SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                                  FORM 10-Q
                 QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended                                       Commission File No.
-----------------                                       -------------------
 March 31, 2001                                              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.)

Wheat Road and Lincoln Avenue, Buena, NJ                      08310
----------------------------------------                      -----
(Address of principal executive offices)                    (Zip Code)

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

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  [ ]

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

                  Common Shares Outstanding at May 11, 2001

                                 11,077,731

<PAGE>  1


ITEM 1.   Financial Statements

                       PART I   FINANCIAL INFORMATION

                         IGI, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
           (in thousands, except share and per share information)
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                  March 31,
                                                          -----------------------
                                                            2001            2000
                                                            ----            ----

<S>                                                       <C>             <C>
Revenues:
  Sales, net                                              $ 3,726         $ 4,471
  Licensing and royalty income                                382             789
                                                          -----------------------
      Total revenues                                        4,108           5,260

Cost and expenses:
  Cost of sales                                             2,088           2,301
  Selling, general and administrative expenses              1,274           1,950
  Product development and research expenses                   172             228
  Non-recurring charges                                       660               -
                                                          -----------------------
Operating profit (loss)                                       (86)            781
Interest expense                                              550           1,899
                                                          -----------------------

Loss from continuing operations before benefit for
 income taxes                                                (636)         (1,118)
Benefit for income taxes                                        -             296
                                                          -----------------------

Loss from continuing operations                              (636)           (822)
                                                          -----------------------

Discontinued operations:
  Loss from operations of discontinued business,
   net of tax                                                   -            (229)
  Gain on disposal of discontinued business                   268               -

Cumulative effect of accounting change                          -            (168)
                                                          -----------------------
Net loss                                                     (368)         (1,219)

Mark to market for detachable stock warrants                 (143)              -
                                                          -----------------------
Net loss attributable to common stock                     $  (511)        $(1,219)
                                                          =======================

Basic and Diluted Loss Per Common Share
  Continuing operations                                   $  (.07)        $  (.08)
  Discontinued operations                                     .02            (.02)
  Cumulative effect of accounting change                        -            (.02)
                                                          -----------------------
  Net loss attributable to common stock                   $  (.05)        $  (.12)
                                                          =======================

  Basic and diluted weighted average number of
   common shares outstanding                           10,403,140      10,126,899
</TABLE>

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

<PAGE>  2


                         IGI, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               March 31, 2001
                                                                (unaudited)      December 31, 2000
                                                               --------------    -----------------
                                                                     (amounts in thousands)

<S>                                                               <C>                 <C>
ASSETS
Current assets:
  Cash and cash equivalents                                       $    54             $    69
  Restricted cash                                                     103                 102
  Accounts receivable, less allowance for doubtful accounts
   of $223 and $280 in 2001 and 2000, respectively                  1,630               2,482
  Licensing and royalty income receivable                             374                 413
  Inventories                                                       2,523               2,585
  Prepaid expenses and other current assets                           502                 140
                                                                 ----------------------------
      Total current assets                                          5,186               5,791
Investments                                                             3                   3
Property, plant and equipment, net                                  4,788               5,343
Deferred financing costs                                              786                 829
Other assets                                                          359                 421
                                                                 ----------------------------
      Total assets                                               $ 11,122            $ 12,387
                                                                 ============================

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Revolving credit facility                                      $  1,342            $  2,401
  Current portion of long-term debt                                   483               7,384
  Accounts payable                                                  1,661               2,359
  Accrued payroll                                                     262                 106
  Accrued interest                                                    147                 254
  Other accrued expenses                                            1,693               1,728
  Income taxes payable                                                 13                  15
                                                                 ----------------------------
      Total current liabilities                                     5,601              14,247
Long-term debt, net of discount and current portion                 7,067                   -
Deferred income                                                       714                 223
                                                                 ----------------------------
      Total liabilities                                            13,382              14,470
                                                                 ----------------------------
Detachable stock warrants                                           1,335               1,192
                                                                 ----------------------------
Stockholders' deficit:
  Preferred stock $.01 par value, 1,000,000 shares
   authorized, none outstanding                                         -                   -
  Common stock $.01 par value, 50,000,000 shares authorized;
   10,577,731 and 10,343,073 shares issued in 2001 and 2000,
   respectively                                                       106                 104
  Additional paid-in capital                                       22,554              22,508
  Accumulated deficit                                             (25,361)            (24,993)
Less treasury stock, 66,698 shares at cost in 2001 and 2000          (894)               (894)
                                                                 ----------------------------
      Total stockholders' deficit                                  (3,595)             (3,275)
                                                                 ----------------------------
      Total liabilities and stockholders' deficit                $ 11,122            $ 12,387
                                                                 ============================
</TABLE>

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

<PAGE>  3


                         IGI, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three months ended March 31,
                                                                   ----------------------------
                                                                       2001          2000
                                                                       ----          ----
                                                                     (amounts in thousands)

