10KSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                .
Commission file number 001-08568
IGI, Inc.
(Name of small business issuer in its charter)
Delaware			01-0355758
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
105 Lincoln Ave., Buena, NJ (Address of principal executive offices)			08310 (Zip Code)
Registrant's telephone number: (856) 697-1441
Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Name of each exchange on which registered
Common Stock-$0.01 Par Value		American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act  [  ]
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  [X]    No  [  ]
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [  ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  [  ]    No  [X]
Issuer's revenues for its most recent fiscal year were $2,620,000.
The aggregate market value of the registrant's common stock held by non-affiliates on March 28, 2007 (based on the closing stock price on the American Stock Exchange) on such date was approximately $4,398,000
As of March 28, 2007, there were 14,612,899 shares of common stock outstanding.
Documents Incorporated By Reference
Certain information contained in the definitive Proxy Statement for the Company's Annual Meeting of Stockholders to be held on May 10, 2007 is incorporated by reference into Part III hereof.
Transitional Small Business Disclosure Format (Check One)    Yes  [  ]    No  [X]

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

      IGI, Inc. ("IGI" or the "Company") was incorporated in Delaware in 1977. Its executive offices are at 105 Lincoln Avenue, Buena, New Jersey. The Company is principally engaged in the development and manufacturing of topical semi solid and liquid products for pharmaceutical, cosmeceutical and cosmetic companies with or without its proprietary encapsulation technology.

      In December 1995, IGI distributed its ownership of its majority-owned subsidiary, Novavax, Inc. ("Novavax"), in the form of a tax-free stock dividend, to IGI stockholders. In connection with the distribution, the Company paid Novavax $5,000,000 and assigned them all IP related to the encapsulation technologies. As per the distribution agreement, Novavax licensed back to IGI the exclusive use of technologies in certain fields for a period of ten-years with an option to renew it for another ten years on a payment of $1,000,000 license fee. The license (the "IGI License Agreement") entitled IGI to the exclusive use of the Novasome® lipid vesicle encapsulation and certain other technologies ("Microencapsulation Technologies" or collectively the "Technologies") in the fields of (i) animal pharmaceuticals, biologicals and other animal health products; (ii) foods, food applications, nutrients and flavorings; (iii) cosmetics, consumer pro ducts and dermatological over-the-counter and prescription products (excluding certain topically delivered hormones); (iv) fragrances; and (v) chemicals, including herbicides, insecticides, pesticides, paints and coatings, photographic chemicals and other specialty chemicals, and the processes for making the same (collectively, the "IGI Field"). IGI exercised its option on December 12, 2005 to extend the exclusive license for an additional ten-year period for $1,000,000. In 2006, the Company sublicensed back to Novavax certain rights with respect to animal pharmaceuticals and biologicals.

      IGI's business is primarily focused on the continued commercialization of the Microencapsulation Technologies for skin care applications. These efforts have been directed toward high quality skin care products that the Company helps develop and manufactures for pharmaceutical, cosmetic and consumer products companies. IGI plans to continue to work with cosmetics, personal care products and over-the-counter ("OTC") pharmaceutical companies for commercial application of its encapsulation technologies.

      In July 2004, the Company, in order to allow growth and new business opportunities, renegotiated its contract with Estee Lauder, a significant customer. The goal of the Company was to lift the exclusivity it had under the prior agreement with Estee Lauder that did not allow the Company to do business with competitors of Estee Lauder. The exclusivity provision was removed from the agreement, the terms of which are as follows: Estee Lauder is manufacturing all Novasome® and non-Novasome® products at their facility and is paying the Company a royalty per kilogram on all Novasome® products manufactured by Estee Lauder, including all new products developed, plus they made a one time payment to the Company of $100,000 in 2004 for the use of the Novamix™ machine, which is used to manufacture Novasomes®.

      In the second quarter of 2006, the Company launched MIAJ™, its own line of anti-aging skin care products. The line consists of ten products. The line also contains its proprietary and patented 10% pure vitamin C serum product. The MIAJ™ line of products is currently available via the Internet at www.miaj.com. The Company intends to sell these products through other marketing channels by collaborating with other companies expert in selling through a particular market channel.

      In December 2006, the Company purchased three fully automatic filling and packaging lines to enhance the services we provide to our customers. This equipment will allow the Company to fill the products we currently manufacture and ship in bulk form.

      On October 11, 2006, the Company signed an agreement with DermWorx, Inc. to exclusively license, develop and manufacture a series of dermatological specialty products utilizing its encapsulation technology, for Dermworx. The agreement currently calls for the Company to receive product development fees, manufacturing revenues and royalties on product sales from Dermworx. In addition, the agreement also calls for IGI to receive shares of DermWorx stock which would result in IGI holding approximately 19.9% of the issued and outstanding shares of common stock of DermWorx. Due to its inability to raise capital in the required time frame, Dermworx was not able to make the second payment to the Company for such exclusive license, as a result, Dermworx only has rights to one product. The agreement is now being renegotiated for the benefit of both of the companies. The first installment of $250,000 received by the Company was recorded as defer red income for the year ended December 31, 2006. The Company will recognize those fees as per the renegotiated agreement.

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      Metal Plating Business  In February 2004, the Company signed a license agreement with Universal Chemical Technologies, Inc. ("UCT") to utilize its patented technology for an electroless Nickel Boride metal finishing process. This was a new venture for the Company and the Company had capital expenditures of approximately $913,000, related to building improvements and purchase of equipment, spread over 2004 and 2005. However, due to below expected sales performance and objections by customers to having the plating line next to the pharmaceutical operation, the Company ceased operations of the metal finishing division in November 2005. The business was classified as discontinued operation in the third quarter of 2006 and an impairment charge of $175,000 was previously recorded in the fourth quarter of 2005 on the equipment for the plating line. On July 10, 2006, the Company's Board of Directors along with management accepted a plan to sell the plating equipment to a third party. Management recorded an additional impairment expense of $38,000 for the equipment in the third quarter of 2006 to record the equipment at its current fair market value less costs to sell. In the first quarter of 2007, the Company received a purchase order and deposit in the amount of $130,000 toward the purchase of the plating equipment from UCT to re-purchase the equipment back from the Company. The purchase price of the equipment of $260,000 represents the equipment net of outstanding liabilities in the amount of $118,000 owed to UCT by the Company.

Manufacturing

      The Company's manufacturing operations include bulk manufacturing and testing of conventional cosmetics, dermatologicals, emulsions, shampoos and the Novasome® based products. As previously noted, the Company will have the ability to fill the products it manufactures beginning in the second quarter of 2007. The raw materials used for these products are available from several suppliers. The Company has manufacturing capacity to meet its current and foreseeable needs.

Research and Development

      The Company's consumer products development efforts are directed toward Novasome® encapsulation to improve performance and efficacy of specialty chemicals, cosmetics, consumer products, and pharmaceutical products. Total product development and research fees were $1,065,000 and $949,000 in 2006 and 2005, respectively.

Patents and Trademarks

      Under the terms of the 1995 IGI License Agreement, the Company has an exclusive ten-year license to use the Patented Technologies licensed from Novavax in the IGI Field. Novavax holds 44 U.S. patents and a number of foreign patents covering the Technologies licensed to IGI with various expiration dates thru 2021. The Company also owns the Miaj trademark.

Government Regulation and Regulatory Proceedings

Government Regulations

      In the United States, pharmaceuticals, including over-the-counter products that are manufactured by the Company, are subject to rigorous Food and Drug Administration ("FDA") regulations. The Company is required to obtain a satisfactory inspection by the FDA covering its manufacturing facilities before a product can be marketed in the United States. Any non-compliance with the regulatory guidelines may necessitate corrective action that may result in additional expenses and use of more resources.

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

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Intense Competition in the Marketplace

      The Company competes with large, well-financed cosmetic, pharmaceutical 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 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 encapsulation technology in their products may decide to reduce their purchases from the Company or shift their business to other suppliers.

Dependence on Major Customers

      The Company's major customers are Vetoquinol USA, Genesis Pharmaceuticals, and Albrian International. The loss of any of these customers would have a material adverse effect on the Company. Major customers of the Company have sales for the latest fiscal year equal to or greater than 10% of that years gross product sales. Estee Lauder continues to be a major customer representing at least 20% of our royalty revenues for the year 2006.

Employees

      On March 25, 2007, the Company had 19 full-time employees. The Company has no collective bargaining agreement with its employees, and believes that its employee relations are good.

Executive Officers of the Company

      The following table sets forth (i) the name and age of each executive officer of the Company as of March 31, 2007, (ii) the position with the Company held by each such executive officer and (iii) the principal occupation held by each executive officer for at least the past five years.

Name	Age	Officer Since	Principal Occupation and Other Business Experience During Past Five Years
Rajiv Mathur	52	2007	Appointed Chief Executive Officer on January 1, 2007. Mr. Mathur was Vice President of Topical Technologies at Cardinal Health, 2001 to 2006; prior to that he worked for IGI, Inc. from 1986 to 2001 in various capacities.
Nadya Lawrence	38	2001	Appointed Vice President of Operations in 2001. Prior to that, Ms. Lawrence served as the Company's R&D Technical Director and R&D Manager from 1995 to 2001.
Carlene Lloyd	34	2004	Appointed Vice President of Finance in July 2004. Prior to that, Ms. Lloyd served as the Company's Controller and Senior Accountant from 1999 to 2004.

      Mr. Gerardi had been Chief Executive Officer through December 31, 2006 and was replaced by Mr. Mathur in January 2007.

ITEM 2. DESCRIPTION OF PROPERTY

      The Company's executive administrative offices are located in Buena, New Jersey, in a 25,000 square foot facility built in 1995, which the Company owns. This facility is also used for production, product development, marketing and warehousing for the Company's cosmetic, pharmaceutical and personal care products. The Company also owns four acres of land adjacent to its main facility that can be used for future expansion. During 2006 Univest Management, Inc. held a first mortgage on the Company's real property, securing principal and interest payments on a note in the principal amount of $1,000,000. During part of 2006, Pharmachem Laboratories, Inc. held a second mortgage on such property securing a $100,000 loan. The Univest loan was repaid in March 2007 and the Pharmachem loan was repaid in 2006.

      The Company was previously a party to an agreement of sale-leaseback with Bellevue Properties, LLC for the above-described facility and land building and the adjacent land. The closing of the agreement was subject to a contingency and, as amended became terminable by either party on or after October 16, 2006 if the contingency was not met by such date On March 28, 2007 the Company terminated the agreement; the contingency not having been met as of such date.

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ITEM 3. LEGAL PROCEEDINGS

      On March 2, 2001, the Company discovered the presence of environmental contamination resulting from an unknown heating oil leak at its now divested Companion Pet Products manufacturing site. The remediation was completed in September 30, 2003. The Company has spent approximately $562,000 to date on the cleanup. Periodic soil monitoring will be required for the next two years at an estimated cost of $90,000, which has been accrued as of December 31, 2006. The Company received a monetary settlement of $181,000 in December 2005 from one of its prior insurance carriers and was recorded in other income in the Statement of Operations for the year ended December 31, 2005.

      The adjacent property was also affected by this contamination and the Company was involved in a lawsuit with the property owner. IGI believes that it has performed the required soil remediation of the adjacent property. In 2005, IGI settled the case for $70,000. The settlement was recorded in Selling, General and Administration Expenses in the Statement of Operations for the year ended December 31, 2005.

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

      No matters were submitted to a vote of the Company's stockholders during the last quarter of 2006.

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PART II
ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
The Company has never paid cash dividends on its Common Stock. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.")
The principal market for the Company's Common Stock ($.01 par value) (the "Common Stock") is the American Stock Exchange ("AMEX") (symbol: "IG"). On June 12, 2006, AMEX notified the Company that it was below certain of the Exchange's continuing listing standards. Specifically, the Company was required to reflect income from continuing operations and/or net income in one of its four most recent fiscal years and a minimum of $4,000,000 in stockholders' equity to remain listed on the exchange. The Company had net income from continuing operations in its 2002 fiscal year, but had net losses and losses from continuing operations in each of its 2003, 2004, and 2005 fiscal years. The Company's stockholders' equity at December 31, 2006 was $2.1 million. On July 17, 2006, the Company submitted a plan of compliance to AMEX. AMEX had 45 days to review the plan and notify the Company whether they will accept the plan or if the Company will be sub ject to delisting procedures. On September 1, 2006, the Exchange notified the Company that it has completed its review of IGI's plan of compliance and supporting documentation and has determined that, in accordance with Section 1009 of the Company Guide, the Plan makes a reasonable demonstration of the Company's ability to regain compliance with the continued listing standards by the end of the Plan period and therefore its listing is being continued pursuant to an extension. The targeted completion date to regain compliance with the continued listing standards is December 12, 2007. Failure to regain compliance with the continued listing standards by the end of the extension period could result in the Company being delisted from the American Stock Exchange.
In 2006, the Company was also notified by the American Stock Exchange ("Amex") that the Company has more shares outstanding than the Amex has recorded as listed. Under Section 301 of the Amex Company Guide, the Company may not issue unlisted shares. The Amex has asked the Company to investigate the situation. The Company believes that at least some of the shares in question were in fact listed. Because of management changes the Company has had difficulty in locating the listing application for such shares. The Company has filed an additional listing of application for the shares in question and we are awaiting a response. Failure to satisfactorily resolve this issue with Amex could result in the Company being delisted from the American Stock Exchange.
The following table shows the range of high and low closing sale prices on the AMEX for the periods indicated:

	High	Low
2006
First quarter	$1.35	$  .81
Second quarter	1.45	.80
Third quarter	2.05	1.02
Fourth quarter	2.07	.90
2005
First quarter	$1.40	$  .95
Second quarter	1.35	.97
Third quarter	1.34	.94
Fourth quarter	.98	.67

The approximate number of holders of record of the Company's Common Stock at March 25, 2007 was 656 (not including stockholders for whom shares are held in a "nominee" or "street" name).

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Recent Sales of Unregistered Securities

      Pursuant to a Private Placement Memorandum ("Private Placement") dated March 7, 2007, the Company issued 1,500,000 shares to an accredited investor, Pharmachem Laboratories, Inc for gross proceeds of $1,500,000. The Company granted Pharmachem the right to have its shares included in one registration (except in the case it suffers a cutback of its shares) of the company securities ("piggyback registration rights) until January 1, 2010, with certain exception and subject to certain rights of the Company to cutback shares to be included in the registration.

      The aforementioned securities were sold in reliance upon the exemption afforded by the provisions of Regulation D, as promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), and/or Section 4(2) of the Act.

      In connection with the transaction the Company paid $112,500 to Landmark Financial Corporation, 22,123 shares to Landmark and issued a warrant to purchase 150,000 shares at $1.00 per share expiring March 7, 2009. The aforementioned securities were sold in reliance upon the exemption afforded by the provisions of Regulation D, as promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), and/or Section 4(2) of the Act.

      The Company used the proceeds to repay $1,164,000 in principal and accrued interest to Univest Management, Inc., an entity controlled by Frank Gerardi, to pay Landmark its fee and for general working capital purposes.

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

Forward-Looking Statements

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

Overview

      During 2006, the Company continued its efforts to expand the commercialization of the licensed Novasome® technology through initiation of product development agreements with new and existing customers. Several of these product development agreements were signed over the last 6 months period and are in execution phase. These products are projected to be commercialized by the end of this year, which is the typical timeline required to develop and manufacture commercial quantities of new cosmetic products. The Company launched its first product line under the name Miaj™ through direct to consumer internet sales, in June 2006. The lack of funding to advertise the product line resulted in much lower than expected sales of Miaj™ and build up of inventory. Some of the products in the inventory are dated and have limited shelf life, therefore the Company recorded an impairment charge of $70,000 in the fourth quarter of 2006 for these products.

      The year 2006 proved to be a difficult one for the Company. The effort to expand our licensed Novasome® technology was a difficult task with such a limited amount of cash. The results for the year 2006 reflect our difficulties. The Company continued to depend on non-operational cash flow to sustain the Company; this cash flow was provided when certain of the Company's directors exercised stock options and warrants associated with the 2005 private placement completed during 2006.

      In November 2006, the Company established a $1,000,000 line of credit with Pharmachem Laboratories Inc. to assist with cash flow. The funds could be borrowed and re-borrowed from time to time at a rate of 1.5% above Wall Street Prime rate. This line of credit was replaced in 2007.

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      In January 2007, the Company appointed Rajiv Mathur as its President and CEO to provide vision and lead the company to profitability. Mr. Mathur has a diverse experience background of 30 years in pharmaceutical and consumer product companies. Most recently he was Vice President of Topical Division of Cardinal Health. He served on IGI's Board of Directors since September 2005. Due to his prior affiliation with IGI, Mr. Mathur has an in depth knowledge of our Novasome technology. He brings with him a new vision and focus for IGI utilizing our strengths and resources, as well as an aggressive business plan to bring this Company into profitability. Our business plan for 2007 includes the upgrading of our manufacturing and expanding our production services to include filling and packaging capabilities. These additions will provide turn key solutions to our existing and potential customers. We anticipate that our high-speed packaging services to b e operational by the second quarter of 2007. We currently have orders in house from several of our existing customers to provide turn key operation. In addition to this, we are going to strengthen our technology base by adding new patents and increase our R&D product pipeline. In order to achieve its goal, the Company will enhance its employee talent base by recruiting high caliber experienced individuals.

Results of Operations

      2006 Compared to 2005

      The Company had a net loss of $1,667,000, or $(.13) per share, in 2006 compared to a net loss of $1,298,000, or $(.11) per share, in 2005 which resulted from the following:

      Total revenues for 2006 were $2,620,000, which represented a decrease of $235,000 from revenues of $2,855,000 in 2005. Licensing and royalty income of $657,000 in 2006 decreased by $213,000 compared to 2005, primarily as a result of a decrease in Genesis Pharmaceutical royalties and a decrease of J&J Consumer royalties which were partially offset by an increase royalty revenue from Estee Lauder . The Company believes the declining royalties from J&J Consumer is related to the normal life cycle of a product and that these royalties will continue to decline.

      Product sales of $1,787,000 in 2006 decreased $198,000, or 10%, compared to 2005 due mainly to a loss of product sales in 2006 to Estee Lauder but this loss was partially offset by higher sales in 2006 to Albrian International and to Vetoquinol USA.

      Cost of sales decreased by $133,000, or 9%, in 2006 as compared to 2005. As a percentage of product sales, cost of sales increased slightly from 78% in 2005 to 79% in 2006. The cost of sales for 2006 included an inventory impairment charge of $70,000 to record our Miaj product line at the lower of cost or market. Several of the products in this product line have a limited shelf life and revenues from these products may never be recognized.

      Selling, general and administrative expenses increased by $538,000, or 34%, from $1,567,000 in 2005 to $2,105,000 in 2006. These expenses were 80% of revenues for 2006 compared to 55% in 2005. The increase is primarily due to severance fees recorded in the amount of $190,000 for our former CEO, higher professional fees of $165,000, and higher Board of Directors fees of $57,000 recorded in 2006. A portion of the increase in professional fees in 2006 related to the recognition of $92,000 of legal fees related to the sale-leaseback agreement that the Company was a party to in 2006. The Company has cancelled the agreement in March 2007 and therefore, all legal fees related to the agreement with services provided in 2006 were expensed in 2006.

      Product development and research expenses increased by $116,000 in 2006, or 12%, compared to 2005. The increase in 2006 relates to $100,000 of amortization of the Novasome licensing fee paid by the Company in paid in December 2005 for the ten year extension of the Novasome technology.

      Interest expense amounted to $129,000 (net of income) in 2006 compared to interest expense of $4,000 (net of income) in 2005. The interest expense in 2006 relates to the short term notes payable recorded in December 2005.

      The tax benefit of $458,000 in 2006 and $280,000 in 2005 was a result of the sales of a portion of the Company's state tax operating loss carry forwards.

      The loss related to discontinued operations for the Company amounted to $58,000 for 2006 compared to a loss of $479,000 for 2005 a decrease of $421,000, or 88%. The decrease of loss was due to the shutdown of operations in 2006 for the segment. In 2005, there were sales of $12,000, cost of goods sold of $379,000 (including an impairment charge of $175,000) and selling, general and administrative costs of $112,000 compared to costs in 2006 consisting of depreciation for $20,000 and an impairment charge for $38,000 on the equipment.

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Liquidity and Capital Resources

      The Company's operating activities used $377,000 in 2006, compared to $877,000 used during 2005. The decrease in cash used in 2006 was primarily due to the increase in accounts payable and deferred income offset by the larger loss and the increase in inventory.

      The Company's investing activities used $133,000 of cash in 2006 compared to $752,000 used in 2005. Cash used in investing activities in 2005 were a result of the sale of the marketable securities in the amount of $335,000 offset by the payment of $1,000,000 to Novavax to extend its license agreement for an additional 10 years. The cash used in 2006 investing activities of $133,000 was for the packaging and filling machinery purchased in the fourth quarter of 2006.

      The Company's financing activities provided $764,000 of cash in 2006 compared to $1,614,000 provided in 2005. The cash provided in 2006 was from the proceeds from the exercise of stock options by a former director, former employees, and current directors of the Company and from the exercise of the four warrants (described below) in the amount of $364,000, also, $100,000 was from the private placement sale of one unit of 133,333 shares of common stock and $300,000 from the borrowings under the Pharmachem line of credit. The cash provided in 2005 was (i) related to the note payable in the amount of $1,000,000 established by the Company with Univest Management Inc., a company owned by Frank Gerardi, IGI's Chairman and Former CEO, in order to exercise its option to extend its license agreement as noted above; (ii) $300,000 from the private placement sale of (3) units, each consisting of 133,333 shares of common stock and warrants to purchase 26, 666 shares of common stock at an exercise price $0.90 per share: and (iii) the exercise of stock options for $338,000.

      Our business operations have been partially funded over the past three years through the exercise of stock options by our directors and officers. If necessary, we may continue to seek to raise additional capital through the sale of our equity. We may accomplish this via a strategic alliance with a third party. There may be additional acquisition and growth opportunities that may require external financing. There can be no assurance that such financing will be available or available on terms acceptable to the Company.

