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, 2004                            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 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
                                 -----     -----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                            Yes        No    X
                                 -----     -----

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 10, 2004 is 11,581,780


<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,
                                                  ----------------------------
                                                        2004            2003
                                                        ----            ----


                                                  <c>           <c>
Revenues:
  Product sales, net                                   $ 855         $  805
  Licensing and royalty income                           132            203
                                                       -----         ------
      Total revenues                                     987          1,008

Cost and expenses:
  Cost of sales                                          349            330
  Selling, general and administrative expenses           429            499
  Product development and research expenses              213            147
                                                       -----         ------
Operating profit (loss)                                   (4)            32
Interest income                                            9              6

Income before provision for income taxes                   5             38
Provision for income taxes                                (2)            (2)
                                                       -----         ------

Net income                                             $   3         $   36
                                                       =====         ======

Basic Earnings Per Common Share
  Net income per share                                 $   -         $    -

Diluted Earnings Per Common Share
  Net income per share                                 $   -         $    -

Weighted Average of Common Stock and
 Common Stock Equivalents Outstanding
  Basic                                              11,447,253    11,382,692
  Diluted                                            12,018,279    11,479,206
</TABLE>

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


<PAGE>  2


                         IGI, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
               (in thousands except share and per share data)

<TABLE>
<CAPTION>

                                                               March 31, 2004    December 31, 2003
                                                               --------------    -----------------
                                                                 (unaudited)


                                                               <c>                 <c>
ASSETS
Current assets:
  Cash and cash equivalents                                       $    639            $    821
  Restricted cash                                                       50                  50
  Marketable securities                                                804                 800
  Accounts receivable, less allowance for doubtful accounts
   of $10 and $16 in 2004 and 2003, respectively                       514                 350
  Licensing and royalty income receivable                                5                  17
  Inventories                                                          213                 192
  Prepaid expenses and other current assets                            201                 133
                                                                  --------            --------
      Total current assets                                           2,426               2,363
Property, plant and equipment, net                                   2,541               2,607
Other assets                                                           230                  54
                                                                  --------            --------
      Total assets                                                $  5,197            $  5,024
                                                                  ========            ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                $     49                 105
  Accrued payroll                                                       50                  75
  Other accrued expenses                                               299                 301
  Income taxes payable                                                   9                   7
  Deferred income                                                      238                 165
                                                                  --------            --------
      Total current liabilities                                        645                 653
Deferred income                                                        171                 205
                                                                  --------            --------
      Total liabilities                                                816                 858
                                                                  --------            --------

Stockholders' equity:
  Common stock, $.01 par value, 50,000,000 shares authorized;
   13,530,854 and 13,351,237 shares issued in 2004 and 2003,
   respectively                                                        135                 134
    Additional paid-in capital                                      23,909              23,702
    Accumulated deficit                                            (18,272)            (18,275)
  Less treasury stock, 1,965,740 shares
   at cost in 2004 and 2003                                         (1,395)             (1,395)
  Accumulated other comprehensive income                                 4                   -
                                                                  --------            --------
      Total stockholders' equity                                     4,381               4,166
                                                                  --------            --------
      Total liabilities and stockholders' equity                  $  5,197            $  5,024
                                                                  ========            ========
</TABLE>

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


<PAGE>  3


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

<TABLE>
<CAPTION>

                                                              Three months ended March 31,
                                                              ----------------------------
                                                                    2004       2003
                                                                    ----       ----


                                                                <c>        <c>
Cash flows from operating activities:
  Net income                                                       $   3      $   36
  Reconciliation of net income to net cash used
   in operating activities:
    Depreciation and amortization                                     70          64
    Provision for (reversal of) loss on accounts
     receivable and inventories                                       (6)          6
    Recognition of deferred income                                   (46)        (34)
    Stock compensation expense                                         -          26
  Changes in operating assets and liabilities:
    Accounts receivable                                             (158)         41
    Inventories                                                      (21)        (44)
    Licensing and royalty income receivable                           12          (2)
    Prepaid expenses and other assets                                (68)       (108)
    Accounts payable, accrued expenses and deferred income             2        (205)
    Income taxes payable                                               2          (2)
                                                                   -----      ------

