expensed by the Company in the second 
quarter of 2004 (included in product development and research expenses in 
the Consolidated Statement of Operations), when the sublicense agreement 
with Tarpan was executed and Holick could no longer terminate the license 
agreement as it relates to the PTH Technologies and the options became 
fully vested.  The fair value of the stock options was calculated under 
SFAS No. 123 using the Black-Scholes model.


  41


17.   Quarterly Consolidated Financial Data (Unaudited)

      Following is a summary of the Company's quarterly results for each of 
the quarters in the years ended December 31, 2004 and 2003 (in thousands, 
except per share information).



                                     March        June      September   December
                                    31, 2004    30, 2004    30, 2004    31, 2004
                                    --------    --------    ---------   ---------

                                                            
Total revenues                      $   987     $ 1,198     $   582     $   791
Operating loss                           (4)       (846)       (223)       (147)
Income (loss) from continuing 
 operations                               3        (842)       (219)        166
Net income (loss)                         3        (842)       (219)        166
                                    =======     =======     =======     =======
Basic income (loss) per share       $   .00     $  (.07)    $  (.02)    $   .01
Diluted income (loss) per share         .00        (.07)       (.02)        .01



                                     March        June      September   December
                                    31, 2003    30, 2003    30, 2003    31, 2003
                                    --------    --------    ---------   ---------

                                                            
Total revenues                     $ 1,008      $   844     $   899     $   806
Operating profit (loss)                 32         (520)       (241)       (243)
Income (loss) from continuing
 operations                             36         (518)       (242)        (33)
Net income (loss)                       36         (349)       (257)        248
                                   =======      =======     =======     =======
Basic and diluted income
 (loss) per share
  Continuing operations            $   .00      $ (.05)     $  (.02)     $  .00
  Net income (loss)                    .00        (.03)        (.02)        .02


      The fourth quarter of 2004 and 2003 include $298,000 and $224,000 
respectively of tax benefit from the sale of New Jersey state net operating 
loss carryforwards.


  42


                         IGI, INC. AND SUBSIDIARIES

               SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                           (amounts in thousands)



   COL. A                                      COL. B            COL. C              COL. D       COL. E
   ------                                      ------            ------              ------       ------
                                                                Additions
                                               Balance    -----------------------
                                                  at      Charged to   Charged to                 Balance
                                              beginning   costs and      other                    at end
Description                                   of period    expenses     accounts    Deductions   of period
-----------                                   ---------   ----------   ----------   ----------   ---------

                                                                                     
December 31, 2002:

Allowance for doubtful accounts                  $122       $  3        $ 24(C)       $114(A)       $35
Obsolete and slow moving inventory reserve          5         20           -            15(B)        10

December 31, 2003

Allowance for doubtful accounts                  $ 35       $  1        $(20)(D)      $  -          $16
Obsolete and slow moving inventory reserve         10          9           -             4(B)        15

December 31, 2004

Allowance for doubtful accounts                  $ 16          1                      $  7(A)       $10
Obsolete and slow moving inventory reserve         15          6           -             -           21


(A)   Relates to write-off of uncollectible accounts and recoveries of 
      reviously reserved amounts.
(B)   Relates to disposition of obsolete inventory.
(C)   Relates to a credit balance in accounts receivable that was reclassed 
      to allowance for doubtful accounts.
(D)   Relates to a reclass to deferred income from allowance for doubtful 
      accounts.




  43


                         IGI, INC. AND SUBSIDIARIES
            INDEX TO EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF
                      REGULATION S-K (Section 229.601)