<S>                                                                  <C>           <C>
Cash flows from operating activities:
  Net loss                                                           $  (368)      $(1,046)
  Reconciliation of net loss to net cash (used by) provided
   by operating Activities:
    Depreciation and amortization                                        127           221
    Amortization of deferred financing costs and debt discount           145           184
    Non-recurring charges from plant shut-down                           567             -
    Provision for loss on accounts receivable and inventories           (194)         (104)
    Recognition of deferred income                                       (34)          (74)
    Benefit for deferred income taxes                                      -          (448)
    Accrued interest expense relating to put feature of warrants           -         1,073
    Interest expense related to subordinated note agreement               40             -
    Stock compensation expense:
      Non employee stock options                                           -            23
      Directors' stock issuance                                           28            36
  Changes in operating assets and liabilities:
    Restricted cash                                                       (1)            -
    Accounts receivable                                                  906          (171)
    Inventories                                                          100          (278)
    Receivables under royalty agreements                                  39          (174)
    Prepaid expenses and other assets                                   (327)           62
    Accounts payable and accrued expenses                               (532)       (1,103)
    Income taxes payable                                                  (2)           (5)
    Discontinued operations - working capital changes and
     non-cash charges                                                      -            55
    Deferred income                                                      525             -
    Short term notes payable, operating                                    -          (197)
                                                                     ---------------------

        Net cash (used by) provided by operating activities            1,019        (1,946)
                                                                     ---------------------

Cash flows from investing activities:
  Capital expenditures                                                   (20)         (137)
  (Increase) decrease in other assets                                     10           (40)
                                                                     ---------------------
        Net cash used by investing activities                            (10)         (177)
                                                                     ---------------------

Cash flows from financing activities:
  Borrowings under capital expenditures facility                           -           257
  Borrowings under revolving credit agreement                          5,263         9,741
  Repayments of revolving credit agreement                            (6,322)       (8,459)
  Proceeds from exercise of common stock options and
   purchase of common stock                                               35           120
  Change in book overdraft                                                 -           405
                                                                     ---------------------
        Net cash (used by) provided by financing activities           (1,024)        2,064
                                                                     ---------------------

Net decrease in cash and equivalents                                     (15)          (59)
Cash and equivalents at beginning of period                               69           416
                                                                     ---------------------
Cash and equivalents at end of period                                $    54       $   357
                                                                     =====================
</TABLE>

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

<PAGE>  4


                         IGI, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

1.    Basis of Presentation

The accompanying consolidated financial statements have been prepared by
IGI, Inc. without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"), and reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation
of the results for the interim periods presented.  All such adjustments are
of a normal recurring nature.  Certain previously reported amounts have been
reclassified to conform with the current period presentation.

Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the SEC, although the Company believes the disclosures are
adequate to make the information presented not misleading.  These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000
(the "2000 10-K Annual Report").

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern.  As discussed in
Note 3 to the consolidated financial statements, the Company has suffered
recurring losses from operations and has negative working capital and a
stockholders' deficit as of March 31, 2001. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

2.    Discontinued Operations

On September 15, 2000, the shareholders of the Company approved, and the
Company consummated, the sale of the assets and transfer of the liabilities
of the Vineland division, which produced and marketed poultry vaccines and
related products.  The buyer assumed liabilities of approximately
$2,300,000, and paid the Company cash in the amount of $12,500,000, of which
$500,000 was placed in an escrow fund to secure potential obligations of the
Company relating to final purchase price adjustments and indemnification. In
March 2001, the Company negotiated a settlement of the escrow in the amount
of approximately $237,000.  In addition, the Company reduced an accrual by
$31,000 for costs related to the sale.  The Company's results reflect a
$268,000 gain on the sale of the Vineland division for the three months
ended March 31, 2001.  The Vineland division incurred an operating loss of
$229,000 for the three months ended March 31, 2000.

3.    Debt and Stock Warrants

On October 29, 1999, the Company entered into a $22 million senior bank
credit agreement ("Senior Debt Agreement") with Fleet Capital Corporation
("Fleet") and a $7 million subordinated debt agreement ("Subordinated Debt
Agreement") with American Capital Strategies, LTD. ("ACS").  These
agreements enabled the Company to retire approximately $18.6 million of
outstanding debt with its former bank lenders.

Upon the sale of the Vineland division in 2000, the amount of debt pursuant
to the Senior Debt Agreement was reduced.  The Senior Debt Agreement now
provides for (i) a revolving line of credit facility of up to $5 million,
based upon qualifying accounts receivable and inventory and (ii) a $2.7
million term loan. The borrowings under the revolving line of credit bear
interest at the prime rate plus 1.0% or the London Interbank Offered Rate
plus 3.25% (9% at March 31, 2001).  The borrowings under the term loan
credit facility bear interest at the prime rate plus 1.5% or the London
Interbank Offered Rate plus 3.75% (9.5% at March 31, 2001).  Provisions
under the revolving line of credit require the Company to maintain a lockbox
with the lender, allowing Fleet to sweep cash receipts from customers and
pay down the revolving line of credit.  Drawdowns on the revolving line of
credit are made when needed to fund operations.  Upon renegotiation of the
covenants for the term loan, Fleet agreed to change the repayment terms,
from quarterly to monthly payments starting February 2001.  The payments for
February to April were paid in April 2001.  The Company will make principal
payments to Fleet for the years ended December 31, 2001, 2002, 2003 and 2004
of $367,000, $492,000, $592,000, and $1,155,000, respectively.