      As previously stated, in November 2006, the Company established a twelve-month $1,000,000 secured line of credit (secured by the Company's assets other than real property) with Pharmachem Laboratories Inc. to assist with cash flow. The funds could be borrowed and re-borrowed from time to time at a rate of 1.5% above Wall Street Prime rate. This line of credit was cancelled in January of 2007 when Pharmachem Laboratories Inc. agreed to participate in a private placement for 1,500,000 shares of common stock for $1,500,000. This transaction was completed in March 2007. The Company repaid the outstanding note payable plus accrued interest to Univest Management, Inc. with the funds from the private placement in March 2007. The Company subsequently established another secured line of credit of $1,000,000 in January 2007, which expires in July 2008, with Pinnacle Mountain Partners, LLC, a company owned by Dr. and Mrs. Hager, major shareholders of t he Company, under substantially the same terms as the Pharmachem line of credit, except that the Pinnacle line of credit expires eighteen months from issuance.

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Risk Factors

      The Company could be affected by various risks, many of which are beyond its control. Based on current information the Company believes that the following are the most significant risk factors that are affecting its business. However, the risks and uncertainties that Company faces are not limited to those discussed below. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial could also affect its business. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Intense Competition in Consumer Products Business

      The industry segments in which the Company competes are subject to intense competitive pressures

      The Company's business competes with large, well-financed cosmetic, pharmaceutical 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 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® 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 these 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.

Failure to Obtain Required Financing

      If necessary, the Company may continue to seek to raise additional capital through the sale of its equity or other type of financing. We may accomplish this via a strategic alliance with a third party. There may be additional acquisition and growth opportunities that may require external financing. There can be no assurance that such financing will be available or available on terms acceptable to the Company.

American Stock Exchange (AMEX) Continuing Listing Standards

      On June 12, 2006, 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/or net income in one of its four most recent fiscal years and a minimum of $4,000,000 in stockholders' equity to remain listed on the exchange. The Company had net income from continuing operations in its 2002 fiscal year, but had net losses and losses from continuing operations in each of its 2003, 2004, and 2005 fiscal years. The Company's stockholders' equity at December 31, 2006 was $2.1 million.

      On July 17, 2006, the Company submitted a plan of compliance to AMEX. AMEX had 45 days to review the plan and notify the Company whether they will accept the plan or if the Company will be subject to delisting procedures.

      On September 1, 2006, the Exchange notified the Company that it has completed its review of IGI's plan of compliance and supporting documentation and has determined that, in accordance with Section 1009 of the Company Guide, the Plan makes a reasonable demonstration of the Company's ability to regain compliance with the continued listing standards by the end of the Plan period and therefore its listing is being continued pursuant to an extension. The targeted completion date to regain compliance with the continued listing standards is December 12, 2007. Failure to regain compliance with the continued listing standards by the end of the extension period could result in the Company being delisted from the American Stock Exchange.

      In 2006, the Company was also notified by the American Stock Exchange ("Amex") that the Company has more shares outstanding than the Amex has recorded as listed. Under Section 301 of the Amex Company Guide, the Company may not issue unlisted shares. The Amex has asked the Company to investigate the situation. The Company believes that at least some of the shares in question were in fact listed. Because of management changes the Company has had difficulty in locating the listing application for such shares. The Company has filed an additional listing application for the shares in question and we are awaiting a response. Failure to satisfactorily resolve this issue with Amex could result in the Company being delisted from the American Stock Exchange.

<PAGE>  10

Recent Pronouncements

      In June 2006, the FASB issued Financial Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes- An Interpretation of FASB Statement No 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than fifty percent likely of being realized upon ultimate settlement. The interpretation also provides guidance on derecognition, classification, interest and penalties, and other matters. These provisions are effective for the Company beginning in the first quarter of 2007. The Company has assessed the impact of this statement and currently does not believe that the adoption will have a material effect on its consolidated financial statements.

      In September 2006, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 108, Topic 1N, Financial Statements - Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in the Current Year Financial Statements. SAB No. 108 addresses how to quantify the effect of an error on the financial statements and requires a dual approach to compute the materiality of the misstatement. Specifically, the amount of the misstatement is to be computed using both the "rollover" (i.e., the current year income statement perspective) and the "iron curtain" (i.e., the year-end balance sheet perspective). SAB No. 108 is effective for all fiscal years ending after November 15, 2006, and accordingly, the Company adopted SAB No. 108 in the fourth quarter of 2006. The adoption of SAB No. 108 did not have a material impact on the Company's financial condition or its result s of operations.

      In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for the Impairment or Disposal of Long-Lived Assets. Specifically, SFAS No. 155 amends SFAS No. 133 to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided the whole instrument is accounted for on a fair value basis. Additionally, SFAS No. 155 amends SFAS No. 140 to allow a qualifying special purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with early application allo wed. The adoption of SFAS No. 155 is not expected to have a material impact on the Company's results of operations or financial position.

      In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This new statement provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. The required effective date of SFAS No. 157 is the first quarter of 2008. The Company is currently evaluating the impact this statement may have on its consolidated financial statements.

      In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for many financial assets and liabilities and certain other items including insurance contracts. Entities electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company is currently evaluating the impact of adopting SFAS No. 159 on its fina ncial condition and results of operations.

<PAGE>  11

Critical Accounting Policies and Estimates

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

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

Environmental Remediation Liability

      On March 2, 2001, the Company became aware of environmental contamination resulting from an unknown heating oil leak at its Companion Pet Products manufacturing facility. The Company immediately notified the New Jersey Department of Environmental Protection and the local authorities, and hired a contractor to assess the exposure and required clean up. Based on the initial information from the contractor, the Company originally estimated the cost for the cleanup and remediation to be $310,000. In September 2001, the contractor updated the estimated total cost for the cleanup and remediation to be $550,000. In December 2006, a further update was performed and the final estimated costs were increased to $652,000, of which $90,000 remains accrued as of December 31, 2006. Based on information provided to the Company from its environmental consultant and what is known to date, the Company believes the reserve is sufficient for the remediation of t he environmental contamination. There is a possibility, however, that the remediation costs may exceed the Company's estimates.

Long-Lived Assets

      The Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net undiscounted cash flows expected to be generated by the asset. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. During 2006, the Company recorded an impairment charge of $38,000 to further reduce the carrying value of the equipment relating to the discontinued metal plating division to its fair value.

Deferred Tax Valuation Allowance

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

Revenue Recognition

      The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred or contractual services rendered, the sales price is fixed or determinable, and collection is reasonably assured in conformity with SAB No. 104, Revenue Recognition.

      The Company derives its revenues from three basic types of transactions: sales of manufactured product, licensing of technology, and research and product development services performed for third parties. Due to differences in the substance of these transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each.

      Product Sales: The Company recognizes revenue when title transfers to its customers, which is upon shipment of products. These shipments are made in accordance with sales commitments and related sales orders entered into with customers either verbally or in written form. The revenues associated with these transactions, net of appropriate cash discounts, product returns and sales reserves, are recorded upon shipment of the products.

<PAGE>  12

Licensing Revenues: Revenues earned under licensing or sublicensing contracts are recognized ratably over the life of the agreements. Advance payments by customers are initially recorded as deferred income on the Consolidated Balance Sheet and then recognized ratably over the life of the agreement or as contract obligations are completed.
Product Development Services:  The Company establishes agreed upon product development agreements with its customers to perform product development services. Product development revenues will be recognized in accordance with the product development agreement upon the completion of the phases of development and when we have no future performance obligations relating to that phase of development. Revenue recognition requires the Company to assess progress against contracted obligations to assure completion of each stage. These payments are generally non-refundable and are reported as deferred until they are recognizable as revenue. If no such arrangement exists, product development fees are recognized ratably over the entire period during which the services are performed.
In making such assessments, judgments are required to evaluate contingencies such as potential variances in schedule and the costs, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards. Changes in total estimated contract cost and losses, if any, are recognized in the period they are determined. Billings on research and development contracts are typically based upon terms agreed upon by the Company and customer and are stated in the contracts themselves and do not always align with the revenues recognized by the Company. On occasions when revenue recognized exceeds the milestone or progress billed to our customer, an "unbilled" receivable is recorded on our Consolidated Balance Sheet.
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.
The Company does not use derivative instruments. Changes in interest rates are not expected to have an adverse effect on the Company's financial condition or results of operations.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements and notes thereto listed in the accompanying index to financial statements (Item 13) are filed as part of this Annual Report and incorporated herein by reference.
ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

<PAGE>  13

ITEM 8A. CONTROLS AND PROCEDURES

      Evaluation of Disclosure Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Vice President of Finance, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of the period covered by this Report. Based upon that evaluation, the Chief Executive Officer and Vice President of Finance concluded that the Company's disclosure controls and procedures are not completely effective because of material financial weaknesses 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 (including its consolidated subsidiaries) required to be included in the Company's periodic Securities and Exchange Commission filings. These weaknesses, which are disclosed below, were identified during our fiscal 2006 evaluation of internal control over financial reporting. No significant changes were made in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. The Company has determined that there are material weaknesses among its internal controls upon the discovery of theft within the Company. The Company is currently taking steps to revise our procedures to reduce the possibility of fraud occurring again in the future. In early 2007, the Company uncovered that some of its checks were forged by an employee, with its books reflecting that the amounts indicated on the checks were actually being paid to vendors (the "Theft"). The Theft totaled approximately $80,000 over 42 months. The Company has implemented controls to help prevent future occurrences. The failure to prevent the fraud or detect it earlier is a material weakness in the internal control over financial reporting and the Disclosure Controls and Procedures.

      In a report to the Audit Committee of our Board of Directors and management of the Company, delivered by our independent audit firm, Amper, Politziner & Mattia P.C. on March 29, 2007 in connection with their audit of our financial results for the year ended December 31, 2006, two items were identified to be material weaknesses in our internal controls. A "material weakness" is a significant deficiency in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our material weaknesses were inadequate segregation of duties in the accounting/finance department and management overrides of controls. As a resu lt of these material weaknesses, our internal control over financial reporting is ineffective. The Company is currently evaluating the steps necessary to alleviate these material weaknesses. We will be adding additional management oversight controls to alleviate the lack of segregation of duties. We believe the process of compliance with the Sarbanes-Oxley Regulation will help us further define those steps. In addition, we hope to hire an additional support person for the accounting department in the second quarter 2007. The impact of the above conditions did not affect the results of this period or any prior period.

      Changes in Internal Control over Financial Reporting. There was no change in the Company's internal control over financial reporting that occurred during the period covered by this report on Form 10-KSB that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. However, the failure to prevent the Theft or detect it earlier is a material weakness in the internal control over financial reporting and the Disclosure Controls and Procedures.

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

      Sarbanes-Oxley 404 Compliance ("SOX 404"). It is anticipated that Management will begin conducting an evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission sometime in the second quarter of 2007. The assessment process will require significant amounts of management time and resources, thus management plans to engage a consulting firm to assist in the process.

ITEM 8B. OTHER INFORMATION

      In December 2006, the Company acquired packaging and filling equipment from A & M Consultants, an entity owned by the spouse of Rajiv Mathur our current CEO. The purchase price of the equipment was $133,000 and was payable in 10 days. A finder's fee of $10,000 to A & M Consultants was included in the purchase price of the equipment.

<PAGE>  14

PART III
ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
A portion of the information required by this item is contained in part under the caption "Executive Officers of the Registrant" in Part I hereof, and the remainder is contained in the Company's Proxy Statement for the Company's 2007 Annual Meeting of Stockholders (the "2007 Proxy Statement") under the captions "PROPOSAL 1-Election of Directors-Nominees for Election as Directors," "Committees of the Board-Audit Committee" and "Section 16(a) Beneficial Ownership Reporting Compliance" which are incorporated herein by this reference. Officers are elected on an annual basis and serve at the discretion of the Board of Directors. The Company expects to file the 2007 Proxy Statement no later than April 30, 2007.
The Company has adopted a code of ethics that applies to all directors, officers and employees of the Company and its subsidiaries. The Company's code of ethics is available at its web site at www.askigi.com.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is contained in the Company's 2007 Proxy Statement under the captions "EXECUTIVE COMPENSATION-Employment Agreements," "EXECUTIVE COMPENSATION-Summary Compensation Table", "EXECUTIVE COMPENSATION-Stock Options", and "Director Compensation and Stock Options" and is incorporated herein by this reference.
ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
A portion of the information required by this item is contained in the Company's 2007 Proxy Statement under the caption "Beneficial Ownership of Common Stock" and is incorporated herein by this reference.
Securities Authorized For Issuance Under Equity Compensation Plans
The following table includes information as of December 31, 2006 relating to the Company's 1999 Stock Incentive Plan, the 1999 Director Stock Option Plan and the 1998 Director Stock Plan, which comprises all of the equity compensation plans of the Company. The table provides the number of securities to be issued upon the exercise of outstanding options under such plans, the weighted-average exercise price of such outstanding options and the number of securities remaining available for future issuance under such equity compensation plans:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
	(a)(1)	(b)(1)	(c)(2)
Equity compensation plans approved by security holders	1,818,548	$1.56	1,321,995
Equity compensation plans not approved by security holders	- -	- -	- -
Total	1,818,548	$1.56	1,321,995

(1)	Includes information with respect to the 1989 Stock Option Plan, 1991 Stock Option Plan, 1999 Stock Incentive Plan, the 1999 Director Stock Option Plan, as such items do not apply to the 1998 Directors Stock Plan.
(2)	Includes information with respect to the 1989 Stock option Plan, 1991 Stock Option Plan, 1999 Stock Incentive Plan, the 1999 Director Stock Option Plan, and the 1998 Directors Stock Plan.

<PAGE>  15

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Company's 2007 Proxy Statement under the captions "Proposal-1 Election of Directors-Independence, "Propsal-1 Election of Directors-Committees of the Board" (first paragraph) and "Certain Relationships and Related Transactions" and is incorporated herein by this reference.
ITEM 13. EXHIBITS
(a)	(1)	Financial Statements:
		Report of Independent Registered Public Accounting Firm
		Consolidated Balance Sheet, December 31, 2006
		Consolidated Statements of Operations for the years ended December 31, 2006 and 2005.
		Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005.
		Consolidated Statements of Stockholders' Equity and Comprehensive (Loss) for the years ended December 31, 2006 and 2005.
		Notes to Consolidated Financial Statements
		Schedules are omitted for the reason that they are either not applicable or not required or because the information required is contained in the financial statements or notes thereto.
		Condensed financial information of the Registrant is omitted since there are no substantial amounts of "restricted net assets" applicable to the Company's consolidated subsidiaries.
	(2)	Exhibits Required to be Filed by Item 601 of Regulation S-B:
		The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed as part of this Annual Report on Form 10-KSB unless incorporated by reference as indicated.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is contained in the Company's 2007 Proxy Statement under the caption "Relationship with Independent Public Accountants" and is incorporated herein by this reference.

<PAGE>  16

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:		IGI, Inc.
April 2, 2007		By:  /s/ Rajiv Mathur
		Rajiv Mathur President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacity and on the dates indicated.
Signatures	Title		Date
/s/ Rajiv Mathur	President and Chief Executive Officer		April 2, 2007
Rajiv Mathur
/s/ Frank Gerardi	Chairman of the Board		April 2, 2007
Frank Gerardi
/s/ Carlene A. Lloyd	Vice President of Finance		April 2, 2007
Carlene A. Lloyd
/s/ Stephen J. Morris	Director		April 2, 2007
Stephen J. Morris
/s/ Terrence O'Donnell	Director		April 2, 2007
Terrence O'Donnell
/s/ Sunil Pai	Director		April 2, 2007
Sunil Pai

<PAGE>  17

Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
IGI, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of IGI, Inc. and Subsidiaries as of December 31, 2006, and the related consolidated statements of operations, cash flows, stockholders' equity and comprehensive (loss) for each of the years in the two year period then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as wel l as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the IGI, Inc. and Subsidiaries as of December 31, 2006, and the results of their operations and their cash flows for each of the years in the two year period then ended, in conformity with U.S generally accepted accounting principles.
During the year ended December 31, 2006, the Company has changed its method of accounting for stock-based compensation.
	/s/ AMPER, POLITZINER & MATTIA, P.C.
March 31, 2007
Edison, New Jersey

<PAGE>  18

IGI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

December 31, 2006

(in thousands, except share and per share information)

	2006
ASSETS
Current assets:
Cash and cash equivalents	$	619
Restricted cash		50
Accounts receivable, less allowance for doubtful accounts of $34		197
Licensing and royalty income receivable		91
Inventories		485
Prepaid expenses and other current assets		45
Assets of discontinued operations held for sale		350
Total current assets		1,837
Property, plant and equipment, net		2,396
License fee, net		900
Other assets		10
Total assets	$	5,143
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable- related party	$	1,145
Note payable		306
Accounts payable		505
Accrued expenses		417
Deferred income, current		400
Liabilities of discontinued operations		118
Total current liabilities		2,891
Deferred income, long term		59
Total liabilities		2,950
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized;       15,056,516 shares issued and 13,090,776 shares outstanding		151
Additional paid-in capital		25,569
Accumulated deficit		(22,132)
Less treasury stock, 1,965,740 shares at cost		(1,395)
Total stockholders' equity		2,193
Total liabilities and stockholders' equity	$	5,143
The accompanying notes are an integral part of the consolidated financial statements.

<PAGE>  19

IGI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

for the years ended December 31, 2006 and 2005

(in thousands, except share and per share information)

	2006		2005
Revenues:
Sales, net	$	1,787	$	1,985
Licensing and royalty income		657		870
Research and development income		176		-
Total revenues		2,620		2,855
Costs and Expenses:
Cost of sales		1,388		1,541
Selling, general and administrative expenses		2,105		1,567
Product development and research expenses		1,065		949
Operating (loss)		(1,938)		(1,202)
Interest (expense), net		(129)		(4)
(Loss) on sale of investment securities		-		(74)
Other income, net		-		181
Loss from continuing operations before benefit from income taxes		(2,067)		(1,099)
Benefit from income taxes		458		280
Loss from continuing operations		(1,609)		(819)
Discontinued operations: (Note 14)
Loss from discontinued operations		(58)		(479)
Net loss	$	(1,667)	$	(1,298)
Basic and Diluted (Loss) per Share
Continuing operations	$	(.13)	$	(.07)
Discontinued operations		(.00)		(.04)
		(.13)		(.11)
Weighted average shares of common stock outstanding
Basic and diluted	12,845,711		11,971,337
The accompanying notes are an integral part of the consolidated financial statements.

<PAGE>  20

IGI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

for the years ended December 31, 2006 and 2005

(in thousands)

	2006		2005
Cash flows from operating activities:
Net (loss)	$	(1,667)	$	(1,298)
Reconciliation of net (loss) to net cash used in       operating activities:
Depreciation and amortization		271		300
Impairment charge for equipment of discontinued segment		38		175
Loss on sale of marketable securities		-		74
Bad debt expense		29		14
Provision for write down of inventory		70		-
Recognition of deferred income		(87)		(169)
Stock-based compensation expense		38		2
Amortization of license fee		100		-
Changes in operating assets and liabilities:
Accounts receivable		41		22
Licensing and royalty income receivable		56		8
Inventories		(294)		(12)
Prepaid expenses and other assets		68		(103)
Accounts payable and accrued expenses		606		50
Deferred income		354		60
Net cash used in operating activities		(377)		(877)
Cash flows from investing activities:
Capital expenditures		(133)		(87)
Payment of license fee		-		(1,000)
Proceeds from sale of marketable securities		-		335
Net cash used in investing activities		(133)		(752)
Cash flows from financing activities:
Borrowings from notes payable		300		1,000
Proceeds from private placement of common stock, net of expenses		100		276
Proceeds from exercise of common stock options and warrants		364		338
Net cash provided by financing activities		764		1,614
Net increase (decrease) in cash and cash equivalents		254		(15)
Cash and cash equivalents at beginning of year		365		380
Cash and cash equivalents at end of year	$	619	$	365
Supplemental cash flow information:
Cash payments for interest	$	-	$	-
Cash (receipt) from taxes		(458)		(274)
The accompanying notes are an integral part of the consolidated financial statements.

<PAGE>  21

IGI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE (LOSS)

for the years ended December 31, 2006 and 2005

(in thousands, except share information)

			Additional Paid-In Capital	Accumulated Other Comprehensive (Loss)	Comprehensive (Loss)	Accumulated Deficit	Treasury Stock	Total Stockholders' Equity
	Common Stock
	Shares	Amount
Balance, December 31, 2004	13,547,520	$135	$24,467	$(32)		$(19,167)	$(1,395)	$4,008
Stock options exercised	537,000	6	332					338
Issuance of stock pursuant to a   private placement, net of costs   of $24	399,999	4	272					276
Issuance of stock option to   non-employee			2					2
Net loss					$(1,298)	(1,298)		(1,298)
Other comprehensive income
Holding(losses) on investments       arising during the period					(42)
Less reclassification adjustment       for losses on investments       included in net loss					74
Total other comprehensive loss				32	32			32
Comprehensive loss					$(1,266)
Balance, December 31, 2005	14,484,519	145	25,073	-		(20,465)	(1,395)	3,358
			264
Stock options exercised	332,000	4	38					268
Stock-based compensation expense								38
Issuance of stock pursuant to a   private placement	133,333	1	99					100
Warrants exercised	106,664	1	95					96
Net loss	-	-	-	-		(1,667)	-	(1,667)
Balance, December 31, 2006	15,056,516	$151	$25,569	$    -		$(22,132)	$(1,395)	$2,193
The accompanying notes are an integral part of the consolidated financial statements.

<PAGE>  22

IGI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

      Nature of the Business

      IGI, Inc. ("IGI" or the "Company"), a Delaware corporation, operating in the State of New Jersey, is primarily engaged in the production and packaging of cosmetics, skin care, and consumer products.

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

      IGI's Metal Plating Division has been classified as discontinued operations for all periods presented. (See Note 14)

      Major Customers

      The following summarizes the Company's customers, which individually account for more than 10% of the Company's revenue:

      Vetoquinol USA accounted for 32% of 2006 product revenues and 19% of 2005 product revenues. Genesis Pharmaceuticals accounted 20% of the 2006 product revenues and 15% of 2005 product revenues. Albrian International accounted for 20% of 2006 product revenues and 5% of 2005 product revenues.

      Estee Lauder did not have product revenues in 2006 but they accounted for 20% of 2005 product revenues. Estee Lauder accounted 78% of 2006 royalty revenues and 54% of 2005 royalty revenues.

      Accounts receivable related to the Company's major customers comprised 51% of all account receivables as of December 31, 2006.

      Our geographic area of operations is the United States with a concentration of our customers located in the Northeastern United States.