(3)(a)    Certificate of Incorporation of IGI, Inc., as amended.  
          [Incorporated by reference to Exhibit 4.1 to the Company's 
          Registration Statement on Form S-8, File No. 33-63700, filed June 
          2, 1993.]
(3)(b)    By-laws of IGI, Inc., as amended.  [Incorporated by reference to 
          Exhibit 2(b) to the Company's Registration Statement on Form S-18, 
          File No. 002-72262-B, filed May 12, 1981.]
(4)       Specimen stock certificate for shares of Common Stock, par value 
          $.01 per share. [Incorporated by reference to Exhibit 4 to the 
          Company's Annual Report on Form 10-K for the fiscal year ended 
          December 31, 2000, File No. 001-08568, filed March 28, 2001 ("the 
          2000 Form 10-K").]
(10.1)    IGI, Inc. 1989 Stock Option Plan.  [Incorporated by reference to 
          the Company's Proxy Statement for the Annual Meeting of 
          Stockholders held May 11, 1989, File No. 001-08568, filed April 
          12, 1989.]
(10.2)    IGI, Inc. Non-Qualified Stock Option Plan.  [Incorporated by 
          reference to Exhibit 3(k) to the Company's Annual Report on Form 
          10-K for the fiscal year ended December 31, 1991, File No. 001-
          08568, filed March 30, 1992 ("the 1991 Form 10-K").]
(10.3)    Amendment No. 1 to IGI, Inc. 1991 Stock Option Plan as approved by 
          Board of Directors on March 11, 1993.  [Incorporated by reference 
          to Exhibit 10(p) to the Company's Annual Report on Form 10-K for 
          the fiscal year ended December 31, 1992 ("the 1992 Form 10-K").]
(10.4)    Amendment No. 2 to IGI, Inc. 1991 Stock Option Plan as approved by 
          Board of Directors on March 22, 1995.  [Incorporated by reference 
          to the Appendix to the Company's Proxy Statement for the Annual 
          Meeting of Stockholders held May 9, 1995, filed April 14, 1995.]
(10.5)    Amendment No. 3 to IGI, Inc. 1991 Stock Option Plan as approved by 
          Board of Directors on March 19, 1997.  [Incorporated by reference 
          to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for 
          the quarter ended June 30, 1997, File No. 001-08568, filed August 
          14, 1997.]
(10.6)    Amendment No. 4 to IGI, Inc. 1991 Stock Option Plan as approved by 
          Board of Directors on March 17, 1998.  [Incorporated by reference 
          to the Company's Quarterly Report on Form 10-Q for the quarter 
          ended September 30, 1998, File No. 001-08568, filed November 6, 
          1998.]
(10.7)    Supply Agreement, dated as of January 27, 1997, between IGI, Inc. 
          and Glaxo Wellcome Inc. [Incorporated by reference to Exhibit 10.1 
          to the Company's Quarterly Report on Form 10-Q/A, Amendment No. 1, 
          for the quarter ended March 31, 1997, File No. 001-08568, filed 
          June 16, 1997.]
(10.8)    IGI, Inc. 1998 Director Stock Option Plan as approved by the Board 
          of Directors on October 19, 1998.  [Incorporated by reference to 
          Exhibit 10.38 to the Company's Annual Report on Form 10-K for the 
          fiscal year ended December 31, 1998, File No. 001-08568, filed 
          April 12, 1999 ("the 1998 Form 10-K").]
(10.9)    Common Stock Purchase Warrant No. 5 to purchase 150,000 shares of 
          IGI, Inc. Common Stock issued to Fleet Bank, NH on March 11, 1999.  
          [Incorporated by reference to Exhibit 10.40 to the 1998 Form 
          10-K.]
(10.10)   IGI, Inc. 1999 Director Stock Option Plan as approved by the Board 
          of Directors on September 15, 1999.  [Incorporated by reference to 
          Exhibit 99.1 to the Company's Registration on Form S-8, File No. 
          333-52312, filed December 20, 2000.]
(10.11)   Common Stock Purchase Warrant No. 7 to purchase 120,000 shares of 
          IGI, Inc. Common Stock issued to Mellon Bank, N.A. on March 11, 
          1999.  [Incorporated by reference to Exhibit 10.42 to the 1998 
          Form 10-K.]
(10.12)   Employment Agreement, dated May 1, 1998, between IGI, Inc. and 
          Paul Woitach.  [Incorporated by reference to Exhibit 10.44 to the 
          1998 Form 10-K.]
(10.13)   Loan and Security Agreement by and among Fleet Capital Corporation 
          and IGI, Inc., together with its subsidiaries, dated October 29, 
          1999.  [Incorporated by reference to Exhibit 10.21 to the 
          Company's Annual Report for the fiscal year ended December 31, 
          1999, File No. 0001-08568, filed April 14, 2000 ("the 1999 Form 
          10-K").]
(10.14)   Revolving Credit Note issued by IGI, Inc., together with its 
          subsidiaries, to Fleet Capital Corporation, dated October 29, 
          1999. [Incorporated by reference to Exhibit 10.22 to the 1999 Form 
          10-K.]
(10.15)   Term Loan A Note issued by IGI, Inc., together with its 
          subsidiaries, to Fleet Capital Corporation, dated October 29, 
          1999.  [Incorporated by reference to Exhibit 10.23 to the 1999 
          Form 10-K.]
(10.16)   Term Loan B Note issued by IGI, Inc., together with its 
          subsidiaries, to Fleet Capital Corporation, dated October 29, 
          1999. [Incorporated by reference to Exhibit 10.24 to the 1999 Form 
          10-K.]
(10.17)   Capital Expenditure Loan Note issued by IGI, Inc., together with 
          its subsidiaries, to Fleet Capital Corporation, dated October 29, 
          1999.  [Incorporated by reference to Exhibit 10.25 to the 1999 
          Form 10-K.]