<PAGE>  5


                         IGI, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

Borrowings under the Subordinated Debt Agreement bear interest at the rate
of 12.5% ("cash portion of interest on subordinated debt") plus an
additional interest component at the rate of 2.25% which is payable at the
Company's election in cash or the Company's Common Stock.  As of March 31,
2001, the loan balance under the subordinated notes was $7,212,000, offset
by an unamortized debt discount of $2,267,000.  The Subordinated Debt
Agreement matures in October 2006.  In connection with the Subordinated Debt
Agreement the Company issued to the lender warrants to purchase 1,907,543
shares of IGI Common Stock at an exercise price of $.01 per share.  The debt
discount was recorded at issuance, representing the difference between the
$7,000,000 proceeds received by the Company and the total obligation, which
included principal of $7,000,000 and an initial warrant liability of
$2,842,000.

To secure all of its obligations under these agreements, the Company granted
the lenders a security interest in all of the assets and properties of the
Company and its subsidiaries.  In addition, ACS has the right to designate
for election to the Company's Board of Directors that number of directors
that bears the same ratio to the total number of directors as the number of
shares of Company Common Stock owned by it plus the number of shares
issuable upon exercise of its warrants bear to the total number of
outstanding shares of Company Common Stock on a fully-diluted basis,
provided that so long as it owns any Common Stock or warrants or any of its
loans are outstanding, it shall have the right to designate at least one
director or observer on the Board of Directors.  ACS has made such a
designation, and the Company intends to implement it by action of the Board
of Directors after the annual meeting of shareholders.

On April 12, 2000, ACS amended its Subordinated Debt Agreement with the
Company whereby the "put" provision associated with the original warrants
granted to purchase 1,907,543 shares of the Company's Common Stock was
replaced by a "make-whole" feature.  The "make-whole" feature requires the
Company to compensate ACS, in either Common Stock or cash, at the option of
the Company, in the event that ACS ultimately realizes proceeds from the
sale of the Common Stock obtained upon exercise of its warrants that are
less than the fair value of the Common Stock upon exercise of such warrants.
Fair value of the Common Stock upon exercise is defined as the 30-day
average value prior to notice of intent to sell.  ACS must exercise
reasonable effort to sell or place its shares in the marketplace over a 180-
day period before it can invoke the make-whole provision.

The debt agreements contain various affirmative and negative covenants, such
as interest coverage and minimum fixed charge coverage ratios.  The
covenants under the debt agreements were further amended during 2000.  Fleet
and ACS had waived compliance with certain financial covenants through
December 31, 2000.  During the first quarter of 2001, the Company
renegotiated the covenants with ACS and Fleet for 2001 and forward.  As of
March 31, 2001, the Company is in compliance with the new covenants.

The Company remains highly leveraged and access to additional funding
sources is limited. The Company's available borrowings under the revolving
line of credit facility are dependent on the level of qualifying accounts
receivable and inventory.  If the Company's operating results deteriorate or
product sales do not improve or the Company is not successful in meeting its
financial obligations, a default could result under the Company's loan
agreements and any such default, if not resolved, could result in the
lenders calling the outstanding loan amounts.  The demand for repayment may
lead to curtailment of certain of its business operations, sale of certain
assets or the commencement of bankruptcy or insolvency proceedings by the
Company or its creditors.  As of March 31, 2001, the Company had available
borrowings under the revolving line of credit facility of $1,161,000.

4.    Common Stock to be Issued

      In March 2001, the Company agreed to sell 500,000 shares of common
stock to an investor in exchange for $250,000.  The cash was received in
March 2001, but the shares were not issued until April 2001.  At March 31,
2001, the $250,000 was included in accrued expenses.

<PAGE>  6


                         IGI, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

5.    Per Share Data

Per share data is computed based upon the weighted average number of shares
of common stock, adjusted for the potential conversion of dilutive common
stock equivalents.  Given the Company's net loss, basic and diluted earnings
per share data are equal for the three months ended March 31, 2001 and 2000.

6.    Inventories

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

Inventories at March 31, 2001 and December 31, 2000 consist of:

<TABLE>
<CAPTION>
                                March 31, 2001      December 31, 2000
                                --------------      -----------------

<S>                                 <C>                  <C>
(amounts in thousands)
Finished goods                      $1,831               $1,458
Raw materials                          692                1,127
                                    ---------------------------
Total                               $2,523               $2,585
                                    ===========================
</TABLE>

7.    Regulatory Proceedings and Legal Proceedings

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.  On July 26, 2000, the
Company reached an agreement in principle with the staff of the SEC to
resolve matters arising with respect to the informal investigation of the
Company.  Under the proposed agreement, which will not be final until
approved by the SEC, the Company neither admits nor denies that the Company
violated the financial reporting and record-keeping requirements of Section
13 of the Securities Exchange Act of 1934, as amended, for the three years
ended December 31,1997.  Further, in the proposed agreement, the Company
agrees to the entry of an order to cease and desist from any such violation
in the future.  No monetary penalty is expected.