      Principles of Consolidation

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

      Cash Equivalents

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

      Fair Value of Financial Instruments

      The carrying amounts of cash and equivalents, trade receivables, accounts payable, notes payable-banks, other short-term borrowings and other accrued liabilities at December 31, 2006 approximate their fair value because of the short-term maturities of these items.

      Accounts Receivable and Allowance for Doubtful Accounts

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

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      Concentration of Credit Risk

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

      Marketable Securities

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

      Inventories

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

      Property, Plant and Equipment

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

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

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

      Long-Lived Assets

      In accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In performing such review for recoverability, the Company compares expected future cash flows of assets to the carrying value of the long-lived assets and related identifiable intangibles. If the expected future cash flows (undiscounted) are less than the carrying amount of such assets, the Company recognizes an impairment loss for the difference between the carrying value of the assets and their estimated fair value, with fair values being determined using projected discounted cash flows at the lowest level of cash flows identifiable in relation to the assets being reviewed. During 2006, the Company recorded an additional impairment charge of $38,000 to reduce the carrying value of the discontinued metal plating equipment to its fair market value.

      Accrued Expenses

      Accrued expenses represent various obligations of the Company including certain operating expenses and taxes payable. For the fiscal years ended December 31, 2006, the largest component of accrued expenses was the severance accrual to our former CEO in the amount of $190,000. Other significant components of other accrued expenses were environmental clean up costs of $90,000, Board of Directors Fees accrual of $45,000 and accrued legal of $27,000.

      License Fee

      License fees are amortized on a straight-line basis over the life of the agreement (10 years).

      Accounting for Environmental Costs

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

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      Income Taxes

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

      Revenue Recognition

      The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred or contractual services rendered, the sales price is fixed or determinable, and collection is reasonably assured in conformity with SAB No. 104, Revenue Recognition.

      The Company derives its revenues from three basic types of transactions: sales of manufactured product, licensing of technology, and research and product development services performed for third parties. Due to differences in the substance of these transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each.

      Product Sales: The Company recognizes revenue when title transfers to its customers, which is upon shipment of products. These shipments are made in accordance with sales commitments and related sales orders entered into with customers either verbally or in written form. The revenues associated with these transactions, net of appropriate cash discounts, product returns and sales reserves, are recorded upon shipment of the products.

      Licensing Revenues: Revenues earned under licensing or sublicensing contracts are recognized ratably over the life of the agreements. Advance payments by customers are initially recorded as deferred income on the Consolidated Balance Sheet and then recognized ratably over the life of the agreement or as contract obligations are completed.

      Product Development Services: The Company establishes agreed upon product development agreements with its customers to perform product development services. Product development revenues will be recognized in accordance with the product development agreement upon the completion of the phases of development and when we have no future performance obligations relating to that phase of development. Revenue recognition requires the Company to assess progress against contracted obligations to assure completion of each stage. These payments are generally non-refundable and are reported as deferred until they are recognizable as revenue. If no such arrangement exists, product development fees are recognized ratably over the entire period during which the services are performed.

      In making such assessments, judgments are required to evaluate contingencies such as potential variances in schedule and the costs, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards. Changes in total estimated contract cost and losses, if any, are recognized in the period they are determined. Billings on research and development contracts are typically based upon terms agreed upon by the Company and customer and are stated in the contracts themselves and do not always align with the revenues recognized by the Company. On occasions when revenue recognized exceeds the milestone or progress billed to our customer, an "unbilled" receivable is recorded on our Consolidated Balance Sheet.

      Stock-Based Compensation

      On January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, using the modified prospective transition method. Under this transition method, compensation cost recognized in the year ended December 31, 2006 include the costs for all share-based payments granted subsequent to January 1, 2006, based upon the grant-date fair value estimated in accordance with the provisions of Statement 123(R). Prior to January 1, 2006, the Company accounted for this plan under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, (Opinion 25) and related interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation. Generally, no stock-based employee compensation cost was recognized in the statements of operations, as options granted under the plan had an exercise price equal to the mar ket value of the underlying common stock on the date of the grant. In accordance with this transition method, the Company's Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). All options issued prior to January 1, 2006 were fully vested as of December 31, 2005, therefore, no expense was recorded during the year ended December 31, 2006 for grants prior to January 1, 2006.

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      As a result of adopting Statement 123(R) on January 1, 2006, the Company's net loss for the year ended December 31, 2006 was $38,000 higher.

      The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of Statement 123 to options granted under the Company's stock option plan for the year ended December 31, 2005:

		2005
	(in thousands, except per share information)
Net (loss) attributable to common         stockholders - as reported		$(1,298)
Deduct: Total stock-based employee         compensation expense determined         under the fair value based method         (net of tax)		(430)
Net (loss) attributable to         common stockholders - pro forma		$(1,728)
(Loss) per share - as reported
Basic and diluted		$(.11)
(Loss) per share - pro forma
Basic and diluted		$(.14)

      The pro forma information has been determined as if the Company had accounted for its employee and director stock options under the fair value method. The weighted average grant date fair value for the stock options was $.90 and $.65 per share for the years ended December 31, 2006 and 2005.

      The Company uses the same valuation methodologies and assumptions in estimating the fair value of options under both SFAS No. 123(R) and the pro forma disclosures under SFAS No.123. The fair value for these options was estimated at the grant date using the Black-Scholes option-pricing model with the following assumptions for 2005 and 2006:

Assumptions	2005	2006
Dividend yield	0%	0%
Risk free interest rate	3.67%	5.10%
Estimated volatility factor	76%	78%
Expected life	7 years	5.5 years

      For 2006 assumptions, estimated volatility was calculated using the historical volatility of the Company's stock over the expected life of the options of 5.5 years. The expected life of the options were estimated using the safe harbor transition method and the forfeiture rates are estimated based on historical employment/directorship termination experience. The risk free interest rate is based on US Treasury yields for securities with terms approximating the terms of the grants. The assumptions used in the Black-Scholes option valuation model are highly subjective, and can materially affect the resulting valuation.

      Product Development and Research

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

      Advertising Costs

      Advertising costs are expensed as incurred. Such expenses for the years ended December 31, 2006 and 2005 were $37,000 and $27,000, respectively.

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      Shipping and Handling Costs

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

      Net (Loss) per Common Share

      Basic net (loss) per share of common stock is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) per share of common stock is computed using the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period. Potential dilutive common stock equivalents include shares issuable upon the exercise of options and warrants. Due to the net loss for the years ended December 31, 2006 and 2005, the effect of the Company's potential dilutive common stock equivalents was anti-dilutive for each year; as a result, the basic and diluted weighted average number of common shares outstanding and net (loss) per common share are the same. Potentially dilutive common stock equivalents which were excluded from the net (loss) per share calculations due to their anti-dilutive effect amounted to was 574,250 for 2006 and 614,250 for 2005.

      Comprehensive (Loss)

      Comprehensive (loss) is defined to include all changes in stockholders' equity during a period except those resulting from investments by or distributions to owners. Comprehensive (loss) is the sum of net (loss) and unrealized gains (losses) on marketable securities. Unrealized (losses) on marketable securities are excluded from net (loss) and are reported in accumulated other comprehensive loss in the accompanying consolidated financial statements.

      Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include allowances for excess and obsolete inventories, allowances for doubtful accounts, provisions for income taxes and related deferred tax asset valuation allowances, and accruals for environmental cleanup and remediation costs. Actual results could differ from those estimates.

      Effect of Recent Accounting Pronouncements

      In June 2006, the FASB issued Financial Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than fifty percent likely of being realized upon ultimate s ettlement. The interpretation also provides guidance on derecognition, classification, interest and penalties, and other matters. These provisions are effective for the Company beginning in the first quarter of 2007. The Company has assessed the impact of this statement and currently does not believe that the adoption will have a material effect on its consolidated financial statements.

      In September 2006, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 108, Topic 1N, Financial Statements - Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in the Current Year Financial Statements. SAB No. 108 addresses how to quantify the effect of an error on the financial statements and requires a dual approach to compute the materiality of the misstatement. Specifically, the amount of the misstatement is to be computed using both the "rollover" (i.e., the current year income statement perspective) and the "iron curtain" (i.e., the year-end balance sheet perspective). SAB No. 108 is effective for all fiscal years ending after November 15, 2006, and accordingly, the Company adopted SAB No. 108 in the fourth quarter of 2006. The adoption of SAB No. 108 did not have a material impact on the Company's financial condition or its results of op erations.

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      In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for the Impairment or Disposal of Long-Lived Assets. Specifically, SFAS No. 155 amends SFAS No. 133 to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided the whole instrument is accounted for on a fair value basis. Additionally, SFAS No. 155 amends SFAS No. 140 to allow a qualifying special purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with early application allo wed. The adoption of SFAS No. 155 is not expected to have a material impact on the Company's results of operations or financial position.

      In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This new statement provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. The required effective date of SFAS No. 157 is the first quarter of 2008. The Company is currently evaluating the impact this statement may have on its consolidated financial statements.

      In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for many financial assets and liabilities and certain other items including insurance contracts. Entities electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company is currently evaluating the impact of adopting SFAS No. 159 on its fina ncial condition and results of operations.

2.  Liquidity

      The Company sustained net losses of $1,667,000 and $1,298,000 for the years ended December 31, 2006 and 2005, respectively, and had a working capital deficiency of $1,054,000 at December 31, 2006. The Company's principal sources of liquidity are cash and cash equivalents of approximately $619,000 at December 31, 2006 and cash from operations.

      Our business operations have been partially funded over the past three years through the exercise of stock options by our directors and officers. If necessary, we may continue to seek to raise additional capital through the sale of our equity. We may accomplish this via a strategic alliance with a third party. There may be additional acquisition and growth opportunities that may require external financing. There can be no assurance that such financing will be available or available on terms acceptable to the Company.

      In November 2006, the Company established a $1,000,000 line of credit with Pharmachem Laboratories Inc. to assist the Company with needed cash flow. The funds could have been borrowed and re-borrowed from time to time at a rate of 1.5% above Wall Street Prime rate. This line of credit was cancelled in January of 2007 when Pharmachem Laboratories Inc. agreed to participate in a private placement for 1,500,000 shares of common stock for $1,500,000. This transaction was completed in March 2007. The Company repaid its outstanding note payable plus accrued interest to Univest Management, Inc. with the funds from the private placement in March 2007. The Company subsequently established another line of credit of $1,000,000 in January 2007 with Pinnacle Mountain Partners, LLC, a company owned by Dr. and Mrs. Hager, major shareholders of the Company, under the same terms as the Pharmachem line of credit.

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3.  Environmental clean up costs

      The estimated cost of $90,000, for the soil remediation work related to our divested pet care manufacturing facility, has been accrued as of December 31, 2006. The Company anticipates the accrual remaining is appropriate to cover the costs of the remaining remediation.

      The $50,000 of restricted cash on our Consolidated Balance Sheet as of December 31, 2006, represents a restricted escrow account set up on the requirement of the NJ Department of Environmental Protection ("DEP") for the soil remediation work. These funds will be released to the Company upon the DEP approval when the remediation is completed. We anticipate the release of funds within the next twelve months.

4.  Supply and Sublicensing Agreements

      On December 12, 2005, the Company extended its license agreement for an additional ten years with Novavax, Inc. for $1,000,000. This extension entitles the Company exclusive use of the Novasome® lipid vesicle encapsulation and certain other technologies ("Microencapsulation Technologies" or collectively the "Technologies") in the fields of (i) animal pharmaceuticals, biologicals and other animal health products; (ii) foods, food applications, nutrients and flavorings; (iii) cosmetics, consumer products and dermatological over-the-counter and prescription products (excluding certain topically delivered hormones); (iv) fragrances; and (v) chemicals, including herbicides, insecticides, pesticides, paints and coatings, photographic chemicals and other specialty chemicals, and the processes for making the same (collectively, the "IGI Field") thru 2015. This payment is being amortized ratably over the ten year period. For the year ended, Decem ber 31, 2006, the Company recorded $100,000 expense related to the amortization of the license. Amortization of this license fee will amount to $100,000 per year for 2007-2011.

      On October 11, 2006, the Company signed an agreement with DermWorx, Inc. to exclusively license, develop and manufacture a series of dermatological specialty products utilizing its encapsulation technology, for Dermworx. The agreement currently calls for the Company to receive product development fees, manufacturing revenues and royalties on product sales from Dermworx. In addition the agreement also calls for IGI to receive shares of DermWorx stock, which would result in IGI holding approximately 19.9% of the issued and outstanding shares of common stock of DermWorx. Due to its inability to raise capital in the required time frame, Dermworx defaulted in making the second payment to the Company for such exclusive license, as a result, Dermworx only has rights to one product. The agreement is now being renegotiated for the benefit of both of the companies'. The first installment of $250,000 received by the Company was recorded as deferred inc ome for the year ended December 31, 2006. The Company will recognize those fees as per the renegotiated agreement.

5.  Inventories

      Inventories as of December 31, 2006 consisted of:

	2006
	(in thousands)
Raw materials		$241
Work in progress		18
Finished goods		226
		$485

      Finished goods inventory related to the Miaj product line amounted to $ 147,000 at December 31, 2006.

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6.  Property, Plant and Equipment

      Property, plant and equipment, at cost, as of December 31, 2006 consisted of:

	2006
	(in thousands)
Land		$    257
Building		3,013
Machinery and equipment		1,829
		5,099
Less accumulated depreciation		(2,703)
Property, plant and equipment, net		$ 2,396

      The Company recorded depreciation expense of $246,000, and $286,000 in 2006 and 2005, respectively.

7.  Note Payable

      On December 12, 2005, the Company received $1,000,000 in the form of a short-term note payable from Univest Management, LLC,Inc., a company owned by Frank Gerardi, former CEO and Chairman of the Company. The funds from this note were used to satisfy our obligation to renew our license fee with Novavax, Inc. for use of the Novasome Technologies for an additional ten year period. The note was due on the earlier of March 31, 2007 or when a sale leaseback of the land and building closes, with 30% interest per annum through February 1, 2006, 12% interest per annum through October 1, 2006 and 10% interest per annum thereafter. The note is collateralized by mortgage on real property owned by the Company. The Company accrued $130,000 of interest related to this note for the year ended December 31, 2006. In March 2007, the Company paid the short-term note payable plus accrued interest with the proceeds from the private placement. (See Note 17)

      On October 4, 2006 the Company received a $100,000 loan from Pharmachem Laboratories, Inc. bearing interest at 10% per annum and secured with a second lien on the Company's real property. The loan was repaid on November 27, 2006.

      On November 27, 2006, the Company established a $1,000,000 line of credit with Pharmachem Laboratories Inc, secured by the assets of the Company (other than real property) to assist the Company with needed cash flow. The Company borrowed $300,000 against this line of credit as of December 31, 2006. The funds could be borrowed and re-borrowed from time to time at a rate of 1.5% above Wall Street Prime rate. The interest rate at December 31, 2006 was 9.75%. This line of credit was cancelled in January of 2007 when Pharmachem Laboratories Inc. agreed to participate in a private placement for 1,500,000 shares for $1,500,000. This transaction was completed in March 2007. (See Note 17)

8.  Stock Options and Common Stock

      In October 1998, the Company adopted the 1998 Directors Stock Plan. Under this plan, 600,000 shares of the Company's common stock are authorized under the plan reserved for issuance to non-employee directors, in lieu of payment of directors' fees in cash. The Company did not issue any shares as consideration for directors' fees in 2006, 2005 or 2004; the amounts related to 2006, 2005 and 2004 fees remain in accrued expenses until the shares are issued to the directors.

      In March 1999, the Company's Board of Directors approved the 1999 Stock Incentive Plan ("1999 Plan"). The 1999 Plan replaced all previously authorized stock option plans, and no additional options may be granted under those plans. Under the 1999 Plan, options or stock awards may be granted to all of the Company's employees, officers, directors, consultants and advisors to purchase a maximum of 2,000,000 shares of common stock. In May 2006, the Company's stockholders approved an increase in the maximum amount of shares to be granted by 500,000, for a total of 2,500,000 shares available for grant. A total of 1,892,500 options, having a maximum term of ten years, have been granted at 100% of the fair market value of the Company's stock at the time of grant. Options outstanding under the 1999 Plan are generally exercisable in cumulative increments over four years commencing one year from date of grant.

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      In September 1999, the Company's Board of Directors approved the 1999 Director Stock Option Plan. The 1999 Director Stock Option Plan provides for the grant of stock options to non-employee directors of the Company at an exercise price equal to the fair market value per share on the date of the grant. An aggregate of 1,475,000 shares have been approved and authorized for issuance pursuant to this plan. In May 2006, an additional 200,000 shares were approved for issuance under this plan, bringing the total to 1,675,000 available for issue under this plan. A total of 1,396,048 options, have been granted to non-employee directors through December 31, 2006. The options granted under the 1999 Director Stock Option Plan vest in full one year after their respective grant dates and have a maximum term of ten years.

      On December 9, 2005, the Company accelerated the vesting of all outstanding options such that all options vested no later than December 9, 2005.

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

	Shares	Exercise Price Per Share	Weighted Average Exercise Price
January 1, 2005 shares
Under option	2,588,048	$.50 - 8.25	$1.85
Granted	425,750	.76 - 1.29	.86
Exercised	(537,000)	.50 - 1.05	.63
Expired	(80,000)	6.63 - 8.25	7.24
Forfeited	(251,250)	1.27 - 6.75	3.00
December 31, 2005 shares
Under option	2,145,548	.50 - 6.75	1.63
Granted	85,000	1.30	1.30
Exercised	(332,000)	.55 - 1.27	.81
Expired	(80,000)	5.75 - 6.75	6.13
Forfeited	-		-
December 31, 2006 shares
Under option	1,818,548	.50 - 3.75	$1.56
Exercisable options at:     December 31, 2005	2,145,548		$1.63
December 31, 2006	1,733,548		$1.58

      The following table summarizes information concerning outstanding and exercisable options as of December 31, 2006:

	Options Outstanding			Options Exercisable
Range of Exercise Price	Number of Options	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price	Number of Options	Weighted Average Exercise Price
$ .50 to $ 1.00	344,250	7.05	$  .73	344,250	$  .73
1.01 to 2.00	1,029,798	5.47	1.47	944,798	1.49
2.01 to 3.00	414,500	5.66	2.31	414,500	2.31
3.01 to 4.00	30,000	1.00	3.75	30,000	3.75
$ .50 to $ 3.75	1,818,548	5.68	$1.56	1,733,548	$1.58

      The Company has recorded $38,000 related to its shared-based expenses in Selling, general and administrative expenses on the accompanying Statement of Operations for the year ended December 31, 2006.

      The aggregate intrinsic value for options outstanding and exercisable at December 31, 2006 was approximately $170,000. The total intrinsic value of the options exercised during 2006 was $175,000.

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A summary of non-vested options at December 31, 2006 and changes during the year ended December 31, 2006 is presented below:

	Options	Weighted Average Grant Date Fair Value
Non-vested option at January 1, 2006	-	$      -
Granted	85,000	1.30
Vested	-	-
Forfeited	-	-
Non-vested options at December 31, 2006	85,000	$1.30

      As of December 31, 2006, there was $38,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements under the Plan. The costs will be recognized monthly through July 2007.

9.  Stock Warrants

      In connection with the private placement consummated in December 2005, the Company granted a warrant to purchase 26,666 shares of IGI common stock at an exercise price of $.90 a share to each participant of the private placement. A total of four warrants to purchase 106,664 shares were granted. During 2006, all of the warrants were exercised providing the Company with proceeds of $95,998 relating to the exercise.

10.  Income Taxes

      The (benefit) for income taxes attributable to loss from continuing operations before (benefit) for income taxes for the years ended December 31, 2006 and 2005 is as follows:

	2006	2005
	(in thousands)
Current tax expense (benefit):
Federal	$      -	$      -
State and local	(458)	(280)
Total current tax expense (benefit)	(458)	(280)
Deferred tax expense
Federal	-	-
State and local	-	-
Total deferred tax expense	-	-
Total expense (benefit) for income taxes	$(458)	$ (280)

      The Company sold some of its New Jersey operating loss carry forwards in exchange for net proceeds of $458,000 and $274,000 in 2006 and 2005 respectively.

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

	2006	2005
	(in thousands)
Statutory benefit	$(718)	$(536)
Other non-deductible expenses	-	-
State income taxes, net of valuation allowance	(303)	(184)
Increase in Federal valuation allowance	563	440
Other, net	-	-
	$(458)	$(280)

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      Deferred tax assets included in the Consolidated Balance Sheets as of December 31, 2006 consisted of the following:

	2006
	(in thousands)
Current Assets (Liabilities)
Allowance for doubtful accounts	$      14
Inventory	41
Accrued severance and environmental	114
Total Current Assets (Liabilities)	169
Long Term Assets (Liabilities)
Property, plant and equipment	$    146
Deferred royalty payments	186
Tax operating loss carry forwards	6,412
Capital loss carryforwards	25
Tax credit carry forwards	764
Non-employee stock options	415
Other	(4)
Total Long Term Assets (Liabilities)	7,944
Gross Deferred Tax Asset (Liability)	8,113
Less: valuation allowance	(8,113)
Deferred taxes, net	$         -

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

      Operating loss and tax credit carry forwards for tax reporting purposes as of December 31, 2006 were as follows:

	(in thousands)
Federal:
Operating losses (expiring through 2026)	$16,624
Capital losses (expiring in the year 2010)	74
Research tax credits (expiring through 2025)	615
Alternative minimum tax credits (available without expiration)	28
State:
Net operating losses - New Jersey (expiring through 2013)	7,607
Research tax credits - New Jersey (expiring through 2012)	91
Alternative minimum assessment - New Jersey (available without expiration)	29

      Federal net operating loss carry forwards that expire through 2026 have significant components expiring in 2018 (11%), 2019 (11%), 2020 (40%), and 2025 (11%).

      The Company's ability to use net operating loss carry forwards may be subject to substantial limitation in future periods under certain provisions of the Internal Revenue Code, including but not limited to Section 382 which applies to corporations that undergo an "ownership change". Internal Revenue Code Section 382 rules limit the utilization of net operating losses upon a more than 50% change in ownership of a company (such change refers to a shift in value).

11.  Commitments and Contingencies

      The Company's commitments and contingencies consisted of operating leases of $22,000 per year for 2007-2009.