  44


(10.18)   Trademark Security Agreement issued by IGI, Inc. in favor of Fleet 
          Capital Corporation, dated October 29, 1999. [Incorporated by 
          reference to Exhibit 10.26 to the 1999 Form 10-K.]
(10.19)   Trademark Security Agreement issued by IGEN, Inc. in favor of 
          Fleet Capital Corporation, dated October 29, 1999. [Incorporated 
          by reference to Exhibit 10.27 to the 1999 Form 10-K.]
(10.20)   Trademark Security Agreement issued by Immunogenetics, Inc. in 
          favor of Fleet Capital Corporation, dated October 29, 1999. 
          [Incorporated by reference to Exhibit 10.28 to the 1999 Form 
          10-K.]
(10.21)   Patent Security Agreement issued by IGI, Inc. in favor of Fleet 
          Capital Corporation, dated October 29, 1999. [Incorporated by 
          reference to Exhibit 10.29 to the 1999 Form 10-K.]
(10.22)   Patent Security Agreement issued by IGEN, Inc. in favor of Fleet 
          Capital Corporation, dated October 29, 1999. [Incorporated by 
          reference to Exhibit 10.30 to the 1999 Form 10-K.]
(10.23)   Pledge Agreement by and between Fleet Capital Corporation and 
          IGEN, Inc., dated October 29, 1999. [Incorporated by reference to 
          Exhibit 10.31 to the 1999 Form 10-K.]
(10.24)   Open-Ended Mortgage, Security Agreement and Assignment of Leases 
          and Rents (Atlantic County, New Jersey) issued by IGI, Inc. to 
          Fleet Capital Corporation, dated October 29, 1999. [Incorporated 
          by reference to Exhibit 10.32 to the 1999 Form 10-K.]
(10.25)   Open-Ended Mortgage, Security Agreement and Assignment of Leases 
          and Rents (Cumberland County, New Jersey) issued by IGI, Inc. to 
          Fleet Capital Corporation, dated October 29, 1999. [Incorporated 
          by reference to Exhibit 10.33 to the 1999 Form 10-K.]
(10.26)   Subordination Agreement by and between Fleet Capital Corporation 
          and American Capital Strategies, Ltd., dated October 29, 1999. 
          [Incorporated by reference to Exhibit 10.34 to the 1999 Form 
          10-K.]
(10.27)   Note and Equity Purchase Agreement by and among American Capital 
          Strategies, Ltd. and IGI, Inc., together with its subsidiaries, 
          dated as of October 29, 1999. [Incorporated by reference to 
          Exhibit 10.35 to the 1999 Form 10-K.]
(10.28)   Series A Senior Secured Subordinated Note issued by IGI, Inc., 
          together with its subsidiaries, to American Capital Strategies, 
          Ltd., dated as of October 29, 1999. [Incorporated by reference to 
          Exhibit 10.36 to the 1999 Form 10-K.]
(10.29)   Series B Senior Secured Subordinated Note issued by IGI, Inc., 
          together with its subsidiaries, to American Capital Strategies, 
          Ltd., dated as of October 29, 1999. [Incorporated by reference to 
          Exhibit 10.37 to the 1999 Form 10-K.]
(10.30)   Warrant to purchase 1,907,543 shares of IGI, Inc. Common Stock, 
          issued to American Capital Strategies, Ltd. on October 29, 1999.  
          [Incorporated by reference to Exhibit 10.38 to the 1999 Form 
          10-K.]
(10.31)   Security Agreement issued by IGI, Inc., together with its 
          subsidiaries, in favor of American Capital Strategies, Ltd., dated 
          as of October 29, 1999. [Incorporated by reference to Exhibit 
          10.39 to the 1999 Form 10-K.]
(10.32)   Trademark Security Agreement issued by IGI, Inc. in favor of 
          American Capital Strategies, Ltd., dated as of October 29, 1999. 
          [Incorporated by reference to Exhibit 10.40 to the 1999 Form 
          10-K.]
(10.33)   Trademark Security Agreement issued by Immunogenetics, Inc. in 
          favor of American Capital Strategies, Ltd., dated as of October 
          29, 1999. [Incorporated by reference to Exhibit 10.41 to the 1999 
          Form 10-K.]
(10.34)   Trademark Security Agreement issued by Blood Cells, Inc. in favor 
          of American Capital Strategies, Ltd., dated as of October 29, 
          1999.  [Incorporated by reference to Exhibit 10.42 to the 1999 
          Form 10-K.]
(10.35)   Trademark Security Agreement issued by IGEN, Inc. in favor of 
          American Capital Strategies, Ltd., dated as of October 29, 1999. 
          [Incorporated by reference to Exhibit 10.43 to the 1999 Form 
          10-K.]
(10.36)   Patent Security Agreement issued by IGI, Inc. in favor of American 
          Capital Strategies, Ltd., dated as of October 29, 1999. 
          [Incorporated by reference to Exhibit 10.44 to the 1999 Form 
          10-K.]
(10.37)   Patent Security Agreement issued by Immunogenetics, Inc. in favor 
          of American Capital Strategies, Ltd., dated as of October 29, 
          1999. [Incorporated by reference to Exhibit 10.45 to the 1999 Form 
          10-K.]
(10.38)   Patent Security Agreement issued by Blood Cells, Inc. in favor of 
          American Capital Strategies, Ltd., dated as of October 29, 1999. 
          [Incorporated by reference to Exhibit 10.46 to the 1999 Form 
          10-K.]
(10.39)   Patent Security Agreement issued by IGEN, Inc. in favor of 
          American Capital Strategies, Ltd., dated as of October 29, 1999.  
          [Incorporated by reference to Exhibit 10.47 to the 1999 Form 
          10-K.]
(10.40)   Georgia Leasehold Deed to Secure Debt issued by IGI, Inc. in favor 
          of American Capital Strategies, dated as of October 29, 1999. 
          [Incorporated by reference to Exhibit 10.48 to the 1999 Form 
          10-K.]
(10.41)   Open-Ended Mortgage, Security Agreement and Assignment of Leases 
          and Rents (Cumberland County, New Jersey) issued by IGI, Inc. in 
          favor of American Capital Strategies, Ltd., dated as of October 
          29, 1999. [Incorporated by reference to Exhibit 10.49 to the 1999 
          Form 10-K.]
(10.42)   Open-Ended Mortgage, Security Agreement and Assignment of Leases 
          and Rents (Atlantic County, New Jersey) issued by IGI, Inc. in 
          favor of American Capital Strategies, Ltd., dated as of October 
          29, 1999. [Incorporated by reference to Exhibit 10.50 to the 1999 
          Form 10-K.]
(10.43)   Pledge and Security Agreement issued by IGI, Inc. and 
          Immunogenetics, Inc. in favor of American Capital Strategies, 
          Ltd., dated as of October 29, 1999.  [Incorporated by reference to 
          Exhibit 10.51 to the 1999 Form 10-K.]
(10.44)   Employment Agreement between IGI, Inc. and Manfred Hanuschek dated 
          as of July 26, 1999.  [Incorporated by reference to Exhibit 10.52 
          to the 1999 Form 10-K.]
(10.45)   Amendment to Employment Agreement between Manfred Hanuschek and 
          IGI, Inc. dated March 9, 2000.  [Incorporated by reference to 
          Exhibit 10.53 to the 1999 Form 10-K.]