The SEC's investigation and proposed settlement focus on alleged fraudulent
actions taken by former members of the Company's management.  Upon becoming
aware of the alleged fraudulent activity, IGI, through its Board of
Directors, immediately commenced an internal investigation, which led to the
termination of employment of those responsible.  IGI then cooperated fully
with the staff of the SEC and disclosed to the SEC the results of the
internal investigation.

In April 2000, the FDA initiated an inspection of the Company's Companion
Pet Products division and issued an inspection report on Form FDA 483 on
July 5, 2000.  The July 5, 2000 FDA report includes several unfavorable
observations of manufacturing and quality assurance practices and products
of the division. On May 24, 2000, in an effort to address a number of the
FDA's stated concerns, the Company permanently discontinued production and
shipment of Liquichlor and on June 1, 2000 temporarily stopped production of
Cerumite. The Company has responded to the July 5, 2000 FDA report and is
currently preparing the required written procedures and documentation on
product preparation to comply with the FDA regulations. The FDA will
evaluate the Company's response and will determine the ultimate outcome of
the FDA inspection.  An unfavorable outcome could result in fines, penalties
and the potential permanent or temporary halt of the sale of certain
regulated products, any or all of which could have a material adverse effect
on the Company.  The FDA will return for a final inspection in June 2001.
In March 2001, the Company signed a supply agreement with an entity to
outsource the manufacturing of products for the Companion Pet Products
division, and ceased operations at the Companion Pet Products manufacturing
facility.

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 a Notice of Violation relating to the storage of waste materials in a
number of trailers at the site.  The Company has established a disposal and
cleanup schedule and has commenced operations to remove materials from the
site.  Small amounts of hazardous waste were discovered and the Company was
issued a notice of violation relating to the storage of these materials.

<PAGE>  7


                         IGI, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

The Company is cooperating with the authorities and does not expect to incur
any material fines or penalties. The Company expensed $160,000 during 2000
(none of which was expensed in the three months ended March 31, 2000) which
represents its estimate of the total cost related to the disposal and
cleanup process.

On or around, May 17, 2000, the Company became aware of a spill at its
Vineland manufacturing facility of about 965 gallons of heating oil.   By
May 26, 2000 the Company had completed remediation of the soil and nearby
creek that were affected by the heating oil spill.  To assure that the
nearby groundwater was not contaminated by the spill, the Company's
environmental consultants advised the Company to drill a test well.  The
well has been drilled and the analytical results found no contamination of
groundwater.  The Company has expensed all costs related to the initial
remediation and the drilling of the test well.

On March 2, 2001, the Company became aware of a 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 information from the contractor, the Company has
estimated the cost for the clean up and remediation of $310,000, of which
$300,000 remains accrued as of March 31, 2001.

8.    Business Segments

Summary data related to the Company's reportable segments for the three-
month periods ended March 31, 2001 and 2000 appear below:

<TABLE>
<CAPTION>
                                     (amounts in thousands)
                      Companion      Consumer
                     Pet Products    Products    Corporate*    Consolidated
                     ------------    --------    ----------    ------------

<S>                     <C>           <C>         <C>            <C>
2001
Revenues                $2,679        $1,429      $     -        $4,108
Operating profit
 (loss)                   (380)          927         (633)          (86)
2000
Revenues                $3,329        $1,931      $     -        $5,260
Operating profit
 (loss)                    652         1,247       (1,118)          781

<FN>
*     Notes

(A)   Unallocated corporate expenses are principally general and
      administrative expenses.
(B)   Transactions between reportable segments are not material.
(C)   The amounts reported above for the three month period ending March 31,
      2000 have been adjusted for the change in accounting as discussed in
      Footnote 10.
</FN>
</TABLE>

9.    Non-recurring charges

On March 2, 2001 the Company became aware of a potential 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.  During the first quarter of 2001, the Company had reached a decision to
outsource the manufacturing for this division.  Due to the environmental
situation noted above, the Company decided to accelerate the outsourcing
process (originally anticipated to be completed by June 2001), and ceased
operations at the Companion Pet Products manufacturing facility.  On March
6, 2001, the Company signed a supply agreement with a company to manufacture
the products for the Companion Pet Products division.  On March 8, 2001, the
Company terminated the employment of the manufacturing personnel at this
facility.