<PAGE>  33

12.  Legal and U.S. Regulatory Proceedings

      On March 2, 2001, the Company discovered the presence of environmental contamination resulting from an unknown heating oil leak at its now divested Companion Pet Products manufacturing site. The remediation was completed by September 30, 2003. The Company has spent approximately $562,000 to date on the cleanup. Periodic soil monitoring will be required for the next two years at an estimated cost of $90,000, which has been accrued as of December 31, 2006. The Company received a monetary settlement of $181,000 in December 2005 from one of its prior insurance carriers and was recorded in other income in the Statement of Operations for the year ended December 31, 2005.

      The adjacent property was also affected by this contamination and the Company was involved in a lawsuit with the property owner. Although, IGI believes that it has performed the required soil remediation of the adjacent property. In 2005, IGI settled the case for $70,000. The settlement was recorded in Selling, General and Administration Expenses in the Statement of Operations for the year ended December 31, 2005.

13.  Employee Benefits

      The Company has a 401(k) contribution plan, pursuant to which employees, who have completed six months of employment with the Company or its subsidiaries as of specified dates, may elect to contribute to the plan, in whole percentages, up to 18% of compensation. Employees' contributions are subject to a minimum contribution by participants of 1% of compensation and a maximum contribution of $15,000 for 2006 and $14,000 for 2005. The Company matches 25% of the first 5% of compensation contributed by participants and contributes, on behalf of each participant, $4 per week of employment during the year. The Company contribution is in the form of either common stock or cash, which is vested immediately cash contributions were made for 2006 and 2005. The Company has recorded charges to expense related to this plan of approximately $9,000 and $10,000 in 2006 and 2005, respectively.

14.  Discontinued Operations

      On July 10, 2006 the Company and the Board of Directors decided to discontinue the operations of the Metal Plating division and sell the related equipment to a third party. In accordance with Statement of Financial Standards No.144, "Accounting for the Impairment of Disposal of Long-Lived Assets" ("FAS 144"), the related assets have been classified as held for sale at the lower of its carrying amount or fair value less cost to sell on the Balance Sheet at December 31, 2006. This reporting segment, the Metal Plating Division, is classified as discontinued operations for all periods presented. Management recorded an additional impairment expense of $38,000 on the equipment in the 2006 to record the value of the equipment at fair market value less costs to sell.

      The Company estimated the fair value less of the metal plating equipment less cost to sell at $350,000. In the first quarter of 2007, the Company received a purchase order and deposit in the amount of $130,000 toward the purchase of the plating equipment from UCT to re-purchase the equipment back from the Company. The purchase price of the equipment of $260,000 represents the equipment net of outstanding liabilities in the amount of $118,000 owed to UCT by the Company. All relocation and removal expenses relating to this equipment will to be paid by the purchaser, UCT.

      A summary of the data related to the Company's discontinued operation for the years ended December 31, 2006 and December 31, 2005 appear below: (amounts in thousands)

Discontinued operations     Summary Income Statement	December 31, 2006		December 31, 2005
Product sales		$    -		$   11
Cost of sales		(20)		(204)
Impairment charge related to fixed assets		(38)		(175)
Sales and marketing expenses		-		(112)
Loss from discontinued operations		$(58)		$(479)

      The Company is estimating the sale of the equipment related to discontinued operations will be completed in the second quarter of 2007.

<PAGE>  34

15.  Related Party Transactions

      Frank Gerardi, the Company's Chairman and former CEO, as well as a major IGI shareholder, has personally invested $350,000 in Universal Chemical Technologies ("UCT"), which represented less than a 1% ownership interest in UCT at the time the investment was made. The Company entered into a license agreement to utilize UCT's patented technology for an electroless Nickel Boride metal finishing process in February 2004.

      On December 12, 2005, the Company received $1,000,000 in the form of a short-term note payable from Univest Management, LLC, a company owned by Frank Gerardi, former CEO and Chairman of the Company. The funds from this note were used to fund our obligation to renew our license fee with Novavax, Inc. for use of the Novasome Technologies for an additional ten year period.The note is collateralized by mortgage on real property owned by the Company. (See Note 7)

      On December 15, 2005, the Company entered into agreements to sell four units (the "Units") to accredited investors, pursuant to a Private Placement Memorandum dated November 11, 2005, for an aggregate purchase price of $400,000. Each Unit consists of 133,333 shares of common stock of the Company, $.01 par value per share (the "Common Stock"), and warrants to purchase 26,666 shares of the Common Stock (the "Warrants"). Steve Morris, a director purchased one unit, Univest Management Inc. EPSP, an entity controlled by Mr. Gerardi purchased one unit and the Hager Family Trust of which Jane Hager and Edward Hager are co-trustees purchased one unit. Each of Jane Hager and Edward Hager may be deemed to own more than 10% of the Company's outstanding stock. The Warrants are exercisable one year from the date of grant at an exercise price of $0.90 per share, subject to adjustment upon the occurrence of specific events, including stock dividends , stock splits, combinations or reclassifications of our common stock or distributions of cash or other assets. The Warrants do not entitle the holders to any voting or other rights as a stockholder until such Warrants are exercised and common stock is issued. Sale of the fourth unit to an unrelated party closed in January 2006.

      In December 2006, the Company purchased packaging and filling equipment from A & M Consultants, a company owned by the spouse of Rajiv Mathur, President and CEO of the Company. The purchase price of the equipment was $133,000 and was payable in 10 days. A finder's fee of $10,000 to A & M Consultants was included in the purchase price of the equipment.

16.  2006 Fourth Quarter Adjustments

      Following is a list of significant fourth quarter adjustments:

      -an additional accrual for $42,000 relating to the environmental cleanup the Company is currently undergoing,

      -a severance accrual for our former CEO for $190,000,

      -a reserve for our Miaj inventory in the amount of $70,000; and

      -the expense of $92,000 of deferred legal fees related to our potential sale-leaseback.

<PAGE>  35

17.  Subsequent Events

      On January 29, 2007, the Company terminated the $1,000,000 line of credit agreement ("Agreement") with Pharmachem Laboratories, Inc. ("Pharmachem"). All monies borrowed under this agreement plus accrued interest was paid to Pharmachem on January 29, 2007.

      On January 30, 2007, IGI, Inc. ("Company) entered into a $1,000,000 secured line of credit agreement ("Credit Agreement") with Pinnacle Mountain Partners, LLC for a term of eighteen months. The Credit Agreement permits the Company to borrow money on the available principal balance, which has not been borrowed by the Company during the term of the Credit Agreement. The Company may also repay the outstanding balance of the Credit Agreement and continue to draw down on the balance. Any principal balance outstanding at the end of the term must be repaid together with interest. Loans under the Credit Agreement bear interest at prime plus 1.5% and are secured by assets of the Company (other than real property). All accrued and unpaid interest is payable monthly in arrears on the first of each month. The Company has borrowed $500,000 against this line of credit as of March 28, 2007. The line of credit is secured by the Company's assets (other than real property).

      On February 6, 2007 the Registrant and Pharmachem Laboratories, Inc.("Pharmachem") entered into a subscription agreement pursuant to which the Registrant agreed to sell to Pharmachem 1,500,000 shares ("Shares") of its common stock, $.01 par value ("Common Stock") at $1 per share for gross proceeds of $1,500,000. Pharmachem was granted certain piggyback registration rights with respect to the shares purchased. This transaction was approved by the American Stock Exchange and shares were issued on March 13, 2007. The Company used the proceeds from this equity investment to repay outstanding debts and accrued interest to Univest Management EPSP, an entity controlled by Frank Gerardi, Chairman of the Board of Directors of the Company. In connection with the transaction, $112,500 was paid to Landmark Financial Corporation ("Landmark"), 22,139 shares of common stock were issued to Landmark and a warrant to purchase 150,000 shares of common stock , expiring March 7, 2009, exercisable at $1.00 per share was issued to Landmark.

<PAGE>  36

IGI, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS REQUIRED TO BE FILED BY ITEM 601
OF REGULATION S-K ([SECTION]229.601)
(3)(a)	Certificate of Incorporation of IGI, Inc., as amended. [Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8, File No. 33-63700, filed June 2, 1993.]
(3)(a)1	Amendment to Certificate of Incorporation of IGI, Inc., [Incorporated by reference to the Proxy Statement filed April 12, 1999.]
(3)(b)	By-laws of IGI, Inc., as amended. [Incorporated by reference to Exhibit 2(b) to the Company's Registration Statement on Form S-18, File No. 002-72262-B, filed May 12, 1981.]
(4)	Specimen stock certificate for shares of Common Stock, par value $.01 per share. [Incorporated by reference to Exhibit 4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, File No. 001-08568, filed March 28, 2001 ("the 2000 Form 10-K").]
(10.1)	IGI, Inc. 1989 Stock Option Plan. [Incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Stockholders held May 11, 1989, File No. 001-08568, filed April 12, 1989.]
(10.2)	IGI, Inc. Non-Qualified Stock Option Plan. [Incorporated by reference to Exhibit 3(k) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File No. 001-08568, filed March 30, 1992 ("the 1991 Form 10-K").]
(10.3)	IGI, Inc. 1991 Stock Option Plan. [Incorporated by reference to the Company's Proxy Statement for the Annual Meeting held May 9, 1991, File No. 001-08568, filed April 5, 1991.]
(10.4)	Amendment No. 1 to IGI, Inc. 1991 Stock Option Plan as approved by Board of Directors on March 11, 1993. [Incorporated by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 ("the 1992 Form 10-K").]
(10.5)	Amendment No. 2 to IGI, Inc. 1991 Stock Option Plan as approved by Board of Directors on March 22, 1995. [Incorporated by reference to the Appendix to the Company's Proxy Statement for the Annual Meeting of Stockholders held May 9, 1995, filed April 14, 1995.]
(10.6)	Amendment No. 3 to IGI, Inc. 1991 Stock Option Plan as approved by Board of Directors on March 19, 1997. [Incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 001-08568, filed August 14, 1997.]
(10.7)	Amendment No. 4 to IGI, Inc. 1991 Stock Option Plan as approved by Board of Directors on March 17, 1998. [Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 001-08568, filed November 6, 1998.]
(10.8)	IGI, Inc. 1998 Director Stock Option Plan as approved by the Board of Directors on October 19, 1998 (number of shares authorized increased to 600,000 pursuant to Proposal 4 of the Proxy Statement dated May 1, 2006). [Incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 001-08568, filed April 12, 1999 ("the 1998 Form 10-K").]
(10.9)	Common Stock Purchase Warrant No. 5 to purchase 150,000 shares of IGI, Inc. Common Stock issued to Fleet Bank, NH on March 11, 1999. [Incorporated by reference to Exhibit 10.40 to the 1998 Form 10-K.]
(10.10)	IGI, Inc. 1999 Incentive Stock Plan [Incorporated by Reference to the Proxy Statement filed April 12, 1999] Amendment (cumulative) to IGI 1999 Incentive Stock Plan [Incorporated by Reference to the Proxy Statement filed May 1, 2006](10.10) 111999 Director Stock Option Plan as amended approved by the Board of Directors on September 15, 1999. [Incorporated by reference to Exhibit 9910.1 to the Company's Registration on Form S-8/A, File No. 333-52312, filed April 25, 2006December 20, 2000.]
(10.11)	Common Stock Purchase Warrant No. 7 to purchase 120,000 shares of IGI, Inc. Common Stock issued to Mellon Bank, N.A. on March 11, 1999. [Incorporated by reference to Exhibit 10.42 to the 1998 Form 10-K.]
(10.12)	Asset Purchase Agreement dated as of June 19, 2000 by and between the Buyer and the Company. [Incorporated by reference to Annex A to the Company's Definitive Proxy Statement on Schedule 14A effective September 1, 2000.]
(10.13)	Certificate of Release and Termination of Contract dated as of March 1, 2001 between Genesis Pharmaceutical, Inc. and Tristrata Technology, Inc. [Incorporated by reference to Exhibit 10.58 to the 2000 Form 10-K.]
(10.14)	Manufacturing and Supply Agreement dated as of February 14, 2001 among IGI, Inc., IGEN, Inc., Immunogenetics, Inc. and Genesis Pharmaceutical, Inc. [Incorporated by reference to Exhibit 10.59 to the 2000 Form 10-K.]
(10.15)	Assignment of Trademark dated as of February 14, 2001 among IGI, Inc., IGEN, Inc, Immunogenetics, Inc. and Genesis Pharmaceutical, Inc. [Incorporated by reference to Exhibit 10.60 to the 2000 Form 10-K.]
(10.16)	Supply Agreement dated as of March 6, 2001 between Corwood Laboratory, Inc. and IGI, Inc. [Incorporated by reference to Exhibit 10.61 to the 2000 Form 10-K.]
(10.17)	License Agreement dated as of March 6, 2001 among IGI, Inc., IGEN, Inc., Immunogenetics, Inc. and its division EVSCO Pharmaceutical and Corwood Laboratory, Inc. [Incorporated by reference to Exhibit 10.62 to the 2000 Form 10-K.]
(10.18)	Employment Agreement between IGI, Inc. and Domenic N. Golato dated as of August 31, 2000. [Incorporated by reference to Exhibit 10.63 to the 2000 Form 10-K.]

<PAGE>  37

(10.19)	IGI, Inc. 1991 Stock Option Plan. [Incorporated by reference to the Company's Proxy Statement for the Annual Meeting held May 9, 1991, File No. 001-08568, filed April 5, 1991.]
(10.20)	Research and Development Agreement dated as of January 2, 2001 between IGI, Inc. and Prime Pharmaceutical Corporation. [Incorporated by reference to Exhibit 10.68 on the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2001, File No. 001-08568, filed on March 15, 2002 ("the 2001 Form 10-K").]
(10.21)	Manufacturing and Supply Agreement dated November 5, 2002 between IGI, Inc. and Desert Whale Jojoba Company, Inc. [Incorporated by reference to Exhibit 10.69 on the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, File No. 001-08568, filed March 10, 2003 ("the 2002 Form 10-K).]
(10.22)	Contract of Sale for Real Estate dated October 21, 2001 between IGI, Inc. and Poultry Investors, LLC. [Incorporated by reference to Exhibit 10.73 to the 2002 Form 10-K]
(10.23)	Addendum dated November 14, 2001 to Contract of Sale for Real Estate dated October 21, 2001 between IGI, Inc. and Poultry Investors, LLC. [Incorporated by reference to Exhibit 10.74 to the 2002 Form 10-K]
(10.24)	Manufacturing and Supply Agreement dated May 31, 2002 between IGI, Inc. and IGEN, Inc. (collectively Suppliers) and Vetoquinol, USA, Inc. (Purchaser). [Incorporated by reference to Exhibit 10.93 to the 2002 Form 10-K]
(10.25)	Technological Rights Agreement dated May 31, 2002 between IGI, Inc. and IGEN, Inc. (collectively Sellers) and Vetoquinol, USA, Inc. (Purchaser). [Incorporated by reference to Exhibit 10.94 to the 2002 Form 10-K]
(10.26)	Supplemental Agreement dated May 31, 2002 between IGI, Inc. (Seller) and Vetoquinol, USA, Inc. (Buyer). [Incorporated by reference to Exhibit 10.95 to the 2002 Form 10-K]
(10.27)	Amendment dated March 19, 2002, to License Agreement by and among Ethicon, Inc. and IGI, Inc., IGEN, Inc. and Immunogenetics, Inc. [Incorporated by reference to Exhibit 10.98 to the 2002 Form 10-K]
(10.28)	Product Development Agreement dated November 10, 2003, between Pure Energy Corporation d/b/a/ Pure Energy of America, Inc. and IGI, Inc. [Incorporated by reference to Exhibit 10.99 on the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, File No. 001-08568, filed April 14, 2004 ("the 2003 Form 10-K).]
(10.29)	Severance Agreement dated effective as of August 15, 2003, between John F. Ambrose and IGI, Inc. [Incorporated by reference to Exhibit 10.100 to the 2003 Form 10-K]
(10.30)	Employment Agreement dated September 26, 2003, between Michael F. Holick, MD, PhD and IGI, Inc. [Incorporated by reference to Exhibit 10.101 to the 2003 Form 10-K]
(10.31)	Severance Agreement dated effective as of January 9, 2004, between Garry Hardwick and IGI, Inc. [Incorporated by reference to Exhibit 10.102 to the 2003 Form 10-K]
(10.32)	License Agreement effective December 24, 2003, by and among Michael F. Holick, MD, PhD, A&D Bioscience, Inc. and IGI, Inc. [Incorporated by reference to Exhibit 10.103 to the 2003 Form 10-K]
(10.33)	License Agreement dated February 9, 2004, between Universal Chemical Technologies, Inc. and IGI, Inc. [Incorporated by reference to Exhibit 10.104 to the 2003 Form 10-K]
(10.34)	Contract for Sale of Real Estate dated October 22, 2003, between CPB, Inc. ("Buyer") and IGI, Inc. ("Seller").[Incorporated by reference to Exhibit 10.105 to the 2003 Form 10-K](10.33) License Agreement by and between Micro-Pak, Inc. (now known as Novavax, Inc.) and IGEN, Inc. effective as of December 13, 1995 [Incorporated by reference to Exhibit (10) (v) to the Company's Annual Report on Form 10-K for the Fiscal year ended December 31, 1995, File No. 001-08568, filed March 29,1996]
(10.35)	Agreement for Development Services dated March 27, 2003, between Chattem, Inc. and IGI, Inc. [Incorporated by reference to Exhibit 10.107 to the 2003 Form 10-K]
(10.36)	Material Transfer Agreement dated December 1, 2003, between The Procter & Gamble Company and IGI, Inc. [Incorporated by reference to Exhibit 10.108 to the 2003 Form 10-K]
(10.37)	Sublicense Agreement between IGI, Inc. and Tarpan Therapeutics, Inc. dated April 19, 2004 [Incorporated by reference to Exhibit 10.109 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, filed May 14, 2004]
(10.38)	Severance agreement between IGI, Inc. and Domenic N. Golato, Chief Financial Officer dated June 30, 2004. [Incorporated by reference to Exhibit 10.110 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed August 13, 2004.]
(10.39)	Sublicense Agreement between IGI, Inc. and University of Massachusetts dated July 27, 2004 [Incorporated by reference to Exhibit 10.111 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed August 13, 2004.]
(10.40)	Amendment of the supply and license agreement between IGI, Inc. and Estee Lauder, Inc. [Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K filed November 24, 2004.]
(10.41)	Secured Promissory Note, dated December 12, 2005 ("Univest Note"), in favor of Univest Management, Inc. EPSP ("Univest"), c/o Frank Gerardi, Trustee (incorporated by reference to Exhibit 10.1 to the Company's 8-K filed on December 16, 2005).
(10.42)	Letter Agreement dated January 30, 2006 between Univest and the Company re: Univest Note [incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on February 3, 2006]

<PAGE>  38

(10.43)	Letter Agreement dated July 21, 2006 between Univest and the Company re: Univest Note [incorporated by reference to Exhibit 99.1 to the Company's Form 8-K filed on July 27, 2006]
(10.44)	Letter Agreement dated October 4, 2006 between Univest and the Company re: Univest Note [incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on October 4, 2006]
(10.45)	Letter Agreement dated December 28, 2006 between Univest and the Company re: Univest Note [incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on December 29, 2006]
(10.46)	Letter Agreement dated January 31, 2007 between Univest and the Company re: Univest Note [incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on February 2, 2007]
(10.47)	Letter Agreement dated March 1, 2007 between Univest and the Company re: Univest Note [incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on March 7, 2007] (10.41) Form of Unit Subscription Agreements entered into on December 15 2005 with respect to sale of units by the Company to Steve Morris, Univest Management, Inc. EPSP the Hager Family Trust and Emil Solomine (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on December 21, 2005).
(10.48)	Form of Common Stock Purchase Warrants with Respect to Unit Subscription Agreement entered into on December 15, 2005 (incorporated by reference to Exhibit 4.2 to the Company's Form 8-K filed on December 21, 2005).
(10.49)	Severance Agreement dated August 10, 2005 between the Company and Frank Gerardi (incorporated by reference to Exhibit 10.113 to the Company's Form 10-Q for the quarter ended June 30, 2005 and filed on August 15, 2005).
(10.50)	Agreement for Purchase and Sale dated November 18, 2005 between IGI, Inc. and Bellevue Properties Development Group, L.L.C. (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed November 23, 2005). (21)
*(10.51)	License Agreement dated October 11, 2006 between IGI, Inc. and DermWoRX Inc.
*(10.52)	Employment Agreement dated November 7, 2006, between Rajiv Mathur and IGI, Inc.
*(10.53)	Loan and Security Agreement dated, November 27, 2006, in favor of Pharmachem Laboratories, Inc.
*(10.54)	Loan and Security Agreement dated, January 29, 2007, in favor of Pinnacle Mountain Partners LLC.
*(10.55)	Form of Unit Subscription Agreement entered into on February 6, 2007 with respect to sale of units by the Company to Pharmachem Laboratories Inc. ("Pharmachem")
*(10.56)	Form of Common Stock Purchase Warrant issued to Landmark Financial Corporation with respect to Unit Subscription Agreement entered into February 6, 2007.
(10.57)	Note dated October 9, 2006 issued to Pharmachem, (incorporated by reference to the Company's Form 8-K filed October 10, 2006)
(10.58)	Mortgage dated October 9, 2006 issued to Pharmachem, (incorporated by reference to the Company's Form 8-K filed October 10, 2006)
(21)	List of Subsidiaries. [Incorporated by reference to Exhibit 21 to the 1999 Form 10-K.]
*(23.1)	Consent of Amper, Politziner & Mattia, P.C.
*(31.1)	Certification of the Chairman and Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*(31.2)	Certification of the Vice President of Finance Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*(32.1)	Certification of the Chairman and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*(32.2)	Certification of the Vice President of Finance Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith.

<PAGE>  39

EX-10

Exhibit 10.51

AGREEMENT

      This Agreement is made this 11th day of October 2006 by and between DermWoRX Incorporated, a Delaware corporation whose offices are located at 934 S. Southlake Drive, Hollywood, Florida 33019 (hereinafter, "DERMWORX") and IGI, Inc., a Delaware corporation whose offices are located at 105 Lincoln Avenue, Buena, New Jersey 08310 ("IGI").