  45


(10.46)   Employment Agreement between IGI, Inc. and Robert McDaniel dated 
          as of September 1, 1999.  [Incorporated by reference to Exhibit 
          10.54 to the 1999 Form 10-K.]
(10.47)   Pledge Agreement by and between Fleet Capital Corporation and IGI, 
          Inc., dated October 29, 1999.  [Incorporated by reference to 
          Exhibit 10.55 to the 1999 Form 10-K.]
(10.48)   Employment Agreement between IGI, Inc., and Rajiv Mathur dated 
          February 22, 1999. [Incorporated by reference to Exhibit 10.56 to 
          the 1999 Form 10-K.]
(10.49)   Amendment No. 1 to the Note and Equity Purchase Agreement by and 
          between American Capital Strategies, Ltd. and IGI, Inc., together 
          with its subsidiaries dated as of March 30, 2000.  [Incorporated 
          by reference to Exhibit 10.57 to the 1999 Form 10-K.]
(10.50)   Amendment to Loan and Security Agreement by and between Fleet 
          Capital Corporation and IGI, Inc., together with its subsidiaries 
          dated as of April 12, 2000.  [Incorporated by reference to Exhibit 
          10.58 to the 1999 Form 10-K.]
(10.51)   Amendment No. 2 to Note and Equity Purchase Agreement dated as of 
          June 26, 2000 by and among IGI, Inc., IGEN, Inc., Immunogenetics, 
          Inc., Blood Cells, Inc., American Capital Strategies, Ltd. and ACS 
          Funding Trust I.  [Incorporated by reference to Exhibit 99.1 to 
          the Company's Report on Form 8-K filed July 23, 2000.]
(10.52)   Second Amendment to Loan and Security Agreement dated as of June 
          23, 2000 by and among IGI, Inc., IGEN, Inc., Immunogenetics, Inc., 
          Blood Cells, Inc. and Fleet Capital Corporation.  [Incorporated by 
          reference to Exhibit 99.2 to the Company's Report on Form 8-K 
          filed July 23, 2000.]
(10.53)   Termination Agreement dated December 10, 1998 between the Company 
          and Glaxo Wellcome, Inc. [Incorporated by reference to Exhibit 
          10.61 to the 1999 Form 10-K.]
(10.54)   Asset Purchase Agreement dated as of June 19, 2000 by and between 
          the Buyer and the Company. [Incorporated by reference to Annex A 
          to the Company's Definitive Proxy Statement on Schedule 14A 
          effective September 1, 2000.]
(10.55)   Amendment and Waiver to Loan and Security Agreement dated as of 
          October 31, 2000 between Fleet Capital Corporation and the Company 
          and its affiliates.  [Incorporated by reference to Exhibit 10.1 to 
          the Company's Quarterly Report on Form 10-Q for the quarter ended 
          September 30, 2000, filed November 14, 2000.]
(10.56)   Letter Waiver dated November 9, 2000 between American Capital 
          Strategies, Ltd. and the Company and its affiliates. [Incorporated 
          by reference to Exhibit 10.2 to the Company's Quarterly Report on 
          Form 10-Q for the quarter ended September 30, 2000, filed November 
          14, 2000.]
(10.57)   Separation Agreement and General Release dated September 1, 2000 
          between the Company and Paul Woitach.  [Incorporated by reference 
          to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for 
          the quarter ended September 30, 2000, filed November 14, 2000.]
(10.58)   Certificate of Release and Termination of Contract dated as of 
          March 1, 2001 between Genesis Pharmaceutical, Inc. and Tristrata 
          Technology, Inc. [Incorporated by reference to Exhibit 10.58 to 
          the 2000 Form 10-K.]