<PAGE>  8


                         IGI, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

During the quarter ended March 31, 2001, the Company recorded non-recurring
charges related to the plant shutdown of the Companion Pet Products
manufacturing facility of $751,000 ($91,000 has been reflected as a
component of cost of sales, with the remainder reflected as a single line
item in the accompanying statement of operations).  The composition and
activity of the non-recurring charge is as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                     Reduction of        Cash           Accrual at
Description                                Amount       assets       Expenditures     March 31,2001
-----------                                ------    ------------    ------------     -------------

<S>                                         <C>         <C>             <C>               <C>
Impairment of property and equipment        $314        $(314)          $  -              $  -
Environmental clean up costs                 310            -            (10)              300
Write off of inventory                        91          (91)             -                 -
Plant shutdown costs                          21          (11)           (10)                -
Severance                                     15            -             (6)                9
                                            --------------------------------------------------
                                            $751        $(416)          $(26)             $309
                                            ==================================================
</TABLE>

10.   Recent Pronouncements

In 1998, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Transactions."   This statement requires companies
to record derivatives on the balance sheet as assets and liabilities
measured at fair value.  The accounting treatment of gains and losses
resulting from changes in the value of derivatives depends on the use of the
derivative and whether it qualifies for hedge accounting.  The Company
adopted SFAS 133, as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" on January 1, 2001.
There was no impact on the Company's financial position, results of
operations or liquidity upon the adoption of SFAS No. 133.

In December 2000, the Company assessed the impact of Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements"; in
relationship with one of its royalty contracts and recorded a cumulative
adjustment of $168,000 as of January 1, 2000.  The cumulative adjustment
related to the recognition of up-front license fees and installment
payments over the estimated economic life of the agreement. The application
of SAB 101 for the three months ended March 31, 2000 resulted in a $5,000
reduction in licensing and royalty income from that previously reported.

<PAGE>  9


                         IGI, INC. AND SUBSIDIARIES

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

The following discussion and analysis may contain forward-looking
statements.  Such statements are subject to certain risks and uncertainties,
including those discussed below or in the Company's 2000 10-K Annual Report,
that could cause actual results to differ materially from the Company's
expectations.  See "Factors Which May Affect Future Results" below and in
the 2000 10-K Annual Report.  Readers are cautioned not to place undue
reliance on any forward-looking statements, as they reflect management's
analysis as of the date hereof.  The Company undertakes no obligation to
release the results of any revision to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof
or to reflect the occurrence of anticipated events.

Results Of Operations

Three months ended March 31, 2001 compared to March 31, 2000

The Company had a net loss attributable to common stock of $511,000, or $.05
per share, for the three months ended March 31, 2001 compared to a net loss
attributable to common stock of $1,219,000, or $.12 per share, for the first
quarter ended March 31, 2000. Excluding the mark to market adjustment
for detachable stock warrants, the Company had a net loss of $368,000 for
the three months ended March 31, 2001 compared to a net loss of $1,219,000
for the first quarter ended March 31, 2000.  The decrease in the net loss
compared to prior year was primarily due to the gain of $268,000 on disposal
of discontinued operations, lower operating expenses of $945,000 and a mark-
to-market charge of $1,073,000 in 2000, related to the put warrants issued
in conjunction with the American Capital Strategies, Ltd. subordinated
notes.  This was offset by a reduction in revenues in 2001 and non-recurring
charges.

On March 2, 2001, the Company became aware of a 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 start the
clean up. The Company had decided to outsource the manufacturing for this
division during the first quarter of 2001. Due to the environmental
situation noted above, the Company accelerated the outsourcing process and
executed a supply agreement on March 6, 2001 and ceased operations at the
manufacturing facility. In the three months ended March 31, 2001, the
Company recorded $751,000 in expenses that related to the environmental
clean up, the plant shutdown and impairment of related assets, as non-
recurring charges ($91,000 of these charges have been reflected in cost of
sales).  Management anticipates savings related to the manufacturing process
as a result of the outsourcing of production.  Future quarterly results
should reflect the benefits from outsourcing.

Total revenues for the quarter ended March 31, 2001 were $4,108,000, which
represents a decrease of $1,152,000, or 22%, from revenues of $5,260,000 for
the quarter ended March 31, 2000. The decrease in revenues was due to lower
product sales for the Companion Pet Products division and lower consumer sales
and licensing revenues in the Consumer Products division.

Companion Pet Products revenues for the quarter ended March 31, 2001
amounted to $2,679,000, a decrease of $650,000, or 20%, compared to quarter
ended March 31, 2000. This decrease was primarily attributable to decreased
product sales due to product recalls which occurred during last year's
second quarter ending June 30, 2000, and the removal of the affected
products from the product line.

Total Consumer Products revenues for the quarter ended March 31, 2001
decreased 26% to $1,429,000, compared to the quarter ended March 31, 2000 of
$1,931,000. Licensing and royalty income of $382,000 for the quarter ended
March 31, 2001 decreased by $407,000 compared to the first quarter in 2000
mainly from a reduction in one time research and development contracts and
Johnson & Johnson royalty income.  Product sales decreased by $95,000
primarily due to lower Estee Lauder sales.

As a percentage of sales, cost of sales increased from 51% in the quarter
ended March 31, 2000 to 56% in the quarter ended March 31, 2001.  The
resulting decrease in gross profit from 49% in the quarter ended March 31,
2000 to 44% for the first quarter ended March 31, 2001 is primarily the
result of unabsorbed manufacturing costs.

<PAGE>  10


                         IGI, INC. AND SUBSIDIARIES

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)

Companion Pet Products cost of sales as a percentage of sales, increased
from 59% in the first quarter of 2000 to 67% in the first of quarter 2001.
This increase was the result of unabsorbed manufacturing costs.