W I T N E S S E T H:

      WHEREAS, DERMWORX has been formed to develop, market and sell dermatological pharmaceuticals and cosmeceuticals ("Dermatological Drugs"), and

      WHEREAS, IGI has (i) developed and owns rights to certain drug delivery technology, or (ii) is an exclusive licensee from Novavax, Inc. ("Novavax") of a certain Novasome® nanotechnology drug delivery Technology (i and ii are hereinafter collectively the "Drug Delivery Technology") and (iii) is developing and/or is licensing for its use and further licensing, additional Drug Delivery Technologies, and

      WHEREAS, DERMWORX desires that IGI develop for it Initial DERMWORX Products that utilize the IGI Drug Delivery Technology and that IGI sell its Vitamin C Serum to DERMWORX; and

      WHEREAS, DERMWORX will supply IGI with Benzoyl Peroxide in a form compatible with the Novasome® nanotechnology to produce an Initial DERMWORX Product; and

      WHEREAS, IGI possesses the facilities, equipment, technologies, intellectual property rights (either through direct ownership or license), and the technical know-how to produce such products for DERMWORX; and

      WHEREAS, DERMWORX possesses the expertise and know how to perform clinical testing and to determine whether to file for obtain FDA and equivalent foreign government approvals that may be required to market the Initial DERMWORX Products and other Dermatological Drugs utilizing the Drug Delivery Technology; and

<PAGE>  1

      WHEREAS, IGI has developed one Salicylic Acne Product utilizing the Drug Delivery Technology, determined by DERMWORX to be suitable for the treatment of acne; and

      WHEREAS, DERMWORX desires exclusive worldwide marketing and intellectual property rights to the Initial DERMWORX Products and any Potential Products that may be developed for it by IGI; and

      WHEREAS, as a condition to give the exclusive rights DERMWORX desires, IGI is to be the exclusive manufacturer of the Initial DERMWORX Products and Potential Products that IGI may develop for DERMWORX, in the IGI facilities and if not, so long as IGI contracts with third parties whose facilities are at a suitable level of FDA approval as IGI may designate, and at no additional cost to DERMWORX; and

      WHEREAS, DERMWORX and IGI desire to set forth and define their relationship on the subject matter contained herein, including but not limited to consideration, equity and Funding, and their respective rights, benefits, duties and liabilities.

      NOW, THEREFORE, in consideration of the mutual promises contained herein, the payment of $100.00 dollars by each to the other the acknowledgment of which is evidenced by the full execution hereof, and other good and valuable consideration, it is hereby agreed as follows:

            1.  DEFINITIONS. In addition to terms elsewhere defined herein:

            1.1  "Active Ingredient(s)" shall mean the dermatologically active ingredients (A) salicylic acid (C₇H₆O₃) ("Salicylic Acid") and (B) benzoyl peroxide ((C₆H₅CO)₂O₂ or C₁₄H₁₀O₄ ) in a molecule compatible with the Technology ("Benzoyl Peroxide" or "BPO").

            1.2  "Affiliate" shall mean at the time of determination (A) any person or entity which is directly or indirectly controlled by either party hereto; (B) any person or entity which directly or indirectly controls either party hereto; or (C) any person or entity which is under the direct or indirect control of any such person.

            1.3  "Agreement" shall mean this Agreement for certain licensed rights and

<PAGE>  2

manufacturing services, as may be amended from time to time in accordance with the provisions hereof.

            1.4  "Best Efforts" shall mean the efforts that a prudent person or entity desiring to achieve a particular result would use in good faith in order to ensure that such objective is achieved as expeditiously as possible, provided however that the effort does not require a material expenditure of funds or incurrence of a material liability on the part of the obligated party or to act in a manner that would be contrary to normal commercial practices to accomplish the objective.

            1.5  "Confidential Information" shall mean all proprietary information and materials (whether or not patentable), disclosed by one party to another party, irrespective of the manner in which the parties disclosed such information, in furtherance of this Agreement, including, but not limited to: substances, formulations, techniques, methodology, equipment, data, reports, correspondence, know how, manufacturing documentation and sources of supply as well as the existence and status of discussions among the parties concerning or relating to this Agreement, and the Initial DERMWORX Products or Potential Products.

            1.6  "Control" shall mean ownership of greater than fifty percent (50%) of the voting stock or other voting interests of a person or entity.

            1.7  "Development Project" shall mean a potential IGI project compensated by DERMWORX to develop Dermatological Drugs other than the Initial DERMWORX Products pursuant to a Product Development Agreement.

            1.8  "Effective Date" shall mean the date of this Agreement as stated above.

            1.9  "FDA" shall mean the United States Food and Drug Administration and all agencies under its direct control, or any successor organization.

            1.10  "Feasibility Study" shall mean a preliminary determination by IGI whether a molecule (other than Salicylic Acid) proposed by DERMWORX, is compatible with the Technology, together with the production of a small sample for DERMWORX's evaluation.

<PAGE>  3

            1.11  "FFDCA" shall mean the Federal Food, Drug and Cosmetic Act of 1938, as amended from time to time, and the regulations promulgated pursuant thereto or any similar statute adopted to replace such act.

            1.12  "Field" shall mean Dermatological Drugs containing the Active Ingredients for use in the Initial DERMWORX Products covered by this Agreement,

            1.13  "Funding" shall mean advance payments from a marketing strategic partner or a first round of financing received by DERMWORX to be paid to IGI in installments of (A) $250,000 and (B) $750,000.

            1.14  "Funding Date(s)" shall mean (A) November 30, 2006 for the amount specified in Section 1.13(A); and (B) February 15, 2007 for the amount specified in Section 1.13(B), or such actual, earlier date as DERMWORX transfers Funding to IGI.

            1.15  "Improvements" shall mean all improvements, extensions, modifications or alterations to the Initial DERMWORX Products, Potential Product(s) or Vitamin C Serum made or developed during the Term of this Agreement.

            1.16  "Initial DERMWORX Products" shall mean five products not requiring FDA approval, (A) four (4) Salicylic Acid formulations with strengths between two (2%) percent and ten (10%) percent solution for therapeutic use in the treatment of (i) acne, (ii) seborrheic dermatitis, (iii) psoriasis, or (iv) tinea versicolor; and (B) one (1) Benzoyl Peroxide formulation for therapeutic use in the treatment of acne ("BPO Acne Product").

            1.17  "Launch" shall mean the date of first commercial shipment of an Initial DERMWORX Product or Potential Product by DERMWORX, its Affiliates, or sublicensees to third-party customers in any country.

            1.18  "Potential Product" shall mean Dermatological Drugs using the Drug Delivery Technology other than the Initial DERMWORX Products that IGI may be desirous and capable of producing and would not violate the terms of any agreement with a third party to which IGI is bound.

<PAGE>  4

which the parties may elect to develop under a Product Development Agreement, the rights to which will be granted by amendment to this Agreement. For avoidance of doubt, no Dermatological Drug shall be a Potential Product until and unless the parties agree, the definition of Potential Products is included herein merely to indicate that if the parties do agree to develop a Dermatological Drug into a Potential Product, they may use the terms established herein for Initial DERMWORX Products to reduce paperwork by amending this Agreement.

            1.19  "Product Development Agreement" shall mean separate agreements in substantially the form annexed hereto as Exhibit 1 that shall be entered into by and between IGI and DERMWORX specifying among other items the budget, scope, feasibility, schedule, terms and conditions, pricing and other particulars of projects by IGI to develop formulations for Initial DERMWORX Products (other than the Salicylic Acne Product) or for Potential Products for DERMWORX.

            1.20  "Salicylic Acne Product" shall mean the Initial DERMWORX Product referenced in 1.16(A)(i) of this Section, more specifically defined as IGI formulation code RL1109B.

            1.21  "Specifications" shall mean the product specifications requested by DERMWORX from IGI for manufacturing the Initial DERMWORX Products and Potential Products and accepted by IGI and modifications to the Specifications that may be mutually agreed upon in writing by the parties.

            1.22  "Subsidiaries" shall mean any direct and indirect subsidiaries of a party hereto that exists of may in the future exist.

            1.23  "Technology" shall mean IGI's production technology, including, without limitation, the patented Novasome® encapsulation nanotechnology and processes.

            1.24  "Vitamin C Serum" shall mean IGI's proprietary 10% Pure C Serum.

<PAGE>  5

            2.  GRANT

                  On the Effective Date of this Agreement, the parties make the following grants:

            2.1  IGI hereby grants to DERMWORX a license and sublicense to its Drug Delivery Technology (collectively "DERMWORX License") and DERMWORX accepts the License, subject to the terms and conditions of this Agreement, which License shall be exclusive, worldwide, royalty bearing, for DERMWORX to use, sell, offer for sale, distribute, have sold, import, or otherwise exploit the Initial DERMWORX Products in the Field during the term of this Agreement,, and rights to assign and sublicense, for the term of this Agreement unless sooner terminated as hereinafter provided (the license and sub-license are hereinafter collectively referred to as the "DERMWORX License"). Subject to the provisions of Section 2.5 and Article 9 of this Agreement, the DERMWORX License shall have a term equal to the life of the Patents and the IGI license covering the Drug Delivery Technology.

            2.2  DERMWORX hereby agrees to grant to IGI a nonexclusive, irrevocable, royalty-free license for any purpose under any Improvement, any Patent, Patent Application, Use Patent or Patented Dermatological Drugs, disclosing such Improvement, and any Improvement know-how. DERMWORX shall disclose any such Improvement to IGI in writing within thirty (30) days following its actual or constructive reduction to practice.

            2.3  IGI and DERMWORX do not grant any right or license to the other except those expressly provided herein, and no other grant or license is to be implied by or inferred from any provision hereof.

            2.4  For the avoidance of doubt, this Agreement places no restriction on DERMWORX's right to develop, market, sell, and distribute any other drug or product outside the Field in any geographic area of the world, to the extent that such activity does not require any of the rights granted under this Agreement or rights reserved to IGI.

<PAGE>  6

            2.5  The DERMWORX License shall have a term equal to the life of the Patents covering the Drug Delivery Technology, subject to the following:

            (a)  If no Funding has been tendered by DERMWORX to IGI by the Funding Date specified in Section 1.14(A), this Agreement and the DERMWORX License granted herein shall be void and the parties shall be without any liability to the other;

            (b)  If DERMWORX tenders to IGI the Funding of Section 1.13(A) by the Funding Date of Section 1.14(A), but not the Funding of Section 1.13(B) by the Funding Date of Section 1.14(B), then the Field of the DERMWORX License granted in Section 2.1 shall be amended and strictly limited to the Salicylic Acne Product;

            (c)  If this Agreement is terminated pursuant to the termination provisions herein, the DERMWORX License shall terminate as of the Termination Date;

            (d)  If DERMWORX has not met the minimum purchase provision of Section 9.1 of this Agreement, then the nonexclusivity provisions of that Section shall apply.

            3.  FDA AND PATENT APPROVALS.

            3.1  DERMWORX will clinically test, if deemed necessary each Initial DERMWORX Product and Potential Product for safety and effectiveness, after which DERMWORX, if it deems necessary, will submit the results to the FDA. DERMWORX has determined that the Initial DERMWORX Products and Vitamin C Serum do not require FDA approval pursuant to the current FDA rules and regulations in effect as of the Effective Date.

            3.2  Upon FDA approval of a Potential Product, or if approval is not deemed necessary, DERMWORX shall have the exclusive right throughout the world, including to the exclusion of IGI, to make commercially reasonable efforts, to market, sell and distribute the Initial DERMWORX Products or any Potential Products, even to the exclusion of IGI.

<PAGE>  7

            3.3  DERMWORX shall have the right to seek worldwide patent protection for the Initial DERMWORX Products and any Potential Products conceived and developed pursuant to this Agreement. The patent applications for the Initial DERMWORX Products and any Potential Products ("Patent Applications") will first be filed in the United States Patent and Trademark Office ("USPTO"), which Patent Applications shall be made in the individual name(s) of the actual inventor(s), but state that DERMWORX is the assignee thereof. The Patent Applications, including but not limited to the structure and wording of the claims of each of the Initial DERMWORX Products and any Potential Products, shall be prepared by DERMWORX, and the patent prosecution shall be the responsibility of DERMWORX, with all costs borne solely by DERMWORX. Upon any and all patents being issued by the USPTO, pursuant to a filed Patent Application ("Patented Dermatological Drugs"), then the patents for all such Patented Dermatological Drugs shall be assigned to DERMWORX by the inventors assignments of rights theretofore executed. DERMWORX shall apply and prepare use patents ("Use Patents") for such Patented Dermatological Drugs, for DERMWORX's exclusive use, which Use Patent(s) when issued will be assigned to DERMWORX, by the inventors assignments theretofore executed. Thereafter and in addition, and within the time period permitted by Treaty and Convention DERMWORX shall have the right to seek appropriate Patent Applications to be filed in such countries of the world determined by DERMWORX, the cost for which shall be borne solely by DERMWORX.

            3.4  The foregoing patent-related activities shall be performed in DERMWORX's discretion and its sole cost.

            3.5  IGI will provide reasonable assistance and cooperation to DERMWORX in the processes of clinical testing, securing FDA approval where necessary, and in Patent Applications, reimburseable to IGI within thirty (30) days on the basis of IGI's then standard consulting rates. IGI may require third-parties, if any, selected by DERMWORX for testing and approval purposes, to enter

<PAGE>  8

into a nondisclosure agreement between IGI and the third parties prior to providing such assistance or cooperation.

            4.  DEVELOPMENT OF PRODUCTS

            4.1  The parties acknowledge and agree that (a) IGI has developed at its own expense the Salicylic Acne Product determined by DERMWORX to be suitable for the treatment of acne, (b) all Initial DERMWORX Products containing Salicylic Acid are compatible, and (c) no Feasibility Study is required for any Initial DERMWORX Product containing Salicylic Acid.

            4.2.  DERMWORX shall pay IGI for development of the Salicylic Acne Product in the Funding amount stated in Section 1.13(A) not later than the Funding Date in Section 1.14(A).

            4.3  The parties may elect, but are not obligated hereunder, to enter into (i) Feasibility Studies, other than for the BPO Acne Product; (ii) Product Development Agreements, other than for the Initial DERMWORX Products except the Salicylic Acne Product; or (ii) Development Projects in accordance with this Agreement. For avoidance of doubt, in the event that DERMWORX does not tender to IGI the Funding of Section 1.13(B) by the Funding Date of Section 1.14(B) of this Agreement, IGI shall be under no further obligation to perform Feasibility Studies or Product Development Agreements for DERMWORX and may develop, market and license any Initial DERMWORX Product, Potential Product or Dermatological Drug to any party, excepting only the Salicylic Acne Product if DERMWORX has complied with Section 4.2.

            4.4  For any Feasibility Study DERMWORX may propose, IGI shall provide DERMWORX with a quotation and DERMWORX may elect to proceed by full payment in advance or decline to proceed by written notice to IGI. For Development Projects which the parties may elect to develop, the parties shall enter into a Product Development Agreement for each such Feasibility Study or Development Project. The quoted costs of Feasibility Studies payable to IGI by DERMWORX are anticipated by IGI to be in the range of up to $10,000 for each Feasibility Study.

<PAGE>  9

            4.5  Upon the tender by DERMWORX to IGI of the Funding stated in Section 1.13(B), not later than upon the Funding Date stated in Section 1.14(b); the parties will enter into up to four (4) Project Development Agreements for Initial DERMWORX Products other than the Salicylic Acne Product within the period ending eighteen (18) months from the Effective Date of this Agreement, or as many Project Development Agreements as the Funding of Section 1.13(B) will support. The charges for Product Development Agreements for Initial DERMWORX Products other than the Salicylic Acne Product payable to IGI by DERMWORX are anticipated by IGI to be in the range of from $100,000 up to $250,000 each. After the actual cost of the four (4) Project Development Agreements for the Initial DERMWORX Products is determined, then DERMWORX shall be either (i) given a credit for any surplus money not used in the Project Developments, which credit shall be applied by IGI as DERMWORX determines, provided, however, that DERMWORX shall have no right of refund; or (ii) be billed for any costs in excess of the money paid pursuant to section 1.13(A) and 1.13(B)

            4.6  The commencement of Feasibility Studies and Project Development Agreements for Initial DERMWORX Products other than the Salicylic Acne Product shall be preconditioned on (A) receipt by DERMWORX of the Funding of Section 1.13(B) by the Funding Date of Section 1.14(b), and completion of Feasibility Studies and Project Development Agreements by IGI within the quotation and time period as provided in Section 4.4.. DERMWORX may provide ingredients to IGI for Feasibility Studies.

            4.7  The parties expressly acknowledge and agree that DERMWORX shall be responsible to supply IGI with Benzoyl Peroxide in a form compatible with the Technology for a Feasibility Study for the BPO Acne Product and in conformance with the Specifications to be developed for the BPO Acne Product contemplated in Section 1.16(B) of this Agreement.

            4.8  All costs for the development and manufacturing of the Initial DERMWORX Products and Potential Products subsequent to the Feasibility Studies shall be forecast in a Product

<PAGE>  10

Development Agreement and defined in a further amendment to this Agreement.

            4.9  Nothing herein shall be construed as a representation or warranty by IGI that any Initial DERMWORX Product, except for the Salicylic Acid Product, or any Potential Product can or will be developed using the Drug Delivery Technology. IGI shall have the right, in its sole discretion, to decline to continue any Feasibility Study or to enter into a Product Development Agreement for any Initial DERMWORX Product or Potential Product, if IGI determines that the Initial DERMWORX Product or Potential Product that was the subject of the Feasibility Study is unsuitable for production.

            4.10  The Launch by DERMWORX of (a) the Salicylic Acne Product shall occur within five (5) months of the Funding Date of Section 1.14(a); (b) any other Initial DERMWORX Product or Potential Product must occur within six (6) months of the conclusion of the Product Development Agreement for that Initial DERMWORX Product or Potential Product.

            4.11  Vitamin C Ten (10%) Serum.  IGI shall sell to DERMWORX its Vitamin C Serum at an initial price as set forth in Section 8.2.1 of this Agreement, to be sold and marketed by DERMWORX on a non exclusive basis to dermatologists, plastic surgeons, pharmacists and other health professionals, under a DERMWORX-selected trade name.

            5.  ROYALTY PAYMENTS.

            5.1  Upon DERMWORX effecting sales of the Initial DERMWORX Products (including Potential Products for purposes of this Article 5), IGI shall be paid a seven (7%) percent royalty on Net Sales ("Royalty").

            5.2  Net Sales. "Net Sales" shall mean the total gross sales (number of units shipped times the invoiced price per unit) to third parties representing sales invoiced by DERMWORX and its Affiliates and their sublicensees (including sublicensees of any sublicensee) of Initial DERMWORX Products or Potential Products less deductions for the following to the extent

<PAGE>  11

actually paid or allowed:

            5.2.1  sales and excise taxes and duties (including import duties) paid or allowed by a selling party and any other governmental charges imposed upon the sale of an Initial DERMWORX Product or Potential Product;

            5.2.2  normal and customary trade, quantity and cash discounts (up to the amount normal and customary in a given country for early payment of invoices) and rebates, chargebacks and administrative fees (including rebates to social and welfare systems);

            5.2.3  allowances, chargebacks and credits to third parties on account of rejected, damaged, outdated, returned, withdrawn or recalled Initial DERMWORX Products Potential Products or on account of retroactive price reductions affecting the Initial DERMWORX Products or Potential Products;

            5.2.4  The calculation of Net Sales shall be made in accordance with generally accepted accounting principles applicable to the locality where the invoices are prepared and consistently applied.

            5.2.5  Sales between DERMWORX and its Affiliates and/or their sublicensees shall be excluded from the computation of Net Sales, but Net Sales shall include the first sales to third parties by any such Affiliates and their sublicensees. The supply of the Initial DERMWORX Products and Potential Products, as commercial samples or for use in clinical studies shall not be included within the computation of Net Sales provided such items are provided without consideration. Where (i) an Initial DERMWORX Product or Potential Product is sold by DERMWORX or an Affiliate or their sublicensees as one of a number of items without a separate price; or (ii) the consideration for an Initial DERMWORX Product or Potential Product shall include any non-cash element; or (iii) an Initial DERMWORX Product or Potential Product (other than commercial samples for which no payment is made by the receivi ng party) shall be transferred by DERMWORX or an Affiliate or their sublicensees in any manner other than an invoiced sale, the Net Sales applicable to any such transaction shall be

<PAGE>  12

deemed to be DERMWORX's average Net Sales price for the applicable quantity of such Initial DERMWORX Products or Potential Product at that time.

            5.3  Royalty Reports, Accounting and Exchange Rates. During the term of this Agreement following the Launch of an Initial DERMWORX Product or a Potential Product in any country, DERMWORX shall furnish to IGI a written report by calendar quarter showing in reasonably specific detail, on a country-by-country basis, (a) the total number of units of the Initial DERMWORX Products or Potential Products sold; (b) the Net Sales on an Initial DERMWORX Products or a Potential Product, on a product by product basis (including the detailed calculation of the deductions from gross sales of the Initial DERMWORX Products or Potential Products in arriving at Net Sales); (c) the calculation of the royalties payable pursuant to section 5.1 in United States dollars which shall have accrued hereunder based upon Net Sales of each of the Initial DERMWORX Products and Potential Products, incl uding a detailed calculation showing the application of the applicable royalty rates under section 5.1 to the aggregate Net Sales for the Initial DERMWORX Products and Potential Products; (d) the withholding taxes, if any, required by law to be deducted with respect to such royalties and the amount paid to the appropriate governmental authority with respect to such royalties; (e) the date of Launch of each of the Initial DERMWORX Products and Potential Products in each country in the country during the reporting period; and (f) the exchange rates used in determining the amount of United States dollars. With respect to sales of any of the Initial DERMWORX Products and Potential Products invoiced in United States dollars, the Net Sales and royalties and other payments payable hereunder shall be expressed in United States dollars. With respect to sales of any Initial DERMWORX Products and Potential Products invoiced in a currency other than United States dollars, the Net Sales and royalties and other payments p ayable hereunder with respect to such Initial DERMWORX Products and Potential Products shall be expressed in the domestic currency of the Party making the sale together with the United States dollar equivalent of the royalty payable, and such exchange shall be calculated pursuant to Section 5.6 of this Article.

<PAGE>  13

Reports shall be due on the thirtieth (30th) day following the close of each calendar quarter.