(10.59)   Manufacturing and Supply Agreement dated as of February 14, 2001 
          among IGI, Inc., IGEN, Inc., Immunogenetics, Inc. and Genesis 
          Pharmaceutical, Inc. [Incorporated by reference to Exhibit 10.59 
          to the 2000 Form 10-K.]
(10.60)   Assignment of Trademark dated as of February 14, 2001 among IGI, 
          Inc., IGEN, Inc, Immunogenetics, Inc. and Genesis Pharmaceutical, 
          Inc. [Incorporated by reference to Exhibit 10.60 to the 2000 Form 
          10-K.]
(10.61)   Supply Agreement dated as of March 6, 2001 between Corwood 
          Laboratory, Inc. and IGI, Inc.  [Incorporated by reference to 
          Exhibit 10.61 to the 2000 Form 10-K.]
(10.62)   License Agreement dated as of March 6, 2001 among IGI, Inc., IGEN, 
          Inc., Immunogenetics, Inc. and its division EVSCO Pharmaceutical 
          and Corwood Laboratory, Inc. [Incorporated by reference to Exhibit 
          10.62 to the 2000 Form 10-K.]
(10.63)   Employment Agreement between IGI, Inc. and Domenic N. Golato dated 
          as of August 31, 2000. [Incorporated by reference to Exhibit 10.63 
          to the 2000 Form 10-K.]
(10.64)   IGI, Inc. 1991 Stock Option Plan.  [Incorporated by reference to 
          the Company's Proxy Statement for the Annual Meeting held May 9, 
          1991, File No. 001-08568, filed April 5, 1991.]
(10.65)   Fourth Amendment to Loan and Security Agreement dated as of 
          February 28, 2001 by and among IGI, Inc., IGEN, Inc., 
          Immunogenetics, Inc., Blood Cells, Inc., and Fleet Capital 
          Corporation.  [Incorporated by reference to Exhibit 99.1 to the 
          Company's Report on Form 8-K filed April 20, 2001.]
(10.66)   Amendment No. 4 to Note and Equity Purchase  Agreement dated as of 
          February 28, 2001 by and among IGI, Inc., IGEN, Inc., 
          Immunogenetics, Inc., Blood Cells, Inc., American Capital 
          Strategies, Ltd. and ACS Funding Trust I.  [Incorporated by 
          reference to Exhibit 99.2 to the Company's Report on Form 8-K 
          filed April 20, 2001.]
(10.67)   Asset Purchase Agreement dated as of February 6, 2002 by and 
          between Vetoquinol, U.S.A., Inc. and IGI, Inc. with Vetoquinol, 
          S.A. a party thereto with respect to Article X thereof. 
          [Incorporated by reference to Exhibit 99.1 to the Company's Report 
          on Form 8-K filed February 7, 2002.]
(10.68)   Research and Development Agreement dated as of January 2, 2001 
          between IGI, Inc. and Prime Pharmaceutical Corporation.  
          [Incorporated by reference to Exhibit 10.68 on the Company's 
          Annual Report on Form 10-K for fiscal year ended December 31, 
          2001, File No. 001-08568, filed on March 15, 2002 ("the 2001 Form 
          10-K").]
(10.69)   Manufacturing and Supply Agreement dated November 5, 2002 between 
          IGI, Inc. and Desert Whale Jojoba Company, Inc. [Incorporated by 
          reference to Exhibit 10.69 on the Company's Annual Report on Form 
          10-K for the fiscal year ended December 31, 2002, File No. 
          001-08568, filed March 10, 2003 ("the 2002 Form 10-K).]
(10.70)   Loan Agreement dated January 10, 2002 between IGI, Inc. and the 
          New Jersey Economic Development Authority. [Incorporated by 
          reference to Exhibit 10.70 to the 2002 Form 10-K]
(10.71)   Promissory Note dated January 10, 2002 by IGI, Inc. to the New 
          Jersey Economic Development Authority. [Incorporated by reference 
          to Exhibit 10.71 to the 2002 Form 10-K]