Consumer Products cost of sales as a percentage of sales, decreased from 31%
in the first quarter of 2000 to 28% in the first quarter of 2001. This
decrease was the result of lower labor and material costs.

Selling, general and administrative expenses decreased $676,000, or 35%,
from $1,950,000 in the quarter ended March 31, 2000. As a percentage of
revenues, these expenses were 37% of revenues in the first quarter of 2000
compared to 31% for the first quarter of 2001. Overall expenses decreased
due to decreased professional fees, reduced staffing and additional cost
saving measures implemented.

Product development and research expenses decreased $56,000, or 25%,
compared to the quarter ended March 31, 2000. The decrease is principally
related to the timing of expenditures.

During the quarter ended March 31, 2001, the Company recorded non-recurring
charges totaling $751,000.  Charges related to the manufacturing plant shut
down and required outsourcing of production consisted of $314,000 for the
impairment of property and equipment, $310,000 for environmental clean up
and $36,000 for plant shutdown costs for a total of $660,000 reflected as a
single line item on the accompanying statement of operations.  A $91,000
charge has been reflected in cost of sales on the statement of operations
related to the write off of inventory.

Interest expense decreased $1,349,000, or 71%, from $1,899,000 in the quarter
ended March 31, 2000 to $550,000 in the quarter ended March 31, 2001.  The
decrease is a result of a charge of $1,073,000 in the first quarter of 2000
for a mark-to-market adjustment on warrants granted to ACS to purchase
1,907,543 shares of the Company's stock.  The remaining decrease in interest
was due to the reduction of outstanding debt and lower interest rates.

Liquidity and Capital Resources

The Senior Debt Agreement provides for (i) a revolving line of credit
facility of up to $5 million, based upon qualifying accounts receivable and
inventory, and (ii) a $2.7 million term loan.  The borrowings under the
revolving line of credit bear interest at the prime rate plus 1.0% or the
London Interbank Offered Rate plus 3.25% (9% at March 31, 2001).  The
borrowings under the term loan credit facility bear interest at the prime
rate plus 1.5% or the London Interbank Offered Rate plus 3.75% (9.5% at
March 31, 2001).  Provisions under the revolving line of credit require the
Company to maintain a lockbox with the lender, allowing Fleet to sweep cash
receipts from customers and pay down the revolving line of credit.
Drawdowns on the revolving line of credit are made when needed to fund
operations. Upon renegotiation of the covenants for the term loan, Fleet
agreed to change the repayment terms, from quarterly to monthly payments
starting February 2001.  The payments for February to April were paid in
April 2001.  The Company will make principal payments to Fleet for the years
ended December 2001, 2002, 2003 and 2004 of $367,000, $492,000, $592,000 and
$1,155,000, respectively.

Borrowings under the Subordinated Debt Agreement bear interest at the rate
of 12.5% ("cash portion of interest on subordinated debt") plus an
additional interest component at the rate of 2.25% which is payable at the
Company's election in cash or Company Common Stock.  The additional interest
component increased in the first quarter of 2001 upon renegotiation of the
covenants.  As of March 31, 2001, borrowings under the subordinated notes
were $7,212,000, offset by an unamortized debt discount of $2,267,000.  The
Subordinated Debt Agreement matures in October 2006.  In connection with the
Subordinated Debt Agreement the Company issued to the lender warrants to
purchase 1,907,543 shares of IGI Common Stock at an exercise price of $.01
per share.  The debt discount was recorded at issuance, representing the
difference between the $7,000,000 proceeds received by the Company and the
total obligation, which included principal of $7,000,000 and an initial
warrant liability of $2,842,000.

<PAGE>  11


                         IGI, INC. AND SUBSIDIARIES

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)

To secure all of its obligations under these agreements, the Company granted
the lenders a security interest in all of the assets and properties of the
Company and its subsidiaries.  In addition, ACS has the right to designate
for election to the Company's Board of Directors that number of directors
that bears the same ratio to the total number of directors as the number of
shares of Company Common Stock owned by it plus the number of shares
issuable upon exercise of its warrants bear to the total number of
outstanding shares of Company Common Stock on a fully-diluted basis,
provided that so long as it owns any Common Stock or warrants or any of its
loans are outstanding, it shall have the right to designate at least one
director or observer on the Board of Directors.  ACS has made such a
designation, and the Company intends to implement it by action of the Board
of Directors after the annual meeting of shareholders.

The debt agreements contain various affirmative and negative covenants, such
as interest coverage and minimum fixed charge coverage ratios.  The
covenants under the debt agreements were further amended during 2000.  Fleet
and ACS had waived compliance with certain financial covenants through
December 31, 2000.  During the first quarter of 2001, the Company
renegotiated the covenants with ACS and Fleet for 2001 and forward.  As of
March 31, 2001, the Company is in compliance with the new covenants.