            5.4  IGI Audit Rights.

            5.4.1  DERMWORX shall maintain, and DERMWORX shall require its Affiliates and each of their sublicensees to maintain, at their respective offices accurate and complete books and records of the Net Sales of each of the Initial DERMWORX Products or Potential Products consistent with sound business and accounting practices and in such form and in such detail as to enable DERMWORX, its Affiliates and sublicensees to verify the royalties payable to IGI pursuant to section 5.1. Upon the written request of IGI, but not more than once in each calendar year, DERMWORX, its Affiliates and sublicensees shall permit an independent certified public accounting firm selected by IGI or such third party and reasonably acceptable to DERMWORX, at IGI's expense, on reasonable notice to have access during normal business hours to such of the records of DERMWORX, its Affiliates and sublicensees as m ay be reasonably necessary to verify the accuracy of the royalty reports hereunder for any year ending not more than twenty four (24) months prior to the date of such request. The IGI designated certified public accounting firm shall execute such confidentiality agreements with respect to such access as DERMWORX, its Affiliates and sublicensees shall reasonably request.

            5.4.2  If such accounting firm concludes that additional royalties were owed or that royalties were overpaid during such period, DERMWORX shall pay the additional royalties or IGI shall credit or pay DERMWORX the overage, in each case with interest computed at the London Interbank Offering Rate of interest plus two percent (2%), as reported by The Wall Street Journal for the applicable payment date, or if not so published on such date, as published in The Wall Street Journal for the next business day, within thirty (30) days of the date IGI or the Third Party delivers to DERMWORX such accounting firm's written report so concluding. The fees charged by such accounting firm shall be paid by IGI, provided, however, that if the audit discloses that the royalties payable by DERMWORX for the audited period are more than one hundred five percent (105%) of

<PAGE>  14

the royalties actually paid for such period, then DERMWORX shall pay the reasonable fees and expenses charged by such accounting firm.

            5.5  Confidential Financial Information. Each party shall treat all financial information subject to review under this Article 5 as confidential, and shall cause its accounting firm to retain all such financial information in confidence.

            5.6  Payment; Exchange Rates. All payments payable pursuant to this Agreement shall be made in United States dollars and all royalty payments shall be paid on a country-by-country and product-by-product basis not later than thirty (30) days from the end of each calendar quarter for Net Sales of each Initial DERMWORX Products and Potential Products in the country. With respect to payments to be made which are based in a currency other than United States dollars, conversion from such currency to United States dollars shall be determined based on the average of the U.S. dollar equivalent exchange rate as published in The Wall Street Journal for the first and last business day for such calendar quarter.

            5.7.  Best Efforts.  DERMWORX shall use its Best Efforts to market and effectuate sales of Initial DERMWORX Products or Potential Products for the objectives of maximizing revenues for DERMWORX and Royalties for IGI.

            6.  ISSUANCE OF SHARES OF STOCK; TRANSFER OF STOCK; BOARD.

            6.1  DERMWORX Shares to IGI. Upon the execution of this Agreement, IGI shall be issued 1,630,976 shares of DERMWORX stock ("DERMWORX Shares") in partial consideration for its (i) participation in the development of the Initial DERMWORX Products and any Potential Products, (ii) the sublicense and related rights to IGI's applicable licensed patents rights, and of the Initial DERMWORX Products and Potential Products that may be developed in accordance this Agreement, so that after the Effective Date of this Agreement, IGI shall have been issued nineteen and nine-tenths (%) percent of the then issued and outstanding shares of Stock of

<PAGE>  15

DERMWORX.

            6.2.  Dilution.

            6.2.1  In the event (a) DERMWORX creates an Employee Stock option Plan or similar incentive program (collectively "ESOP Program"), or (b) DERMWORX obtains financing by (i) the sale of equity of DERMWORX, or (ii) any other transaction which yields funds to DERMWORX who issues equity for such funds (collectively "Financing"), then the dilution from such ESOP Program, or Financing shall be proportionate between all stockholders of record on the dilution date fixed by the Board of DERMWORX.

            6.3  Board of Directors.  IGI shall have the right, exercisable at any time and from time to time, to appoint one person to DERMWORX's Board of Directors.

            7,  MANUFACTURE OF PRODUCTS

            7.1   Grant of Exclusive Manufacturing Rights. During the term of this Agreement, IGI, subject to certain conditions herein provided for, shall have the exclusive right to manufacture the Initial DERMWORX Products and Potential Products. DERMWORX hereby grants a nonexclusive, world-wide, royalty-free, fully, paid-up, revocable license in and to all intellectual property rights it may now or in the future possess (including all patent, copyright, trade secret and know-how/show-how rights) that may be necessary for the purpose of manufacturing the Initial DERMWORX Products and Potential Products at the request of DERMWORX. Except as provided in Section 9.2.2 of this Agreement, during the term of this Agreement, DERMWORX shall not enter into any agreement or other arrangement with any person or entity other than IGI for the manufacture of the Initial DERMWORX Products and Potential Products, without the express prior written consent of IGI, which consent may be granted or withheld in IGI's sole discretion; provided, however, that in the event that IGI's production facility in Buena, New Jersey ("IGI Production Facility") does not have FDA approval to produce an Initial DERMWORX Product or Potential Product, IGI shall with

<PAGE>  16

DERMWORX's cooperation locate and equip a facility with the requisite FDA approval to produce same pursuant to terms to be agreed by amendment to this Agreement.

            7.2  Agreement Not to Manufacture or Sell Products. Subject to the terms of this Agreement, IGI shall not during the term of this Agreement manufacture or sell the Initial DERMWORX Products or Potential Products on its own behalf or for any third party or entity other than DERMWORX, without the express prior written consent of DERMWORX, which consent may be granted or withheld in DERMWORX's sole discretion.

            7.3  Raw Materials and Active Ingredients.

            7.3.1  Substitution of Non-Active Ingredients. IGI shall have the right to substitute any raw materials that could be substituted in the Salicylic Acne Product or Initial DERMWORX Products or Potential Products with other raw materials or raw materials from a different vendor, except for Active Ingredient(s), provided that these are substantially equivalent to the raw materials being replaced, upon the prior written notice to DERMWORX, and the written consent of DERMWORX to any such substitution. The parties shall cooperate promptly and in good faith to reach a mutual agreement as to the specific raw materials to be substituted.

            7.3.2  DERMWORX Supply of Benzoyl Peroxide.

            (i)  DERMWORX shall supply IGI with an initial shipment of compatible BPO within three (3) months of the conclusion of the Product Development Agreement for the BPO Acne Product. In accordance with Section 4.6 of this Agreement, all BPO shipped by DERMWORX to IGI under this Agreement shall be accompanied by and delivered with a certificate of analysis and expiration date.

            (ii)  Risk of loss to any and all BPO shall not pass to IGI, and shall remain with DERMWORX, until such time as IGI receives such shipment of BPO. DERMWORX shall not ship to IGI any BPO in amounts exceeding that which is necessary for production of the BPO Acne Product or Potential Product containing BPO to which the shipment relates (hereinafter "Excess

<PAGE>  17

BPO"). In the event that DERMWORX ships any Excess BPO to IGI, the title to all such Excess BPO shall at all times remain with DERMWORX.

            (iii)  DERMWORX shall be responsible for any and all costs and expenses of return shipment for any and all Excess BPO and for any and all incompatible, damaged, inferior, non-conforming and/or otherwise defective BPO rejected by IGI, except that any and all costs and expenses associated with any BPO damaged or defective as a result of negligence on the part of the IGI will be the sole responsibility of IGI.

            (iv)  All shipments of BPO shall be sent to the IGI Production Facility or such other address as IGI may provide to DERMWORX.

            (v)  At least fifteen (15) calendar days prior to any shipment of BPO hereunder, DERMWORX shall provide the IGI with a written purchase order for each shipment ("Purchase Order"), which Purchase Order shall specify the quantity and type of BPO for the BPO Acne Product or Potential Product containing BPO, the shipment date and the date that the shipment is expected to arrive at IGI's Production Facility.

            (vi)  IGI agrees to inspect all shipments of BPO upon receipt from DERMWORX and to notify DERMWORX within twenty-four (24) business hours of receipt of shipment of the BPO if any of the BPO received are damaged, or without container seals or proper labeling, and to report all damages and make notations on shipping documents so as to assist DERMWORX with filing any and all damaged freight claims with common carriers.

            7.4  Manufacturing Warranties. IGI warrants that the Initial DERMWORX Products and Potential Products it develops and manufactures for DERMWORX under this Agreement will, at the time of shipment or delivery:

            7.4.1  conform to the Specifications;

            7.4.2  be merchantable, of good material and workmanship, and free from defects;

            7.4.3  comply at all times with all stipulations, representations, and certificates

<PAGE>  18

required by, all applicable governmental agencies, executive orders, federal, state, municipal, and local laws and rules, orders, requirements, and regulations applicable to IGI;

            7.4.4  not be adulterated or misbranded within the meaning of the FFDCA or any other federal or state law.

            7.4.5  IGI EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES INCLUDING WITHOUT LIMITATION FITNESS FOR A PARTICULAR PURPOSE, except for the warranty of merchantability.

            7.5  Quality Assurance.

            7.5.1  IGI shall retain for three (3) years from production a representative sample or samples and associated documentation from each IGI's lot of ingredients used in the manufacture of the Initial DERMWORX Products and Potential Products, or for the period required by applicable FDA regulations, if longer than three (3) years. DERMWORX shall reserve the right, upon prior request and subject to reasonable notice, to review, at reasonable business hours, all ingredients, packaging components and certificates of analysis and all subsequent and supplemental analytical, biological and physical testing, including assay results, laboratory records and raw data completed by IGI relating to the manufacture of the Initial DERMWORX Products and Potential Products.

            7.5.2  Upon reasonable notice, IGI will allow representatives of DERMWORX to inspect IGI's production facilities and documentations pertaining to the manufacturing of the Initial DERMWORX Products and Potential Product(s) during normal business hours where and at such times as the Initial DERMWORX Products and Potential Products is manufactured, packaged, warehoused or tested for DERMWORX.

            7.6  Production, Packaging and Shipping.

            7.6.1  IGI shall produce the Initial DERMWORX Products and Potential Products specified in the applicable DERMWORX Purchase Order in accordance with the Specifications, packaged in bulk, or in packages ready-for-sale ("Finished Goods") as specified in DERMWORX

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Purchase Orders, and ready for shipment to DERMWORX or to such location as DERMWORX may direct. In the event a DERMWORX Purchase Order specifies that IGI shipped Finished Goods, then IGI shall provide DERMWORX with bulk and Finished Goods prices for the specific Finished Goods (e.g., DERMWORX-supplied containers, luxury packaging, third-party fulfillment, etc.) specified by DERMWORX. Either party may reject a Purchase Order based upon the type or price of Finished Goods specified. The parties shall cooperate with each other in scheduling production and shipments to facilitate the purposes of this Agreement, including without limitation to accommodate reasonable amendments to Purchase Order terms.

            7.6.2  DERMWORX may at any time request that IGI make changes in specifications as to any Initial DERMWORX Products and Potential Products. If agreed by IGI, any differences in price or time for performance resulting from such changes shall be equitably adjusted and this Agreement shall be modified in writing accordingly.

            7.6.3   Upon completion of the manufacture of the Initial DERMWORX Products and Potential Products, IGI shall (a) notify DERMWORX in writing of such completion, and (b) ship the Initial DERMWORX Products and Potential Products to DERMWORX F.O.B. Buena, New Jersey in a manner directed in writing by DERMWORX. The risk of loss and title to any and all of such Initial DERMWORX Products and Potential Products shall pass to DERMWORX immediately upon IGI's delivery of the Initial DERMWORX Products and Potential Products to the shipment carrier as arranged and designated by DERMWORX for transport to DERMWORX's facility located at 934 S. Southlake Drive, Hollywood, Florida 33019, or such other address as DERMWORX may provide IGI in writing in accordance with the Notice provisions of this Agreement. (hereinafter "DERMWORX's Facility").

            7.6.4  DERMWORX shall be responsible for any and all costs and expenses for shipping and/or otherwise transporting all Initial DERMWORX Products and Potential Products ordered by DERMWORX hereunder from IGI's production facility to DERMWORX's Facility for

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delivery thereof.

            7.7  Discontinuance of Sale of Initial DERMWORX Products and Potential Products. Subject to Section 9.1 of this Agreement, DERMWORX shall have the right to discontinue use of any of the Initial DERMWORX Products and Potential Products, in which case, DERMWORX will be liable for all raw materials and containers purchased by IGI at IGI's actual cost, work-in-process and finished product produced by IGI as ordered pursuant to DERMWORX's open Purchase Orders for the Initial DERMWORX Product(s) and Potential Product(s). In the event that DERMWORX does not provide Purchase Order(s) for the minimum purchase quantity or purchase an extension of exclusivity for any Initial DERMWORX Product or Potential Product within the time allowed under Section 9.1 of this Agreement, then the nonexclusivity provisions of that Section of shall apply.

            8.  PAYMENTS AND PRICES.

            8.1   Terms. IGI shall submit written invoices to DERMWORX specifying the amounts due for all Initial DERMWORX Products and Potential Products produced by IGI and shipped to DERMWORX under this Agreement. Except as provided in Section 9.3 of this Agreement, all invoices from IGI shall be due and payable thirty (30) calendar days after IGI manufactures and packages the Initial DERMWORX Products and Potential Product(s) for shipment to the consignee designated by DERMWORX, to which an invoice pertains. In the event DERMWORX fails to pay three consecutive invoices in a timely manner, IGI reserves the right to require payment from DERMWORX upon delivery to DERMWORX (COD) or before shipment to DERMWORX's consignee (CBD) of any and all shipments of Initial DERMWORX Products and Potential Products thereafter made under this Agreement.

            8.2  Prices.

            8.2.1  The price terms to DERMWORX for production by IGI of the Salicylic Acne

<PAGE>  21

Product and Vitamin C Serum for the initial term is set forth in Schedule B annexed hereto.

            8.2.2  The charges for other Initial DERMWORX Products and Potential Products will be determined by the parties in the course of a Product Development Agreement and set forth same in separate Schedules.

            8.3  Raw Materials and PPI Price Adjustments. The price terms for the Salicylic Acne Product and Vitamin C Serum shall be fixed through the first anniversary of the Effective Date and for other Initial DERMWORX Products and Potential Products from the price established in the Product Development Agreement for each such Initial DERMWORX Products and Potential Product through the first anniversary of the Launch of that Initial DERMWORX Products or Potential Product ("Initial Term"). DERMWORX and IGI agree to implement annual minimum purchase requirements, except for the Vitamin C Serum, and adjustments to the prices for the Initial Term during the entire term of this Agreement upon sixty (60) days' prior written notice, to reflect.

            8.3.1   actual increases or decreases in the cost of raw materials used by IGI in the manufacture of an Initial DERMWORX Product or Potential Product, as supported by written documentation provided by IGI, in the event that the actual increases or decreases in the cost of raw materials used in the Initial DERMWORX Product or Potential Product is greater than 10% since the last change in price;

            8.3.2  increases or decreases in the Producer Price Index ("PPI") - Chemicals and allied products - PCU28, as published by the U.S. Department of Labor for the most recent four quarters; and

            8.3.3  any change in Specifications requested by DERMWORX and accepted by IGI that results in increased production costs.

            8.4   Indemnification.

            8.4.1  DERMWORX agrees to indemnify and hold forever harmless IGI and its Affiliates and each of their agents, directors, officers and employees from and against any loss,

<PAGE>  22

damage, action, proceeding, expense or liability (including reasonable attorneys' fees) arising from or in connection with: (a) the Material Breach or inaccuracy of any representations or warranties made by, or covenants or obligations of DERMWORX in this Agreement including, without limitation, DERMWORX's failure to comply with its obligations to pay Feasibility Study and Development Project fees and Royalties, (b) the gross negligence or willful misconduct of DERMWORX or its Affiliates or any of their agents, directors, officers or employees; (c) the marketing, sale and/or any representation made by DERMWORX regarding the Initial DERMWORX Products and Potential Products, which warranty or representation has not been pre-approved by IGI of any Initial DERMWORX Products and Potential Products by DERMWORX or any of its Affiliates or any of its distributors, sublicensees (including sublicensees of such sublicensees); and (d) the liability of DERMWORX under any feder al, state or foreign laws or regulations pertaining to the offer or sale of securities or pursuant to other foreign laws or regulations arising from this Agreement.

            8.4.2  IGI agrees to indemnify and hold forever harmless DERMWORX and its Affiliates and each of their agents, directors, officers and employees from and against any loss, damage, action, proceeding, expense or liability (including reasonable attorneys' fees) arising from or in connection with: (a) the Material Breach or inaccuracy of any representations or warranties made by, or covenants or obligations of IGI in this Agreement including, without limitation, IGI's failure to comply with its obligations to pursuant to the Feasibility Study and Development Project, (b) the gross negligence or willful misconduct of IGI or its Affiliates or any of their agents, directors, officers or employees; and (c) the loss of the IGI License from Novavax, the production of the Initial DERMWORX Products or Potential Products., or any material misrepresentation made by IGI, regarding any Initi al DERMWORX Products or Potential Products.

            9.   TERM AND TERMINATION.

            9.1   The term of this Agreement shall commence as of the Effective Date and

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shall continue in full force and be effective for the period of the remaining period of the Patents, and the IGI license from Novavax, underlying the DERMWORX License, however subject to and under the terms and Funding provisions set forth in Section 2.5 of this Agreement, subject further to the following minimum purchase requirements; in the event DERMWORX does not make the minimum purchases within the time frame established for an Initial DERMWORX Product or Potential Product, then the exclusivity of the DERMWORX License shall immediately become nonexclusive with respect to that Initial DERMWORX Product or Potential Product and IGI shall not be excluded from marketing, selling, distributing or otherwise exploiting same. To meet the minimum purchase requirements:

            9.1.1  DERMWORX shall submit Purchase Orders in minimum aggregate quantity of 10,000 kilograms of the Salicylic Acne Product yearly, not later than each anniversary of the Effective Date through the Termination Date; and

            9.1.2  For each Initial DERMWORX Product other than the Salicylic Acne Product, and for each Potential Product, if any, DERMWORX shall submit Purchase Orders in a minimum aggregate, annual quantity of 10,000 kilograms or such quantity to be determined by the parties as part of the Product Development Agreement for each such Initial DERMWORX Product or Potential Product, not later than each anniversary of the Launch thereof through the Termination Date.

            9.1.3  For avoidance of doubt, there is no minimum quantity DERMWORX is required to purchase of the Vitamin C Serum.

            9.2   Early Termination of Agreement.

            9.2.1.  This Agreement may be terminated at any time by either party in the event that the other party materially breaches any of its obligations hereunder, and such breach is not cured by the non-performing party within thirty (30) calendar days of receipt of written notice of such breach from the other party, or in the event the breach is of a type that is not curable within a thirty (30) calendar day period, if the non-performing party has not taken substantial steps that are satisfactory

<PAGE>  24

to the non-breaching party to cure such breach within thirty (30) calendar days of receipt of written notice of such breach from the other party (hereinafter "Material Breach").

            9.2.2  Notwithstanding the foregoing, if for reasons other than DERMWORX's failure to supply IGI with BPO in sufficient amounts and quality, and provided DERMWORX is fully in compliance with its obligations under this Agreement and not in Material Breach, IGI is unwilling or unable for a period of thirty (30) days or more to supply one or more Initial DERMWORX Products or Potential Products which comply with its obligations hereunder in quantities sufficient to meet DERMWORX's outstanding Purchase Order(s) made hereunder for that Initial DERMWORX Product(s) or Potential Product(s), and further provided that said Purchase Order(s) do not exceed the average quantities ordered or written, quarterly forecast by DERMWORX for same within the preceding calendar quarter by more than 25%, then DERMWORX shall have the immediate right to obtain such Initial DERMWORX Product(s) or Potenti al Product(s) from a supplier other than IGI (the "Back-up Supplier") which Back-up Supplier shall be selected by IGI, or in the event that IGI does not select such Back-up Supplier in the thirty (30) day period, then DERMWORX shall have the right to contract for a source of supply, and then to sell and market such Initial DERMWORX Products or Potential Product, for and until such time that IGI is capable of resuming the supply to DERMWORX of such Initial DERMWORX Product(s) or Potential Product(s) under this Agreement, without incurring any liability under this Agreement for violation of Section 7.1 of this Agreement. Upon DERMWORX's request, IGI shall cooperate fully with DERMWORX and/or the Back-up Supplier, and shall use commercially reasonable efforts to enable the Back-up Supplier to manufacture and bulk package the Initial DERMWORX Products or Potential Products. This cooperation will include providing necessary equipment, technical support, complete formulas with approved supplier listings for all ra w materials and Active Ingredients, and sub-licensing the Technology to DERMWORX and/or to the Back-up Supplier for the period of time necessary to assure continuity of supply to DERMWORX. In exchange for this sub-licensing agreement, any sublicense pursuant to this Section

<PAGE>  25

9.2.2 will give the Back-up Supplier authority to make Initial DERMWORX Products or Potential Products only for DERMWORX, and for DERMWORX to sell and market the Initial DERMWORX Products and Potential Products, and can be revoked with reasonable notice when IGI is again in a position to provide all of DERMWORX's requirements for Initial DERMWORX Products or Potential Products; provided, however, that in the event that IGI is unable to fulfill some but not all current DERMWORX's Purchase Orders for Initial DERMWORX Products or Potential Products, then IGI shall retain full rights to produce such Initial DERMWORX Products or Potential Products as IGI is able, and shall be required only to provide such sublicense and support to the Back-up Supplier as may be required for Back-up Supplier to produce those Initial DERMWORX Products or Potential Products that IGI is unable to fulfill. Irrespective of the foregoing, nothing contained in this Section 9.2.2 or otherwise i n this Agreement shall operate or be construed to require or otherwise obligate IGI to transfer, confer, convey, and/or otherwise grant to DERMWORX and/or any Back-up Supplier any rights, interest, title or claim of any kind whatsoever in or to any of the Technology beyond the grant of this Agreement, all of which rights, title, interests and claims shall remain the sole property of IGI. For avoidance of doubt, the term "unwilling" for purposes of this Section 9.2.2 contemplates the wrongful refusal by IGI or its successor or assignee to honor its obligations to DERMWORX pursuant to this Agreement for no commercially reasonable purpose or to inflict deliberate harm upon DERMWORX. "Unwillingness" in this context does not in any way refer to a circumstance wherein IGI or its successor or assignee declines to perform or manufacture pursuant to a good faith belief or dispute as to whether DERMWORX has not complied with its obligations under this Agreement. For additional clarity, DERMWORX cannot accede to rights pursuant to this Section 9.2.2 by DERMWORX's own conduct which would induce a reasonable unwillingness by IGI or its successor or assignee to perform its obligations pursuant to this Agreement.