  46


(10.72)   Mortgage and Security Agreement and Fixture Filing dated January 
          10, 2002 between IGI, Inc. and the New Jersey Economic 
          Development Authority. [Incorporated by reference to Exhibit 
          10.72 to the 2002 Form 10-K]
(10.73)   Contract of Sale for Real Estate dated October 21, 2001 between 
          IGI, Inc. and Poultry Investors, LLC. [Incorporated by reference 
          to Exhibit 10.73 to the 2002 Form 10-K]
(10.74)   Addendum dated November 14, 2001 to Contract of Sale for Real 
          Estate dated October 21, 2001 between IGI, Inc. and Poultry 
          Investors, LLC. [Incorporated by reference to Exhibit 10.74 to 
          the 2002 Form 10-K]
(10.75)   Partial Mortgage Release dated February 20, 2002 by Fleet Capital 
          Corporation for real property designated on the municipal tax map 
          for the Township of Buena Vista, New Jersey as Lot 23.01, Block 
          5501. [Incorporated by reference to Exhibit 10.75 to the 2002 
          Form 10-K]
(10.76)   Partial Mortgage Release dated February 22, 2002 by American 
          Capital Strategies, Ltd. for real property designated on the 
          municipal tax map for the Township of Buena Vista, New Jersey as 
          Lot 23.01, Block 5501. [Incorporated by reference to Exhibit 
          10.76 to the 2002 Form 10-K]
(10.77)   Amendment No. 5 dated May 30, 2002 to Note and Equity Agreement 
          by and among IGI, Inc., IGEN, Inc., Immunogenetics, Inc., Blood 
          Cells, Inc. and American Capital Strategies, Ltd. [Incorporated 
          by reference to Exhibit 10.77 to the 2002 Form 10-K] 
(10.78)   Termination and Release of Pledge and Security Agreement dated 
          May 31, 2002 by and among IGI, Inc., IGEN, Inc., Immunogenetics, 
          Inc., Blood Cells, Inc. and American Capital Strategies, Ltd. 
          [Incorporated by reference to Exhibit 10.78 to the 2002 Form 
          10-K]
(10.79)   Termination and Release of Patent Security Agreement (United 
          States Patents) dated May 30, 2002 between American Capital 
          Strategies, Ltd. and IGI, Inc. [Incorporated by reference to 
          Exhibit 10.79 to the 2002 Form 10-K]
(10.80)   Termination and Release of Patent Security Agreement (United 
          States Patents) dated May 30, 2002 between American Capital 
          Strategies, Ltd. and Blood Cells, Inc. [Incorporated by reference 
          to Exhibit 10.80 to the 2002 Form 10-K]
(10.81)   Termination and Release of Patent Security Agreement (United 
          States Patents) dated May 30, 2002 between American Capital 
          Strategies, Ltd. and IGEN, Inc. [Incorporated by reference to 
          Exhibit 10.81 to the 2002 Form 10-K]
(10.82)   Termination and Release of Patent Security Agreement (United 
          States Patents) dated May 30, 2002 between American Capital 
          Strategies, Ltd. and Immunogenetics, Inc. [Incorporated by 
          reference to Exhibit 10.82 to the 2002 Form 10-K]
(10.83)   Termination and Release of Trademark Security Agreement dated May 
          30, 2002 between American Capital Strategies, Ltd. and IGI, Inc. 
          [Incorporated by reference to Exhibit 10.83 to the 2002 Form 
          10-K]
(10.84)   Termination and Release of Trademark Security Agreement dated May 
          30, 2002 between American Capital Strategies, Ltd. and IGEN, Inc. 
          [Incorporated by reference to Exhibit 10.84 to the 2002 Form 
          10-K]
(10.85)   Termination and Release of Trademark Security Agreement dated May 
          30, 2002 between American Capital Strategies, Ltd. and 
          Immunogenetics, Inc. [Incorporated by reference to Exhibit 10.85 
          to the 2002 Form 10-K]
(10.86)   Termination and Release of Trademark Security Agreement dated May 
          30, 2002 between American Capital Strategies, Ltd. and Blood 
          Cells, Inc.[Incorporated by reference to Exhibit 10.86 to the 
          2002 Form 10-K]
(10.87)   Termination and Release of Trademark Security Agreement dated May 
          31, 2002 by and among Wachovia Bank, N.A. and IGI, Inc., IGEN, 
          Inc., Immunogenetics, Inc., Micro-Pak, Inc. and Micro Vescular 
          Systems, Inc. [Incorporated by reference to Exhibit 10.87 to the 
          2002 Form 10-K]
(10.88)   Termination and Release of Trademark Security Agreement dated May 
          31, 2002 between Fleet Capital Corporation and IGI, Inc. 
          [Incorporated by reference to Exhibit 10.88 to the 2002 Form 