The Company remains highly leveraged and access to additional funding
sources is limited. The Company's available borrowings under the revolving
line of credit facility are dependent on the level of qualifying accounts
receivable and inventory.  If the Company's operating results deteriorate or
product sales do not improve or the Company is not successful in meeting its
financial obligations, a default could result under the Company's loan
agreements and any such default, if not resolved, could result in the
lenders calling the outstanding loan amounts.  The demand for repayment may
lead to curtailment of certain of its business operations, sale of certain
assets or the commencement of bankruptcy or insolvency proceedings by the
Company or its creditors.  As of March 31, 2001, the Company had available
borrowings under the revolving line of credit facility of $1,161,000.

Regulatory Proceeding and Legal Proceedings

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.  On July 26, 2000, the
Company reached an agreement in principle with the staff of the SEC to
resolve matters arising with respect to the informal investigation.  Under
the proposed agreement, which will not be final until approved by the SEC,
the Company neither admits nor denies that the Company violated the
financial reporting and record-keeping requirements of Section 13 of the
Securities Exchange Act of 1934, as amended, for the three years ended
December 31,1997.  Further, in the proposed agreement, the Company agrees to
the entry of an order to cease and desist from any such violation in the
future.  No monetary penalty is expected.

The SEC's investigation and proposed settlement focus on alleged fraudulent
actions taken by former members of the Company's management.  Upon becoming
aware of the alleged fraudulent activity, IGI, through its Board of
Directors, immediately commenced an internal investigation, which led to the
termination of employment of those responsible.  IGI then cooperated fully
with the staff of the SEC and disclosed to the SEC the results of the
internal investigation.

In April 2000, the FDA initiated an inspection of the Company's Companion
Pet Products division and issued an inspection report on Form FDA 483 on
July 5, 2000.  The July 5, 2000 FDA report includes several unfavorable
observations of manufacturing and quality assurance practices and products
of the division. On May 24, 2000, in an effort to address a number of the
FDA's stated concerns, the Company permanently discontinued production and
shipment of Liquichlor and on June 1, 2000 temporarily stopped production of
Cerumite. The Company has responded to the July 5, 2000 FDA report and is
currently preparing the required written procedures and documentation on
product preparation to comply with the FDA regulations. The FDA

<PAGE>  12


                         IGI, INC. AND SUBSIDIARIES

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)

will evaluate the Company's response and will determine the ultimate outcome
of the FDA inspection.  An unfavorable outcome could result in fines,
penalties and the potential permanent or temporary halt of the sale of
certain regulated products, any or all of which could have a material
adverse effect on the Company.  The FDA will return for a final inspection
in June 2001.  In March 2001, the Company signed a supply agreement with an
entity to outsource the manufacturing of products for the Companion Pet
Products division, and ceased operations at the Companion Pet Products
manufacturing facility.

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 a Notice of Violation relating to the storage of waste materials in a
number of trailers at the site.  The Company has established a disposal and
cleanup schedule and has commenced operations to remove materials from the
site.  Small amounts of hazardous waste were discovered and the Company was
issued a notice of violation relating to the storage of these materials.
The Company is cooperating with the authorities and does not expect to incur
any material fines or penalties. The Company expensed $160,000 during 2000,
which represents its estimate of the total cost related to the disposal and
cleanup process.

On or around, May 17, 2000, the Company became aware of a spill at its
Vineland manufacturing facility of about 965 gallons of heating oil.   By
May 26, 2000 the Company had completed remediation of the soil and nearby
creek that were affected by the heating oil spill.  To assure that the
nearby groundwater was not contaminated by the spill, the Company's
environmental consultants advised the Company to drill a test well.  The
well has been drilled and the analytical results found no contamination of
groundwater.  The Company has expensed all costs related to the initial
remediation and the drilling of the test well.

On March 2, 2001, the Company became aware of a 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 start the
clean up. The Company decided to outsource the manufacturing for this
division during the first quarter of 2001. Due to the environmental
situation noted above, the Company accelerated the outsourcing process and
executed a supply agreement on March 6, 2001 and ceased operations at the
manufacturing facility. On March 8, 2001, the Company terminated the
employment of the manufacturing personnel at this facility.

Factors Which May Affect Future Results

Highly Leveraged and Debt Covenant Compliance

The Company remains very highly leveraged and subject to restrictive
covenants and restraints which are contained in its senior debt and
subordinate debt agreements.  The debt agreements contain various
affirmative and negative covenants, such as interest coverage and minimum
fixed charge coverage ratios.  The Company's available borrowings under the
revolving line of credit facility are dependent on the level of qualifying
accounts receivable and inventory.  As a result, fluctuations in monthly
performance can create constraints in available borrowings.  The financial
covenants are dependent upon continued improved operating results.  The
Company believes that it can achieve the requisite financial performance;
however, there can be no assurance that the Company will be successful.  If
the Company is not successful in meeting its financial covenants it could
result in a default under its loan agreements and any such default, not
resolved, could lead to curtailment of certain of its business operations,
sale of certain assets or the commencement of insolvency proceedings by its
creditors.

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

<PAGE>  13


                         IGI, INC. AND SUBSIDIARIES

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)

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.