            9.2.3  In the event of an uncured material breach in the license from Novavax to IGI, resulting in the adjudicated termination of the Novavax license to IGI, then DERMWORX shall have

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the right to contact and negotiate with Novavax directly for a license for Novavax Technology.

            9.2.4  This Agreement may be terminated by either party, if: (i) the other party should commence any case, proceeding or action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as a bankrupt or insolvent or seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts; or (ii) the other party should commence any case, proceeding or action seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets; or (iii) there shall be commenced against the other party any case, proceeding or other action which results in the entry of an order f or relief of the type described in (i) or (ii) above, and any such adjudication or appointment remains undismissed, undischarged or unbonded for a period of thirty (30) days.

            9.3  Events Upon Termination.

            9.3.1  Upon termination of this Agreement in accordance with the terms hereof ("Termination Date"), the parties agree to continue their cooperation in order to effect an orderly termination of their relationship. IGI shall to the extent feasible complete production of Initial DERMWORX Products and Potential Products ordered under any Purchase Order from DERMWORX that was actually received by IGI prior to the Termination Date from the remaining quantities of ingredients for the Initial DERMWORX Products and Potential Products in IGI's possession, subject to the provision of Section 9.3.2.

            9.3.2  In the event this Agreement is terminated by IGI under Section 9.2 due in whole or part to DERMWORX's failure to pay IGI amounts due hereunder, IGI shall have no obligation to produce any Initial DERMWORX Products and Potential Products after the Termination Date, provided, however, that DERMWORX shall have a one-time cure option which shall require that DERMWORX fully pays IGI within sixty (60) days following the Termination Date for the amounts

<PAGE>  27

that were previously unpaid with 10% interest and IGI's reasonable costs to restart production, and then IGI shall reinstate the Agreement as if no such Termination Date had occurred and then DERMWORX for a period of six (6) months shall pay in advance for any such Initial DERMWORX Products or Potential Products to be produced under the reinstated Agreement ("Probationary Period"). After the Probationary Period, the terms of payment shall be as originally set forth in this Agreement.

            9.3.3  In the event that DERMWORX fails to pay IGI as provided in Section 9.3.2, IGI may dispose without liability or the cost thereof any remaining BPO or other ingredient(s) that may have been supplied by DERMWORX, unless within thirty (30) calendar days after the Termination Date, DERMWORX arranges for the return of the BPO or other DERMWORX-supplied ingredients to DERMWORX, including, without limitation, the payment of all associated shipping costs.

            10.  REPRESENTATIONS AND WARRANTIES OF DERMWORX.

            DERMWORX represents and warrants as follows, and acknowledges that IGI is relying upon such representations and warranties in connection with its participation in this Agreement and the purchase by IGI of the DERMWORX Shares:

            10.1  DERMWORX, Incorporated. DERMWORX Is duly incorporated and organized under the laws of the State of Delaware. The authorized common capital stock of DERMWORX consists of 20,000,000 shares of Stock with a par value of $0.0001, of which a total 8,195,860 shares of Stock are issued and outstanding to the Founders and their designees. DERMWORX was incorporated on June 6, 2005.

            10.2  Corporate Existence and Power. DERMWORX is in good standing, under the laws of the jurisdiction of its incorporation or organization. DERMWORX has the power to own, lease or operate, its properties and to carry on its business as now being conducted. DERMWORX has available for IGI's inspection, true and complete copies of (a) the certificate of incorporation and all

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amendments thereto of DERMWORX, together with a copy of the filing receipt issued by the State 0f Delaware, and (b) the Articles of Incorporation of DERMWORX as presently in effect, certified as true and correct by DERMWORX.

            10.3  Capital Stock. All issued shares of capital stock of DERMWORX are duly authorized, validly issued and fully-paid and non-assessable. As of the date hereof there are 19,000,000 shares of common stock of DERMWORX authorized for issuance and 6,564,884 shares common stock of DERMWORX outstanding (not including the shares being issued to IGI hereunder). DERMWORX has one other class of stock authorized other than common stock; its certificate of incorporation provides for 1,000,000 shares of blank check preferred stock. No options, warrants or other rights for the purchase of any of the capital stock of DERMWORX are authorized or outstanding and DERMWORX has entered into no agreement to issue same.

            10.4  Authorization, No Restrictions. DERMWORX is authorized to issue and deliver the certificate for the Shares to be issued to IGI. The issuance and delivery of the IGI Shares in accordance with the terms of this Agreement will not, with or without the giving of notice or the passage of time, or both, conflict with, result in a default, right to accelerate or loss of rights under, or result in the creation of any encumbrance pursuant to, or require the consent of any third party or governmental authority pursuant to (a) any provision of the certificate of incorporation or by-laws of DERMWORX, or (b) any franchise, mortgage, indenture or deed of trust or any material lease, license or other agreement or any law, rule, regulation, order, judgment or decree to which DERMWORX is a party or by which any of them (or any of their assets, properties, operations or businesses) may be bound, subject to or affected thereby.

            10.5  Records. The minute books, stock certificate books and stock transfer ledgers of DERMWORX are complete and correct in all material respects, and there have been no material transactions involving DERMWORX which properly should have been set forth therein and which have not been so set forth.

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            10.6  Financial Statements.

            10.6.1   DERMWORX has furnished to IGI the unaudited consolidated balance sheet of DERMWORX and its Subsidiaries as of June 30, 2006 and the related unaudited consolidated statements of operations, consolidated statements of cash flow and consolidated statements of stockholders' equity for DERMWORX since its formation on June 6, 2005 (copies of which are attached hereto as Exhibit B). Such financial statements were prepared in conformity with GAAP and fairly present the consolidated financial position of DERMWORX and its Subsidiaries as of such date and their consolidated results of operations for such periods (subject to normal year-end adjustments).

            10.7  Undisclosed Liabilities. Since June 30, 2006, DERMWORX has not incurred more than $100,000 in liabilities (whether direct or indirect). Since June 30, 2006 DERMWORX has not entered into any transaction outside the ordinary course of business or which is material to DERMWORX.

            10.8  Patents, etc. DERMWORX does not, prior to execution of this Agreement, own or possess any license or other right to use any patents, registered copyrights, or registered marks (including trademarks, service marks, service names, and trade names).

            10.9  Litigation. There is no claim, legal action, arbitration, governmental investigation or other legal or administrative proceeding, nor any order, decree or judgment in progress, pending or in effect, or to the best knowledge of DERMWORX threatened, against or relating to DERMWORX or its properties, assets or business or the transactions contemplated by this Agreement, and DERMWORX does not know or have any reasonable ground to know of any basis of the same.

            10.10  Compliance with Laws and Other Instruments. DERMWORX has complied with all existing laws, rules, regulations, ordinances, orders, judgments and decrees applicable to its business.

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            10.11   Nature and Survival of Representations and Warranties of DERMWORX. No representation or warranty by DERMWORX contained in this Agreement, and no information furnished or to be furnished to IGI pursuant to this Agreement or in connection with the transaction contemplated, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading.

            10.12  DERMWORX shall take all actions necessary so as to enable IGI to make all filings under the Exchange Act of 1934 and the Securities Act of 1933.

            11.  REPRESENTATIONS AND WARRANTIES OF IGI.

            IGI represents and warrants as follows and acknowledges that DERMWORX is relying upon such representations and warranties in connection with its participation in this Agreement and the sale of its Pre-IPO Shares to IGI:

            11.1  IGI, Inc. IGI is duly incorporated and organized in the State of Delaware.

            11.2  Corporate Status. IGI is in good standing, under the laws of the jurisdiction of its incorporation or organization. IGI has the power to own, lease or operate, its properties and to carry on its business as now being conducted. IGI has available for DERMWORX inspection, true and complete copies of (a) the certificate of incorporation and all amendments thereto of IGI, together with a copy of the filing receipt issued by the State of Delaware, and (b) the Articles of incorporation of IGI as presently in effect, certified as true and correct by IGI.

            11.3  Records and Financial Statements. IGI is registered under Section 12 of the Exchange Act of 1934 has filed its Form 10KSB for the year ending December 31, 2005 and Form 10Q for the quarters ending March 31 and June 30, 2006 with the U.S. Securities and Exchange Commission ("SEC"), and its filings are available for inspection on the SEC's website.

            11.4  Patents; Intellectual Property. IGI has been granted license(s) from Novavax to use certain Novavax patent rights ("Novavax Patent(s)") topically and for dermatological use.

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Novavax received patent protection from the USPTO for its Novasome® encapsulation Technologies as more fully described in issued patent(s), a full listing of which is attached in Schedule A annexed hereto, and IGI has no knowledge, or grounds for such knowledge, that the Novavax license(s) to IGI are not valid and binding, and that the license(s) can be assigned and/or sublicensed, and that Novavax Patent(s) (a) was not properly filed, or properly issued, (b) is subject to an invalidity attack for patent misuse or on any other grounds, such as failure to disclose prior art, or for obviousness and (c) no person, firm, corporation or other entity is entitled to restrain Novavax or IGI from using the Novavax Patent. Neither IGI nor Novavax (to IGI's knowledge) has received any notice claiming that it, Novavax, or a Novavax Patent, or its use of any other intellectual property is infringing upon or it is otherwise acting adversely to any patents, patent rights, li censes or trade secrets owned by any person, firm, corporation or other entity.

            11.5  Litigation. There is no claim, legal action, arbitration, governmental investigation or other legal or administrative proceeding, nor any order, decree or judgment in progress, pending or in effect, or to the best of IGI's knowledge threatened against or relating to IGI's intellectual property being licensed hereunder, and IGI does not know or have any reasonable ground to know of any basis of the same.

            11.6  Investment Intent. IGI represents to DERMWORX that it is acquiring DERMWORX Shares for its own account, and not with any present intention of distributing or selling the DERMWORX Shares or any part thereof.

            12.  CONDITIONS PRECEDENT TO OBLIGATIONS OF DERMWORX AND IGI.

            The Agreement is effective as of the Effective Date, and may be terminated as provided for herein generally, and specifically if at or prior to the Funding Date DERMWORX has not been Funded. DERMWORX and IGI may, however, waive the fulfillment of Funding by the Funding Date, either before or after the Funding, but any waiver, to be binding on either DERMWORX or upon IGI, must be by a writing duly executed by the either DERMWORX or IGI against whom enforcement

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is charged.

            13.  REPRESENTATIONS.

            All representations and warranties of DERMWORX and IGI contained in this Agreement or in the Schedule, document, certificate or other instrument delivered by or on behalf of DERMWORX or IGI pursuant to this Agreement, or in connection with the transactions contemplated hereby shall be true and correct in all material respects when made.

            14.  PERFORMANCE OF AGREEMENTS.

            All covenants, agreements and obligations required by the terms of this Agreement to be performed by DERMWORX and IGI or any Subsidiary of either, at or prior to the Effective Date shall have been duly and properly performed or fulfilled in all material respects.

            15.  NO ADVERSE CHANGE.

            At the time of execution, there shall have been no material adverse change in the assets, liabilities, financial condition or business (financial or otherwise) of DERMWORX and IGI between the final negotiations of the parties and the Effective Date of this Agreement, and there shall not have occurred an event which, in the reasonable opinion of DERMWORX or IGI, materially and adversely affects or may materially or adversely affect the operations, business or prospects of the other.

            16.  NECESSARY PROCEEDINGS.

            All proceedings, corporate or otherwise, to be taken by DERMWORX and IGI in connection with the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken, and all documents, resolutions and certificates incident thereto, duly certified by an officer of DERMWORX and IGI as the case may be shall have been delivered to DERMWORX and IGI at or prior to the Effective Date.

            17.  CONSENTS

            DERMWORX and IGI shall have given all notices to, and will obtain all

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consents, approvals or orders of, (a) any federal, state, local or foreign governmental authority and (b) any person, corporation, firm or other entity, which (i) may be required to permit the consummation of the transactions contemplated hereby and (ii) which may be required to permit the change of ownership of DERMWORX Shares herein provided for to be completed without affecting or resulting in the cancellation or termination of any permit or license held by DERMWORX or IGI or any agreement with DERMWORX or IGI.

            18.  DOCUMENTS.

            All documents required to be delivered to DERMWORX and IGI will be delivered within thirty (30) days of the Effective Date.

            19.  BROKERAGE AND INDEMNIFICATION.

            19.1 DERMWORX represents and warrants to IGI that neither it nor its officers, directors and shareholders have engaged or dealt with any broker or other person with whom it has agreed with, or who may be entitled to, any finder's fee, brokerage commission or other like payment ("Brokerage Fee") in respect of the negotiation, execution, or performance of this Agreement, and that it will indemnify and hold harmless IGI against all claims, damages, expenses and losses (including reasonable attorneys' fees and expenses) which may be asserted against IGI by any person as a result of this Agreement.

            19.2   IGI represents and warrants to DERMWORX that neither it nor its officers, directors and shareholders have engaged or dealt with any broker or other person with whom it has agreed with, or who may be entitled to, any Brokerage Fee in respect of the negotiation, execution, or performance of this Agreement, and that it will indemnify and hold harmless DERMWORX against all claims, damages, expenses and losses (including reasonable attorneys' fees and expenses) which may be asserted against DERMWORX by any person as a result of this Agreement.

            20.  PRESS RELEASES.

            Neither DERMWORX nor IGI shall provide any information concerning this

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Agreement, by issuing any press release, or giving interviews to any publication or broadcast entity, without the prior written consent from the other party about the contents of the Press Release, or the interview.

            21.  NOTICES.

            Any and all notices, requests, demands, consents, approvals or other communications required or permitted to be given under any provision of this Agreement shall be in writing and shall be deemed given upon personal delivery or the mailing thereof by first class certified mail, return receipt requested, as follows:

	If to DERMWORX, addressed to
	DERMWORX: 934 S. South Lake Drive Hollywood, Florida 33019 Attention: Norman M. Meier
	with a copy to:
	Shephard Lane, Esq. Dreier LLP 499 Park Avenue - 23rd Floor New York, New York 10022
	If to IGI, addressed to IGI at:
	105 Lincoln Avenue Buena, New Jersey 08310 Attention: Frank Gerardi
	with a copy to:
	William A. Despo, Esq. St John & Wayne 2 Penn Plaza East Newark, New Jersey 07105-2249
Either party may change its address for the purpose of this Agreement by notice to the other parties given as aforesaid.
22  Additional Covenants of DERMWORX.
22.1  All future financial statements of DERMWORX will be prepared from the books

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and records of DERMWORX quarterly in accordance with Generally Accepted Accounting Principles consistently applied and maintained throughout the periods indicated and fairly present the consolidated financial condition of DERMWORX and any Subsidiaries that may then exist, as at their respective dates and the consolidated results of the operations of DERMWORX and Subsidiaries for the periods covered thereby.

            22.2  At such time as IGI may hold a twenty percent (20%) or higher interest in DERMWORX or earlier if IGI is required to report DERMWORX income under the equity method of accounting or on a consolidated basis, (i) DERMWORX will have its financial statements audited annually, by a qualified, independent auditor eligible to practice before the SEC, and will provide IGI with copies of such statements with audited financials within 45 days after the end of DERMWORX's fiscal year, and (ii) DERMWORX will supply IGI with reviewed quarterly statements within 30 days after the end of each calendar quarter, or such shorter period of time if earlier available from its auditor. Otherwise, DERMWORX will provide IGI with financial statements within 45 days after the end of each calendar quarter and within 90 days after year-end (audited if available). Such financial statements will include a balance sheet related unaudited consolidated statements of operations, consolidated statements of cash flow and consolidated statements of stockholders' equity for DERMWORX.

            22.3 DERMWORX will not authorize or issue any shares of preferred stock without the consent of IGI.

            22.4 DERMWORX shall not identify IGI or otherwise use IGI's name in connection with DERMWORX's promotional, marketing or capital-raising activities. DERMWORX may refer to Novasome® nanotechnology in such activities in DERMWORX's sole discretion, provided, however, that reference is not also made to IGI.

            23 Additional Covenants of Both Parties

            23.1 Lockup and Freeze of DERMWORX Shares. DERMWORX Shares shall not be

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transferable or assignable by IGI to any person or entity (except to DERMWORX) prior to the earlier of (i) twenty-four (24) months from the Effective Date or (ii) DERMWORX being registered under the Exchange Act of 1934. In any Initial Public Offering ("IPO"). or other post IPO financing, if required by DERMWORX, or any investor, lender or investment banker, IGI herewith agrees to a "lockup" of its DERMWORX Shares issued hereby, which "lockup" shall be under the same terms and conditions as the "lockup" of the founders' shares of Stock of DERMWORX. In the event of any transfer pursuant to 11.7(i) then such transfer shall only be recorded on the books of DERMWORX if an appropriate legend is endorsed onto the certificate representing the transferred shares referencing this Agreement in general, and specifically the "lock-up" provisions hereof. In the event of a DERMWORX IPO or post IPO financing, IGI will have the right to register its DERMWORX Shares by means of a registration rights agreement containing customary terms providing for piggyback and demand registration rights to be granted to IGI. In addition and notwithstanding the foregoing, IGI at any time and from time to time shall have the right to sell the same percentage of its DERMWORX Shares as are sold by any DERMWORX founder and upon a sale of DERMWORX stock by a DERMWORX founder, DERMWORX shall immediately notify IGI of such sale and the number of shares sold and the number still held by such founder.

            24.  MISCELLANEOUS.

            24.1  Interpretation: This Agreement shall be interpreted as having been negotiated by each party, and any ambiguity that may be found herein shall not be held against either drafting party as this Agreement shall be deemed to have been fully considered by each party prior to its execution.

            24.2  Exhibits and Schedules. The Exhibits, if any, referred to herein are specimens provided as solely as examples of further agreements contemplated between the parties in furtherance of their performance under this Agreement. The Schedules referred to herein , if any, including any amendments thereto, shall be deemed part of this Agreement as fully and effectively as

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if set forth at length herein. The terms used in said Schedules shall have the same meanings as such terms have in this Agreement unless a contrary intention is clearly manifested therein.

            24.3  Partial Invalidity. In the event that any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction for any reason, unless such provision is narrowed by judicial construction, this Agreement shall, as to such jurisdiction, be construed as if such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any provision of this Agreement would be held to be invalid, prohibited or unenforceable in any jurisdiction for any reason, such provision, as to such jurisdiction for any reason, shall be ineffective to the extent of such invalidity, prohibition or unenforceability, without invalidating the remaining portion of such provision or the other provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

            24.4  No Waiver. No waiver of any breach or default hereunder shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

            24.5  Binding Effect. This Agreement shall be binding upon and inure to the benefit of each party hereto, and its successors and assigns. Except as hereafter provided, this Agreement shall not be assigned by either IGI or DERMWORX and any attempted assignment shall be void, provided that either DERMWORX or IGI may assign its rights and obligations pursuant to this Agreement to any corporation owned or controlled by DERMWORX or IGI respectively. In the event of such assignment, DERMWORX or IGI as the case may be shall remain responsible for full performance of this Agreement.

            24.6  Headings. The article and section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of said articles or sections.

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            24.7  Cooperation. Each party hereto shall cooperate, shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement.

            24.8  Governing Law. This Agreement and all amendments thereof shall, in all respects, be governed by and construed and enforced in accordance with the internal laws (without regard to principles of conflicts of law) of the State of Delaware, United States of America.

            24.9  Jurisdiction. In the event of any dispute between DERMWORX and IGI, the exclusive jurisdiction for any legal proceedings shall be the federal and state courts located in the State of New Jersey, United States of America.

            24.10  Counterpart Execution. This Agreement may be signed in counterpart and initially exchanged by fax transmission, and then the duplicate signed counterpart originals exchanged, and then the whole of the executed Agreement will consist of the counterpart originals exchanged between the parties.

            24.11  No Third Party Beneficiaries. DERMWORX and IGI each expressly acknowledge and agree that neither this Agreement, in whole or part, nor any of the terms contained herein, are intended and/or shall operate to benefit and/or confer any rights, interests, obligations and/or other privileges to any third party not a signatory to this Agreement.

            24.12  Independent Contractors. The parties acknowledge and agree that they are dealing with each other hereunder as independent contractors. Nothing contained in this Agreement shall be interpreted as constituting either party as the joint venture or partner or agent of the other party or as conferring upon either party the power or authority to bind the other party in any transaction with third parties.

            24.13  Entire Agreement. This Agreement together with any Schedules or Exhibits annexed hereto constitute the entire agreement of the parties with respect to the subject matter hereof, and incorporates and supersedes all prior understandings, both oral and written, and may not

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be modified, amended or terminated except by a written agreement specifically referring to this Agreement signed by both of the parties.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed the day and year first above written.
	DERMWORX, INCORPORATED
	By:	/s/ Norman Meier
		Norman Meier, Chairman
	IGI, INC.
	By:	/s/ Frank Gerardi
		Frank Gerardi, Chief Executive Officer

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SCHEDULE A OF IGI PATENTS AND LICENSES

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SCHEDULE B - INITIAL PRICE TERM FOR PRODUCTION OF SALICYLIC ACNE PRODUCT AND

VITAMIN C SERUM

I.  SALICYLIC ACNE PRODUCT

Approx. Quantities (1 oz)	Batch size	price
25,000	800 Kg	$28.50/ Kg
50,000	1600 Kg	$24.00/Kg
75,000	2400 Kg	$21.00/Kg

II.  VITAMIN C SERUM

Vitamin C, 10% as packaged for IGI's "Miaj" line
5,000-1 oz units	$30.00/ unit
10,000-1 oz units	$25.00/ unit
25,000 -1 oz units	$19.00/ unit
50,000- 1 oz units	$16.00-14.00/unit
75,000-1 oz units	$12.00-10.00/unit

EX-10

Exhibit 10.52

EMPLOYMENT AGREEMENT

      EMPLOYMENT AGREEMENT (this "Agreement"), effective as of January 1, 2007 (the "Effective Date") by and between IGI, Inc., having an address at 105 Lincoln Avenue, Buena, New Jersey 08310 ("Company") and Rajiv Mathur have an address at 35 Milestone Drive, Ringoes, New Jersey 08551("Executive"). Company and Executive are referred to hereinafter as the "Parties".