          10-K]
(10.89)   Termination and Release of Trademark Security Agreement dated May 
          31, 2002 between Fleet Capital Corporation and Immunogenetics, 
          Inc. [Incorporated by reference to Exhibit 10.89 to the 2002 Form 
          10-K]
(10.90)   Termination and Release of Trademark Security Agreement dated May 
          31, 2002 between Fleet Capital Corporation and IGEN, Inc. 
          [Incorporated by reference to Exhibit 10.90 to the 2002 Form 
          10-K]
(10.91)   Termination and Release of Patent Security Agreement dated May 
          31, 2002 between Fleet Capital Corporation and IGI, Inc. 
          [Incorporated by reference to Exhibit 10.91 to the 2002 Form 
          10-K]
(10.92)   Termination and Release of Patent Security Agreement dated May 
          31, 2002 between Fleet Capital Corporation and IGEN, Inc. 
          [Incorporated by reference to Exhibit 10.92 to the 2002 Form 
          10-K]
(10.93)   Manufacturing and Supply Agreement dated May 31, 2002 between 
          IGI, Inc. and IGEN, Inc. (collectively Suppliers) and Vetoquinol, 
          USA, Inc. (Purchaser). [Incorporated by reference to Exhibit 
          10.93 to the 2002 Form 10-K]
(10.94)   Technological Rights Agreement dated May 31, 2002 between IGI, 
          Inc. and IGEN, Inc. (collectively Sellers) and Vetoquinol, USA, 
          Inc. (Purchaser). [Incorporated by reference to Exhibit 10.94 to 
          the 2002 Form 10-K]
(10.95)   Supplemental Agreement dated May 31, 2002 between IGI, Inc. 
          (Seller) and Vetoquinol, USA, Inc. (Buyer). [Incorporated by 
          reference to Exhibit 10.95 to the 2002 Form 10-K]
(10.96)   Discharge of Mortgage dated May 29, 2002 by Fleet Capital 
          Corporation. [Incorporated by reference to Exhibit 10.96 to the 
          2002 Form 10-K]
(10.97)   Partial Release of Mortgage dated May 31, 2002 by American 
          Capital Strategies, Ltd. for real property designated on the 
          municipal tax map of the Borough of Buena as Lot 1, Block 205. 
          [Incorporated by reference to Exhibit 10.97 to the 2002 Form 
          10-K]
(10.98)   Amendment dated March 19, 2002, to License Agreement by and among 
          Ethicon, Inc. and IGI, Inc., IGEN, Inc. and Immunogenetics, Inc. 
          [Incorporated by reference to Exhibit 10.98 to the 2002 Form 
          10-K] 
(10.99)   Product Development Agreement dated November 10, 2003, between 
          Pure Energy Corporation d/b/a/ Pure Energy of America, Inc. and 
          IGI, Inc. [Incorporated by reference to Exhibit 10.99 on the 
          Company's Annual Report on Form 10-K for the fiscal year ended 
          December 31, 2003, File No. 001-08568, filed April 14, 2004 ("the 
          2003 Form 10-K).]
(10.100)  Severance Agreement dated effective as of August 15, 2003, 
          between John F. Ambrose and IGI, Inc. [Incorporated by reference 
          to Exhibit 10.100 to the 2003 Form 10-K]
(10.101)  Employment Agreement dated September 26, 2003, between Michael F. 
          Holick, MD, PhD and IGI, Inc. [Incorporated by reference to 
          Exhibit 10.101 to the 2003 Form 10-K]
(10.102)  Severance Agreement dated effective as of January 9, 2004, 
          between Garry Hardwick and IGI, Inc. [Incorporated by reference 
          to Exhibit 10.102 to the 2003 Form 10-K]
(10.103)  License Agreement effective December 24, 2003, by and among 
          Michael F. Holick, MD, PhD, A&D Bioscience, Inc. and IGI, Inc. 
          [Incorporated by reference to Exhibit 10.103 to the 2003 Form 
          10-K]
(10.104)  License Agreement dated February 9, 2004, between Universal 
          Chemical Technologies, Inc. and IGI, Inc. [Incorporated by 
          reference to Exhibit 10.104 to the 2003 Form 10-K]
(10.105)  Contract for Sale of Real Estate dated October 22, 2003, between 
          CPB, Inc. ("Buyer") and IGI, Inc. ("Seller").[Incorporated by 
          reference to Exhibit 10.105 to the 2003 Form 10-K]
(10.106)  Cancellation of Mortgage and Security Agreement and Fixture 
          Filing dated February 10, 2004 by the New Jersey Economic 
          Development Authority for real property real property and 
          premises situated, lying and being known as 701 Harding Highway, 
          Buena, Atlantic Country, New Jersey, designated on the Municipal 
          Tax Map of the Borough of Buena as Block 205, Lot 1. 
          [Incorporated by reference to Exhibit 10.106 to the 2003 Form 
          10-K]