      Net cash used in operating activities                         (210)       (222)
                                                                   -----      ------

Cash flows from investing activities:
  Capital expenditures                                                 -         (19)
  Increase in other assets                                          (180)          -
                                                                   -----      ------
      Net cash used in investing activities                         (180)        (19)
                                                                   -----      ------

Cash flows from financing activities:
  Repayment of debt                                                    -          (4)
  Borrowings from EDA loan                                             -          10
  Proceeds from exercise of common stock options and
   purchase of common stock                                          208           4
  Purchase of treasury shares                                          -         (11)
                                                                   -----      ------
      Net cash provided by (used in) financing activities            208          (1)
                                                                   -----      ------

Net decrease in cash and equivalents                                (182)       (242)
Cash and equivalents at beginning of period                          821       1,999
                                                                   -----      ------
Cash and equivalents at end of period                              $ 639      $1,757
                                                                   =====      ======
</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 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, 2003
(the "2003 10-K Annual Report").

Estee Lauder, a significant customer, accounted for $438,000 or 44% of
revenues for the first quarter of 2004 and $579,000 or 57% of revenues for
the first quarter of 2003. It is anticipated that Estee Lauder will be
purchasing a Novasome(R) mixing machine from the Company later in 2004 and
will pay the Company a royalty per kilo on all Novasome(R) products
manufactured by Estee Lauder in-house. The Company's contract manufacturing
of Estee Lauder non-Novasome(R) products, which accounted for $131,000 of
the above revenues in 2004, is scheduled to terminate on June 30, 2004,
without any future royalties or other payments to be received by the Company
on any non-Novasome(R) products manufactured by Estee Lauder. In addition,
during the six month period from January through June 2004, the Company has
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. As
of this time, a formal agreement with Estee Lauder has not been signed by the
Company, but one is anticipated to be signed within the next three months.

2.    Marketable Securities

Marketable securities at March 31, 2004 consists of an investment in a short
term bond mutual fund. The Company currently classifies all marketable
securities as available-for-sale. Securities classified as available-for-
sale are required to be reported at fair value with unrealized gains and
losses, net of taxes, excluded from earnings and shown separately as a
component of accumulated other comprehensive income within stockholders'
equity. Realized gains and losses on the sale of securities available-for-
sale are determined using the specific-identification method.

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

<TABLE>
<CAPTION>

                                      Gross         Gross
                      Amortized    Unrealized    Unrealized    Fair
                         Cost         Gains        Losses      Value
                      ---------    ----------    ----------    -----


                      <c>           <c>          <c>        <c>
Mutual Funds
2004                     $800          $4           $  -       $804
</TABLE>

There were no sales of available-for-sale marketable securities during the
three months ended March 31, 2004 or 2003.

3.    Inventories

Inventories are valued at the lower of cost, using the first-in, first-out
("FIFO") method, or market. Inventories at March 31, 2004 and December 31,
2003 consist of:

<TABLE>
<CAPTION>

                  March 31, 2004    December 31, 2003
                  --------------    -----------------
                         (amounts in thousands)


                    <c>                <c>
Finished goods         $ 32               $ 15
Raw materials           181                177
                       ----               ----
Total                  $213               $192
                       ====               ====
</TABLE>


<PAGE>  5


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

4.    Stock-Based Compensation

Compensation costs attributable to stock option and similar plans are
recognized based on the difference, if any, between the quoted market price
of the stock on the date of grant over the amount the employee is required
to pay to acquire the stock (the intrinsic value method). No stock-based
employee compensation cost is reflected in net income for options that have
been granted, as all options granted under the plans had an exercise price
equal to the market value of the underlying common stock on the date of
grant. Since the Company uses the intrinsic value method, it makes pro forma
disclosures of net income (loss) and net income (loss) per share as if the
fair-value based method of accounting had been applied.