Foreign Regulatory and Economic Considerations

The Company's business may be adversely affected by foreign import
restrictions and additional regulatory requirements.  Also, unstable or
adverse economic conditions and fiscal and monetary policies in certain
Latin American and Far Eastern countries, increasingly important markets for
the Company's animal health products, could adversely affect the Company's
future business in these countries.

Rapidly Changing Marketplace for Pet Products

The emergence of pet superstores, the consolidation of distribution channels
into fewer, more powerful companies and the diminishing traditional role of
veterinarians in the distribution of pet products could adversely affect the
Company's ability to expand its animal health business or to operate at
acceptable gross margin levels.

Effect of Rapidly Changing Technologies

The Company expects to license 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 licensing could
be materially adversely affected.

Regulatory Considerations

The Company's pet pharmaceutical products are regulated by the FDA, which
subject the Company to review, oversight and periodic inspections.  Any new
products are subject to expensive and sometimes protracted FDA regulatory
approval, which ultimately may not be granted.  Also, certain of the
Company's products may not be approved for sales overseas on a timely basis,
thereby limiting the Company's ability to expand its foreign sales.

Income Taxes

The Company has provided a full valuation allowance on its deferred tax
assets consisting primarily of net operating losses, because of uncertainty
regarding its realizability.  The minimum level of future taxable income
necessary to realize the Company's gross deferred tax assets at March 31,
2001, is approximately $28.7 million.  There can be no assurance, however,
that the Company will be able to achieve the minimum levels of taxable
income necessary to realize its gross deferred tax assets.  Federal net
operating loss carryforwards expire through 2020.  Significant components
expire in 2007 (16%), 2018 (23%), 2019 (11%) and 2020 (42%).  Also federal
research credits expire in varying amounts through the year 2020.

<PAGE>  14


                         IGI, INC. AND SUBSIDIARIES

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk

The Company's Senior Debt Agreement with Fleet includes a revolving line of
credit facility and a term loan.  Borrowings under the revolving line of
credit bear interest at the prime rate plus 1.0% or the London Interbank
Offered Rate plus 3.25%.  Borrowings under the term loan bear interest at
the prime rate plus 1.5% or the London Interbank Offered Rate plus 3.75%.
Both the prime rate and the London Interbank Offered Rate are subject to
fluctuations which cannot be predicted.  Based upon the aggregate amount
outstanding under these two facilities as of March 31, 2001, a 100 basis
point change in the prime rate or the London Interbank Offered Rate would
result in a change in annual interest charges to the Company of
approximately $40,000 on an annual basis.

Under the Company's Subordinated Debt Agreement with ACS, as amended, ACS
has been granted warrants to purchase 1,907,543 shares of the Company's
Common Stock.  The terms associated with the warrants include a "make-whole"
feature that requires the Company to compensate ACS, either in Common Stock
or cash, at the option of the Company, in the event that ACS ultimately
realizes proceeds from the sale of the Common Stock obtained upon exercise
of the warrants that are less than the fair value of the Common Stock upon
the notice of exercise of such warrants.  Fair value of the Common Stock
upon exercise is defined as the 30-day average value prior to notice of
intent to sell.  ACS must use reasonable efforts to sell or place its shares
in the market place over a 180-day period before it can invoke the make-
whole provision.  Once ACS has provided notice of its intent to sell,
subsequent changes in the market value of the Company's Common Stock will
affect the Company's obligation to compensate ACS under the make-whole
provision in cash or shares of Common Stock.  Because ACS has neither
exercised the warrants nor issued notice of its intent to sell, the
Company's exposure under this provision cannot be predicted at this time.

<PAGE>  15


                         PART II   OTHER INFORMATION

Item 1 - Legal Proceedings

SEC Investigation

On July 26, 2000, the Company reached an agreement in principle with the
staff of the SEC to resolve matters arising with respect to the informal
investigation of the Company commenced by the SEC in April 1998.  Under the
proposed agreement, which will not be final until approved by the SEC, the
Company neither admits nor denies that the Company violated the financial
reporting and record-keeping requirements of Section 13 of the Securities
Exchange Act of 1934, as amended, for the fiscal years 1995, 1996 and 1997.
Further, in the proposed agreement, the Company agrees to the entry of an
order to cease and desist from any such violation in the future.  No
monetary penalty is expected.

The SEC's investigation and settlement focus on fraudulent actions taken by
former members of the Company's management.  Upon becoming aware of the
fraudulent activity, IGI, through its Board of Directors, immediately
commenced an internal investigation which led to the termination of
employment of those responsible.  IGI then cooperated fully with the staff
of the SEC and disclosed to the Commission the results of the internal
investigation.

<PAGE>  16


                         IGI, INC. AND SUBSIDIARIES

                                 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       IGI, Inc.
                                       (Registrant)

Date:   May 11, 2001                   By:  /s/John Ambrose
                                            -------------------------------
                                            John Ambrose
                                            President and Chief Executive
                                            Officer

Date:   May 11, 2001                   By:  /s/Domenic Golato
                                            -------------------------------
                                            Domenic Golato
                                            Senior Vice President and Chief
                                            Financial Officer

<PAGE>  17