  47


(10.107)  Agreement for Development Services dated March 27, 2003, between 
          Chattem, Inc. and IGI, Inc. [Incorporated by reference to Exhibit 
          10.107 to the 2003 Form 10-K]
(10.108)  Material Transfer Agreement dated December 1, 2003, between The 
          Procter & Gamble Company and IGI, Inc. [Incorporated by 
          reference to Exhibit 10.108 to the 2003 Form 10-K]
(10.109)  Sublicense Agreement between IGI, Inc. and Tarpan Therapeutics, 
          Inc. dated April 19, 2004 [Incorporated by reference to Exhibit 
          10.109 to the Company's Quarterly Report on Form 10-Q for the 
          quarter ended March 31, 2004, filed May 14, 2004]
(10.110)  Severance agreement between IGI, Inc. and Domenic N. Golato, 
          Chief Financial Officer dated June 30, 2004. [Incorporated by 
          reference to Exhibit 10.110 to the Company's Quarterly Report on 
          Form 10-Q for the quarter ended June 30, 2004, filed August 13, 
          2004.]
(10.111)  Sublicense Agreement between IGI, Inc. and University of 
          Massachusetts dated July 27, 2004 [Incorporated by reference to 
          Exhibit 10.111 to the Company's Quarterly Report on Form 10-Q for 
          the quarter ended June 30, 2004, filed August 13, 2004.]
(10.112)  Amendment of the supply and license agreement between IGI, Inc. 
          and Estee Lauder, Inc. [Incorporated by reference to Exhibit 10.1 
          to the Company's Report on Form 8-K filed November 24, 2004.]
(21)      List of Subsidiaries. [Incorporated by reference to Exhibit 21 to 
          the 1999 Form 10-K.]
*(23.1)   Consent of KPMG LLP.
*(23.2)   Consent of Amper, Politziner & Mattia P.C.
*(31.1)   Certification of the Chairman and Chief Executive Officer 
          Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 
          1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley 
          Act of 2002.
*(31.2)   Certification of the Vice President of Finance Pursuant to Rule 
          13a-14(a) under the Securities Exchange Act of 1934, as adopted 
          pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*(32.1)   Certification of the Chairman and Chief Executive Officer 
          Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 
          Section 906 of the Sarbanes-Oxley Act of 2002.
*(32.2)   Certification of the Vice President of Finance Pursuant to 18 
          U.S.C. Section 1350, as adopted pursuant to Section 906 of the 
          Sarbanes-Oxley Act of 2002.

* Filed herewith.


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