If compensation cost for all grants under the Company's stock option plans
had been determined based on the fair value at the grant date consistent
with the provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," the Company's net income
(loss) and net income (loss) per share would have changed to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>

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


                                                     <c>      <c>
Net income - as reported                                $  3     $ 36
Deduct: Total stock-based employee
 compensation expense determined
 under the fair-value based method                       (20)      (9)
                                                        ----     ----
Net income (loss) - pro forma                           $(17)    $ 27
                                                        ====     ====
Income (loss) per share - as reported
  Basic and diluted                                     $.00     $.00
                                                        ====     ====
Income (loss) per share - pro forma
  Basic and diluted                                     $.00     $.00
                                                        ====     ====
</TABLE>

5.    Legal and U.S. Regulatory Proceedings

Gallo Matter

As previously reported by the Company in its historical filings with the
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.


<PAGE>  6


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

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 and 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.


<PAGE>  7


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

IGI has tendered to its insurers the Third Party Complaint for defense and
indemnification and is waiting to receive a response thereto. The Company
will proceed with its defense of the Third Party Complaint in the Novavax
Action in accordance with the rules of Court pursuant to advice of
counsel.Mr. Gallo has not specified the amount of damages sought to be
recovered in the Novavax Action, and hence, the amount in controversy in the
Novavax Action is currently unknown.

6.    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 will also receive a grant of
300,000 stock options under the Company's authorized stock option plans.

On April 19, 2004, IGI signed a sublicense agreement with a third party
entity 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, 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. Subject to Holick's early termination right as provided below,
the term of the License Agreement is the longer of twenty (20) years or the
life of each of the patents thereunder. However, if within 90 days from the
effective date of the License Agreement, the Company has not entered into a
sublicense agreement for the Glycoside Technologies, Holick has the right to
terminate the License Agreement as to the Glycoside Technologies only. The
Company is engaged in discussions with the same third party entity for a
similar sublicense for the PTH (7-34) technology. As of May 14, 2004, Dr.
Holick has not exercised his right to terminate the License Agreement as to
the Glycoside Technologies.

The $50,000 payment was expensed because the PTH and Glycoside Technologies
are in a preliminary development phase and do not have any readily
determinable alternative future use. The $236,000 cash payment and the other
consideration called for under the License Agreement (i.e., amounts advanced
for the prosecution and oversight of any intellectual property rights
related to the licensed technologies and the value ascribed to the stock
options) will be expensed by the Company in the second quarter of 2004.


<PAGE>  8


                         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 2003 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
2003 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.

Recent Events

On April 19, 2004, IGI signed a sublicense agreement with a third party
entity 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, 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. Such amount will be
expensed in the second quarter of 2004, because the technologies are in a
preliminary development stage and do not have any readily determinable
alternative future use. Further, over the course of the sublicense,
milestone payments will be made to IGI as certain stages of development are
reached, and royalty payments will be paid to IGI on sales of all
sublicensed products that go to market. Certain subsequent royalty payments
received by the Company under the sublicense agreement will be shared with
Dr. Holick after the Company has recovered any payments previously made to
Dr. Holick under the License Agreement and an amount equal to the value of
the options received by Dr. Holick under the License Agreement. The Company
is also negotiating with the same third party for the potential sublicensing
of the PTH (7-34) technology under a similar term structure.

The Company continues discussions with Estee Lauder on revising the way they
will do business with them in the future. As of this time, a formal
agreement has not been signed by the two entities, but it is anticipated
that one will be signed within the next three months. It is anticipated that
Estee Lauder will be purchasing a Novasome(R) mixing machine from the
Company later in 2004 and will pay the Company a royalty per kilo on all
Novasome(R) products manufactured by Estee Lauder in-house. In consideration
of the foregoing, Estee Lauder has agreed to release the Company from its
contractual exclusivity restrictions, which will now enable the Company to
sell its products in department and specialty stores.

In February 2004, the Company signed a license agreement with Universal
Chemical Technologies, Inc. ("UCT") to utilize their patented technology for
an electroless nickel boride metal finishing process. This will be a new
venture for the Company and will require an initial capital expenditures of
approximately $500,000, of which $180,000 has been paid to UCT to date, as a
down payment to purchase property and equipment and commits the Company to
 purchase a minimum of $25,000 of raw materials from UCT in the first year
of the license, $75,000 during the second year and $150,000 during the third
and subsequent years. The Company will also be required to hire at least one
new employee to oversee the facility operations at a estimated cost of
$60,000 per year. The Company has an exclusive license within a 150 mile
radius of its facility for commercial and military applications. Frank
Gerardi, the Company's Chairman and Chief Executive Officer, as well as a
major IGI shareholder, has personally invested $250,000 in UCT, which
epresents less than a 1% ownership interest by Mr. Gerardi in UCT.

IGI has given written notice under the terms of the employment agreement
dated August 31, 2000 between Domenic N. Golato, Chief Financial Officer,
and IGI that IGI will not extend the employment agreement that is in effect
until June 30, 2004.


<PAGE>  9


                         IGI, INC. AND SUBSIDIARIES

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

Results of Operations

Quarter ended March 31, 2004 compared to March 31, 2003

The Company had net income of $3,000, or $.00 per share, for the quarter
ended March 31, 2004 compared to net income of $36,000, or $.00 per share,
for the quarter ended March 31, 2003.

Total revenues for the quarter ended March 31, 2004 were $987,000, compared
to $1,008,000 for the quarter ended March 31, 2003, or a $21,000 decrease.
The decrease is primarily due to lower royalty income from Johnson & Johnson
Consumer Products, Inc., partially offset by higher product sales to new
customers.

As a percentage of product sales, cost of sales was 41% for both of the
quarters ended March 31, 2004 and March 31, 2003.

Selling, general and administrative expenses decreased $70,000, or 14%, from
$499,000 in the quarter ended March 31, 2003. As a percentage of revenues,
these expenses were 50% of revenues in the first quarter of 2003 compared to
43% for the first quarter of 2004. Overall, expenses decreased primarily due
to lower executive salaries and travel and entertainment costs.

Product development and research expenses increased $66,000, or 45%,
compared to the quarter ended March 31, 2003. The increase in expenses is a
result of additional projects that are being worked on for existing and
potential new customers, as well as additional personnel.

Interest income increased from $6,000 in the quarter ended March 31, 2003 to
$9,000 in the quarter ended March 31, 2004.

Liquidity and Capital Resources

The Company's operating activities used $210,000 of cash during the first
quarter of 2004 compared to $222,000 used in the comparable quarter of 2003.
Payments for insurance premiums and the increase in accounts receivable were
the major use of cash in 2004.

The Company used $180,000 of cash in the first quarter of 2004 for investing
activities compared to $19,000 used in investing activities in the first
quarter of 2003. The $180,000 represents a down payment to Universal
Chemical Technologies, Inc. ("UCT") to purchase machinery and equipment
related to the electroless nickel boride finishing operations that will be
set up in the Company's Buena facility, while 2003's investing activities
were for the purchase of computers and machinery and equipment.

The Company's financing activities provided $208,000 of cash in the first
quarter of 2004 compared to $1,000 utilized by financing activities in the
first quarter of 2003. The cash provided in 2004 represents proceeds from
the exercise of stock options. The cash utilized in 2003 is primarily the
result of the purchase of Company stock as part of a stock buy-back program,
offset by funding from the EDA loan.

The Company's principal sources of liquidity are cash from operations, cash
and cash equivalents and marketable securities. Management believes that
existing cash and cash equivalents, marketable securities and cash flows
from operations will be sufficient to meet the Company's foreseeable cash
needs for at least the next year. In addition, two shareholders of the
Company have agreed to loan the Company up to $500,000 each, if necessary,
to fund the Company's deficit through March 31, 2005. There may be
acquisition and other growth opportunities, however, that require additional
external financing. Management may, from time to time, seek to obtain
additional funds from the public or private issuances of equity or debt
securities. There can be no assurance that such financings will be available
or available on terms acceptable to the Company.

There have been no material changes to the Company's contractual commitments
as reflected in the 2003 10-K Annual Report.


<PAGE>  10


                         IGI, INC. AND SUBSIDIARIES

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

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

Currently, the Company manufactures Novasome(R) products and contract
manufacturing products for Estee Lauder using the raw materials supplied by
Estee Lauder. The Company is currently renegotiating its agreement with
Estee Lauder. The Company anticipates that the revised agreement will end
all contract manufacturing. The Company also anticipates that it will sell a
Novasome(R) mixing machine to Estee Lauder who will produce Novasome(R)
products in house and will pay the Company a royalty on the volume produced.
In addition, Estee Lauder will remove the exclusivity clause which will
allow the Company to 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 will be a new venture for the Company and will require
significant capital expenditures in the Company's existing manufacturing
facility to set up the operations. The Company is also obligated to purchase
a minimum level of raw materials from UCT during the license term. The
Company has an exclusive license within a 150 mile radius of its facility
for commercial and military applications. Frank Gerardi, the Company's
Chairman and Chief Executive Officer, as well as a major IGI shareholder,
has personally invested $250,000 in UCT, which represents less than a 1%
ownership interest by Mr. Gerardi in UCT. 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.

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.


<PAGE>  11


                         IGI, INC. AND SUBSIDIARIES

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

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 2003 year-end results, the
Company was not in compliance with the AMEX requirement for reporting income
from continuing operations and net income for the year ended December 31,
2003.

As of the date of the filing of the Form 10-Q for the quarter ended March
31, 2004, 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.

Critical Accounting Policies

There have been no material changes to the Company's critical accounting
policies as reflected in the 2003 10-K Annual Report.

ITEM 3.  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
and are recorded directly to stockholders' equity in accumulated other
comprehensive income. Changes in interest rates are not expected to have an
adverse effect on the Company's financial condition or results of
operations.

ITEM 4.  Controls and Procedures

Under the supervision and with the participation of certain members of the
Company's management, including the Chief Executive Officer and Chief
Financial Officer, 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) to the Securities Exchange Act of
1934, as amended (the "Exchange Act")). Based on this evaluation, the
Company's Chief Executive Officer and Chief Financial Officer believe that
the disclosure controls and procedures were effective 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.

The Company's management does not expect 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, as opposed to 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.


<PAGE>  12


                         IGI, INC. AND SUBSIDIARIES

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

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, the Company's
management has concluded, based on their evaluation as of the end of the
period, that the Company's disclosure controls and procedures were
sufficiently effective to provide reasonable assurance that the objectives
of the disclosure control system were met.

There was no change in the Company's internal control over financial
reporting during the Company's last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


<PAGE>  13


                         IGI, INC. AND SUBSIDIARIES
                         PART II  OTHER INFORMATION

ITEM 1.  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 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.


<PAGE>  14


                         IGI, INC. AND SUBSIDIARIES
                    PART II OTHER INFORMATION, Continued

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 and 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 tendered to its insurers the Third Party Complaint for defense and
indemnification and is waiting to receive a response thereto. The Company
will proceed with its defense of the Third Party Complaint in the Novavax
Action in accordance with the rules of Court pursuant to advice of counsel.

Mr. Gallo has not specified the amount of damages sought to be recovered in
the Novavax Action, and hence, the amount in controversy in the Novavax
Action is currently unknown.

ITEM 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of
         Equity Securities

      None.

ITEM 3.  Defaults Upon Senior Securities

      None.

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

      None.

ITEM 5.  Other Information

      None.


<PAGE>  15


                         IGI, INC. AND SUBSIDIARIES
                    PART II OTHER INFORMATION, Continued

ITEM 6.    Exhibits and Reports on Form 8-K

      (a)   Exhibits

             10.109     Sublicense Agreement between IGI, Inc. and Tarpan
                        Therapeutics, Inc. dated April 19, 2004.

             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 Chief Financial 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.

             32.1       Certification of the Chairman and Chief Executive
                        Officer pursuant to 18 U.S.C. Section 1350, as
                        enacted under Section 906 of the Sarbanes-Oxley Act
                        of 2002.

             32.2       Certification of the Chief Financial Officer
                        pursuant to 18 U.S.C. Section 1350, as enacted under
                        Section 906 of the Sarbanes-Oxley Act of 2002.

      (b)   Reports on Form 8-K

            None.


<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 14, 2004                    By:  /s/ Frank Gerardi
                                            -------------------------------
                                            Frank Gerardi
                                            Chairman and Chief Executive
                                            Officer


Date:  May 14, 2004                    By:  /s/ Domenic N. Golato
                                            -------------------------------
                                            Domenic N. Golato
                                            Senior Vice President and Chief
                                            Financial Officer


<PAGE>  17