R E C I T A L S :

      WHEREAS, the Company desires to employ the Executive on the terms and subject to the conditions set forth herein, and Executive is willing to accept such employment on such terms and conditions; and

      WHEREAS, by virtue of such employment, Executive will have access to Confidential Information of IGI and its subsidiaries (the "IGI Companies"); and

      WHEREAS, Executive acknowledges and agrees that the Company (on behalf of itself and the IGI Companies) has a reasonable, necessary and legitimate business interest in protecting its own and the IGI Companies' Confidential Information, client accounts, relationships with prospective clients, Goodwill and ongoing business, and that the terms and conditions set forth below are reasonable and necessary in order to protect these legitimate business interests.

      NOW THEREFORE, in consideration of the representations, warranties, covenants, and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are conclusively acknowledged, the Parties, intending to become legally bound, agree as follows:

A G R E E M E N T :

1.  DEFINITIONS

      1.1  Specific Definitions. Capitalized terms not defined elsewhere herein shall have the following meanings ascribed to them:

      "Board" means the Board of Directors of IGI, Inc.

      "Change in Control" shall mean the occurrence of any of the following events:

      (a)  any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than an individual or entity to which the Company sells securities representing at least 3% of its voting power (after giving effect to the sale) on or before June 1, 2007, Jane Hager, Edward Hager, Steve Morris, Frank Gerardi or any of their respective affiliates, any entity of which any of the foregoing are trustees, or trusts established for their benefit, the Company, any trustee or other fiduciary

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holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the owner, directly or indirectly, of outstanding securities of the Company representing 60% or more of the combined voting power of the Company's then outstanding securities;

      (b)  the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 40% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a re-capitalization of the Company (or similar transaction); or

      (c)  a sale of all or substantially all of the assets of the Company;

      "Goodwill" means the expectation of continued patronage from client accounts and new patronage from prospective clients.

      "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a limited liability company, or a governmental entity (or any department, agency, or political subdivision thereof).

      "IGI Business" means the businesses provided by any of the IGI Companies.

      "IGI Companies" or "IGI Company" means the Company, its subsidiaries (including the Company), and any entity under the control (as defined in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended, without regard to whether any party is a "registrant" under such Act) of IGI, and any of their successors or assigns.

2.  POSITION, RESPONSIBILITIES AND TERM

      2.1.  Executive's Position. On the terms and subject to the conditions set forth in this Agreement, the Company shall employ Executive to serve as President and Chief Executive Officer of the Company. Executive shall report to the Board of Directors of the Company and the Executive Committee thereof. Executive shall perform such services in the Company's offices in Buena New Jersey (except for the time before the executive can relocate to a reasonable distance from Buena as per section 4.5 of this agreement, in which Executive is expected to work from his Buena office for an average of three days per week and from his home for the remainder of the time) and shall incur such business travel as may be reasonably required of him in the performance of his duties. Executive shall also be nominated by the Board of Directors each year during the Term (provided a notice of non-renewal or notice of termination of employment has not been se nt by either party prior to the date the annual Proxy Statement is sent to stockholders) to be a director of the Company. Nothing herein shall require the Board of Directors to nominate Executive, the only consequence of such failure being that the Company shall be in breach of this Agreement.

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      2.2  Executive's Responsibilities. The Executive shall perform all duties customarily attendant to the position and shall perform such services and duties commensurate with such positions as may from time to time be reasonably prescribed by the Board.

      2.3  No Conflicts of Interest. Executive further agrees that throughout the period of his employment hereunder, he will not perform any activities or services, or accept such other employment which would be inconsistent with this Agreement, the employment relationship between the Parties, or would interfere with or present a conflict of interest concerning Executive's employment with the Company; provided, that Executive shall be permitted to serve on the boards of directors of such other companies as the Board shall approve, and that Executive may make personal investments and may act as a director and engage in other activities for any charitable, educational, or other nonprofit institution, as long as such investments and activities do not materially interfere with the performance of Executive's duties hereunder. Executive agrees to adhere to and comply with any and all business practices and requirements of ethical cond uct set forth in writing from time to time by the Company in its employee manual or similar publication.

      2.4.  Initial Term. Executive shall be employed for an initial three year term (the "Initial Term") commencing on January 1, 2007 and ending on the third anniversary of the date thereof, unless sooner terminated in accordance with the provisions of Section 8 of this Agreement.

      2.5  Renewal Term. Unless written notice of termination of this Agreement is given by one party to the other not less than 180 days prior to the termination of the then current Term, this Agreement shall be extended for an additional year term (the "Renewal Term(s)") provided that nothing herein shall obligate either party hereto to renew or extend the Agreement. For purposes of this Agreement all references to "Term" shall also apply to the "Initial Term" and any "Renewal Terms(s)" unless otherwise specified. For purposes of this Agreement, failure by the Company (as opposed to Executive) to renew this Agreement shall be considered a termination "without cause" under Section 8.1 hereof (unless the reason for such non-termination fits within the definition of "cause").

3.  ACCEPTANCE

      3.1  Executive hereby accepts such employment and agrees that throughout the period of employment hereunder, Executive will devote his full business time, attention, knowledge and skills faithfully, diligently and to the best of his ability, in the furtherance of the business of the IGI Companies.

4.  COMPENSATION

      4.1.  Base Salary. As compensation for the services to be rendered by Executive hereunder, the Company agrees to pay Executive, and Executive agrees to accept, an initial base salary ("Base Salary") during employment hereunder at the annual rate of not less than Two Hundred and Ninety Two Thousand (292,000) Dollars. Executive's salary shall be reviewed no later than January 15^th of each year during the term commencing 2008 and Executive shall receive no less than a 3.5% increase in Base Salary for the twelve month periods commencing January 1, 2008 and January 1, 2009. In addition, each year Executive may be granted options

<PAGE>

and all such options shall fully vest one year from the date of grant, other than options granted pursuant to Section 4.7 hereof, provided Executive is employed by the Company on the vesting date. The Base Salary shall be payable in equal installments by the Company according to its normal payroll practices.

      4.2  Benefits. In addition to such compensation, Executive shall be entitled to the benefits which are afforded generally, from time to time to similarly situated executive employees of the IGI Companies. Notwithstanding the foregoing, nothing contained in this Agreement shall require the IGI Companies to establish, maintain or continue any of the group benefits plans already in existence or hereafter adopted for the employees of the IGI Companies, or restrict the right of the IGI Companies to amend, modify or terminate such group benefit plans in a manner which does not discriminate against Executive as compared to other executive employees of IGI Companies.

      4.3  Paid Time Off. Executive shall be entitled to thirty business days of paid time off (consisting of vacation and personal days) and sick days and holidays as are provided in general to similarly situated employees of the IGI Companies, in accordance with usual practices and procedures. Without limiting the foregoing, unless otherwise required by law, Executive shall not be entitled to any additional compensation for any unused paid time off. Paid time off shall stop accruing once Executive has accumulated and not used the number of days to which he is entitled to in a year.

      4.4  Automobile Allowance. The Company agrees to pay to Executive $750 per month, during the Term to be used exclusively by Executive for the retention (whether by lease or otherwise), maintenance, insurance and care of an automobile to be used by Executive in the discharge of his duties to Company. In addition, Company shall reimburse Executive for all gas and parking incurred by Executive in connection with the performance of his duties and the conduct of the business of the Company. Other than as set forth in the foregoing sentences and section 4.5, and other than for car rentals on business trips, Executive will not be reimbursed for mileage.

      4.5  Relocation. The Company shall pay Executive's relocation expenses in an amount not to exceed $75,000, upon presentation of appropriate vouchers therefore, provided that the Company shall not be obligated to make any such reimbursement until later of (i) the one year anniversary of this Agreement and (ii) when the Company can reasonably afford payment. The Company shall reimburse Executive for actual commuting gasoline expenses and prior agreed hotel stay expenses until the time of actual relocation. Executive agrees to relocate within a reasonable time once notification is given him that the Company can afford payment. Relocation expenses shall include but not limited to, closing costs, attorney fees, inspection fees, mortgage points, packaging costs, moving costs and any other cost related to buying or selling a house.

      4.6  Annual Performance Bonus. The Company shall grant Executive an annual bonus (the "Annual Bonus") for each of FY 2007, 2008 and 2009 during the Term payable in cash and/or stock options within 90 days after the end of such fiscal year. Executive must be employed by the Company on December 31 of a fiscal year in order to be eligible for a bonus under this Section 4.6 for such fiscal year.

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      During the Term, Executive's annual bonus will be determined by the Board of Directors or Compensation Committee thereof. The Compensation Committee of the Board shall establish an objectively determinable performance target, which shall include one or more of the following components of overall Company performance: (i) growth in annual revenue, (ii) growth in operating profit, and (iii) growth in EPS, in each case as determined in accordance with the Company's accounting practices, as in effect on the first day of such fiscal year, and which may also provide for adjustments. Achievement of specified levels will result in a bonus award to the executive up to 100% of Base Compensation. The Committee shall establish such specified levels and the bonus award to be paid at each such specified level.

      For purposes of this Section 4.6, the Company's "sales revenues" shall be net of discounts and allowances and shall be otherwise determined under GAAP and shall include the sales revenues of the Company and all entities included in its consolidated financial statements, The Company's cash flow from continued operation activities as determined by independent auditors shall be used for the purpose of section 4.6 (iii).

      4.7  Grant of Stock Options.

      Upon the effective date of this Agreement the Company will grant Executive an option to purchase 500,000 shares of the Company's Common Stock under the Company's 1999 Equity Incentive Plan against delivery by Executive of documents deemed necessary under such plan by IGI at an exercise price equal to the average of the last 30 days clising price of the Company's stock on the effective date of this agreement. Such options shall be fully vested over a period of two years with one-half vesting each year on the anniversary date of employment.

      4.8  One Time Bonus. In addition, the Company will pay Executive a $50,000 bonus on or before September 15, 2007, if he is employed by the Company on the date of payment.

5.  EXPENSES

      5.1  Except as provided in Section 4.4 and Section 4.5, the Company shall reimburse Executive, in accordance with Company policy, for all expenses reasonably and properly incurred by Executive in connection with the performance of Executive's duties hereunder and the conduct of the business of the Company, upon the submission to the Company (or its designee) of appropriate vouchers therefor.

6.  CONFIDENTIAL INFORMATION AND PROPERTY

      6.1  Confidential Information.  Without the prior written consent of the Company, or except to the extent required in the good faith execution of his duties with the Company or as required by law or a valid order of a court of competent jurisdiction (in which event Executive shall notify such IGI Company as promptly as practicable (and, if possible, prior to the making of such disclosure)) , the Executive shall not, at any time, directly or indirectly, use, attempt to use, disclose, or otherwise make known to any person or entity (other than the Board): (a) any confidential or proprietary knowledge or information, including without limitation, lists of customers or suppliers, trade secrets, know-how, inventions, discoveries, processes, and systems,

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as well as any data and records pertaining thereto, which the Executive may acquire in the course of his employment; or (b) any confidential or proprietary knowledge or information of a confidential nature (including, but not limited to, all unpublished matters) relating to, without limitation, the business, properties, accounting, books and records, computer systems and programs, trade secrets, or memoranda of the Company or a subsidiary.

      6.2.  Property of the Company. Executive acknowledges and agrees that all intellectual property and all Confidential Information of the IGI Companies relating thereto, which Executive generates in the course of engaging in , directly or indirectly, any IGI Business during the Term hereof , shall be the sole property of the IGI Companies.

7.  NON-SOLICITATION, NON-COMPETITION AND CONFLICTS OF INTEREST

      7.1.  Non-Solicitation.

      (a)  Except in the normal course of business on behalf of any IGI Company, Executive agrees that during the Term he will not, directly or indirectly, (i) solicit, sell, provide services to, consult for, or accept any request to provide, or induce the termination, cancellation or non-renewal of, any IGI Business from or by any person, corporation, firm or other entity which was a client of an IGI Company or which was contacted by an IGI Company as a prospective client at anytime, or (b) solicit, offer, negotiate or otherwise seek to acquire any interest in any prospective acquisition of an IGI Company, which was a prospective acquisition of an IGI Company at any time.

      (b)  Except in the normal course of business on behalf of any IGI Company, Executive agrees that after the Term he will not, directly or indirectly, (i) solicit, sell, provide services to, consult for, or accept any request to provide, or induce the termination, cancellation or non-renewal of, any IGI Business from or by any person, corporation, firm or other entity which was a client of an IGI Company or which was contacted by an IGI Company for the purposes of becoming a client at anytime within twelve months prior to the end of the Term, or (ii) solicit, offer, negotiate or otherwise seek to acquire any interest in any entity of business which was contacted by an IGI Company as a prospective acquisition within twelve months prior to the end of the Term. The restrictions contained in this Section 7.1(b) shall apply for 12 months following the end of the Term.

      7.2  No Hiring. Executive further agrees that he will not, directly or indirectly, solicit the employment, consulting or other services of, or hire, any other employee of any IGI Company or otherwise induce any of such employees to leave such IGI Company's employment or to breach an employment or independent contractor agreement therewith. The restrictions contained in this Section 7.3 shall apply throughout the Term hereof and thereafter until 24 months following the date on which Executive is no longer employed by any IGI Company.

      7.3  Miscellaneous. Without limiting the provisions of Section 18, in the event of any assignment by the Company permitted under such section, the restrictive periods contained in this Section 7 shall be determined by reference to the termination of Executive's employment with any permitted assignee of the Company.

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8.  TERMINATION

      8.1  Termination by the Company Without Cause. Company shall have the right to terminate Executive's employment hereunder "without cause" by giving Executive written notice to that effect. Any such termination of employment shall be effective on the date specified in such notice. In the event of such termination, the Company shall (i) pay Executive his unpaid Base Salary through the effective date of termination and any business expenses remaining unpaid on the effective date of the termination for which Executive is entitled to be reimbursed under Section 5 of this Agreement; (ii) pay Executive an amount per month equal to one-twelfth of his then adjusted Base Salary for the period commencing on the date following the date of termination and ending on the date which is twelve months following the effective date of termination; (iii) pay Executive any bonus due under Section 4.6 hereof; and (iv) either continue to provide E xecutive with medical and dental healthcare coverage under the plan in which Executive participates immediately prior to the effective date of such termination (where Executive remains eligible to participate, and in accordance with the terms thereof) or in the event Executive no longer remains eligible to participate under such medical and/or dental healthcare plan, to reimburse Executive for the amount of the premium Company would have paid for Executive's medical and/or dental healthcare coverage had Executive remained employed hereunder, in each case until the earlier of (A) the date which is twelve months following the effective date of termination and (B) the commencement of Executive's coverage under another employer's healthcare plan; provided, however, that without limiting any other remedy available hereunder, all payments described in the Section 8.1 shall immediately terminate upon a judge's determination that Executive has breached the provisions of Section 6 or 7 hereof.

      8.2  Termination by the Company for Cause. The Company shall have the right to terminate this Agreement and Executive's employment hereunder "for cause" by giving Executive written notice to that effect. Any such termination of employment shall be effective on the date specified in such notice. In the event of such termination, the Company shall pay to Executive (a) his unpaid Base Salary through the effective date of the termination, and (b) any business expenses remaining unpaid on the effective date of the termination for which Executive is entitled to be reimbursed under Section 5 of this Agreement. For the purpose of this Agreement, "for cause" shall mean (i) commission of a willful and material act of dishonesty in the course of Executive's duties hereunder, (ii) conviction by a court of competent jurisdiction of a crime constituting a felony or conviction in respect of any act involving fraud, dishonesty or moral turpitude, (iii) Executive's performance under the influence of controlled substances, or continued habitual intoxication, during working hours, after the Company shall have provided written notice to Executive and given Executive 30 days within which to commence rehabilitation with respect thereto, and Executive shall have failed to commence such rehabilitation or continued to perform under the influence after such rehabilitation, (iv) frequent or extended, and unjustifiable (not as a result of incapacity or disability) absenteeism which shall not have been cured within 30 days after the Company shall have advised Executive in writing of its intention to terminate Executive's employment in accordance with the provisions of this Section 8.2, in the event such condition shall not have been cured, (v) Executive's personal, willful and continuing misconduct or refusal to perform duties and responsibilities described in Section 2 above, or to carry out directives of the Board of Directors, which, if capable of being cured , shall not have been cured within 60 days after the Company shall have advised Executive

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in writing of its intention to terminate Executive's employment in accordance with the provision of this Section 8.2 or (vi) material non-compliance with the terms of this Agreement, including but not limited to any breach of Section 6 or Section 7 of this Agreement.

      8.3  Termination by Executive Within Six Months After a Change of Control

      Executive shall have the right, to terminate his employment within six months after a Change of Control, by providing the Company at least thirty days notice to that effect. The termination of employment shall be effective on the date specified in such notice, or such earlier date that the Company designates. In the event of such election to terminate, Executive shall be entitled to the same payments as in the case of a termination by the Company of Executive's employment without cause under Section 8.1 hereof.

      8.4  Termination by Executive Other Than for Change of Control. Executive shall have the right to terminate this Agreement and his employment hereunder by giving the Company not less than thirty (30) days prior written notice to that effect. The termination of employment shall be effective on the date specified in such notice. In the event that such notice is given, the Company may require Executive to leave immediately, in which event, Executive must be compensated under this Agreement for the notice period (but in no event for more than 30 days) in a manner commensurate to the compensation Executive would have received during the notice period had his employment not been terminated by him. In the event of such termination, Executive shall be entitled to receive the same payments as would be provided under Section 8.2 in the event of termination for cause.

      8.5  Death, Incapacitation or Disability.

            a.  Death. If Executive dies during his employment hereunder, this Agreement shall terminate upon the date of Executive's death. In the event of any such termination, the Company shall pay to Executive's representative or his estate the same payments as if he was terminated without cause under Section 8.1 hereof.

            b.  Incapacitation or Disability. In the event that Executive is incapacitated or disabled by reason of illness or physical or mental disability from performing Executive's duties hereunder with or without reasonable accommodation (which shall be deemed to have occurred (i) when Executive has become eligible for total disability benefits under the Company's long-term group disability policy, if any, or, if no policy is then in effect, (ii) when such incapacity or disability, as defined below, shall have existed for either (A) one continuous period of six months or (B) a total of seven months out of any twelve consecutive months), the Company shall have the right to terminate Executive's employment hereunder by giving thirty (30) days' written notice to Executive to that effect. If Company terminates Executive pursuant to this paragraph, the termination of employment shall be effective on the date specified in such notice but in no event shall that date be sooner than the date determined under clause (i), or if no long term disability policy is in effect then the date determined in clause (ii). In the event of any such termination, the Company shall pay Executive the same amounts as provided under Section 8.1 hereof for a termination without cause. By way of clarification, nothing herein is intended to imply or state that salary or other compensation is due Executive for the period Executive is absent from work due to disability or incapacity. Except as specifically set forth in this Article

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8.5 or otherwise required by law, Executive is not eligible for and will not be paid any Base Salary or other compensation during any period in which Executive is not actively employed, including but not limited to any period of incapacity, disability, or inability to perform his job duties with or without reasonable accommodation. During any such period, Executive shall be limited to disability benefits, if any, to which Executive may be eligible. Notwithstanding the other provisions of this paragraph, in no event may Executive be terminated under this section 8.5 earlier than any time allowed under applicable law. For purposes of clause (ii), an Executive "disability" shall mean a physical or mental impairment which renders Executive unable to perform the essential functions of his position, even with reasonable accommodation which does not impose an undue hardship on the Company, and "incapacity" as in used clause (ii) shall be limited only to such disability which substantially prevents the Company from availing itself of the services of Executive. The Company reserves the right, in good faith, to make this determination of incapacity or disability under clause (ii) based upon information supplied by Executive and/or his medical personnel, as well as information from medical personnel (or others) selected by the Company or its insurers.

      8.6  Miscellaneous Termination Provisions. Executive, upon termination or expiration of employment for any reason, hereby irrevocably promises to:

            a.  Return all property of the IGI Companies in his possession or within his custody and control wherever located immediately upon such termination.

            b.  Participate in an exit interview with a designated person or persons of Company if requested by Company.

            c.  Subject to obligations under applicable laws and regulations, not publicly make any statements or comments that disparage the reputation of any of the IGI Companies or their senior officers or directors.

            d.  Upon a termination under Sections 8.1, 8.3, or 8.5 hereof all of Executive's options and stock grants shall vest at the later of (i) upon termination and (ii) the earliest time permitted under Section 409A of the Internal Revenue Code, such that Executive is not subject to additional taxes under such section. Upon a termination under Section 8.2, all unvested stock options and restricted stock grants shall be forfeited and shall not vest.

            e.  Upon a termination of Executive's employment for any reason Executive shall immediatelysubmit his written resignation as a director of IGI and each IGI Company. In addition to any other rights or remedies of the Company available at law, the Company shall be entitled to equitable relief in any court of competent jurisdiction, including, without limitation, temporary injunction and permanent injunction for Executive's breach of this Section 8.6(e).

9.  REMEDIES

      9.1.  Equitable Relief. Executive acknowledges that the services to be rendered by him are of a special, unique and extraordinary character and that it would be extremely difficult or impracticable to replace such services, that the material provisions of this Agreement are of crucial importance to the Company and that any damage caused by the breach of Sections 6, 7

<PAGE>

or 8.6(e) of this Agreement would result in irreparable harm to the business of the Company for which money damages alone would not be adequate compensation. Accordingly, Executive agrees that if he violates Sections 6, 7 or 8.6(e) of this Agreement, the Company shall, in addition to any other rights or remedies of the Company available at law, be entitled to seek equitable relief in any court of competent jurisdiction, including, without limitation, temporary injunction and permanent injunction.

10.  WITHHOLDING

      10.1  Each payment to Executive under this Agreement shall be reduced by any amounts required to be withheld by the Company from time to time under applicable laws and regulations then in effect.

11.  EXECUTIVE'S REPRESENTATIONS AND WARRANTIES

      11.1  General. Executive represents and warrants to the Company that the execution of this Agreement and the performance of his duties as contemplated hereunder do not conflict with any other agreement, law, rule, regulation, or court order by which he is bound.

      11.2  No Impairment. Executive represents and warrants that he is not subject to any agreement or contract that would preclude or impair, in any way, his ability to carry out his duties under this Agreement for the Company.

      11.3  No Confidential Information. Executive has not removed from any prior employer any confidential information.

      11.4  No Restrictive Agreements. Executive represents and warrants that, Executive has not heretofore entered into, has not been and is currently not subject to the provisions of, any employment contract, sales and purchase agreement or other agreement (whether oral or written) of any nature whatsoever with any other organization, individual or business entity, which prevents or restricts Executive from competing with, or soliciting the clients, customers, business or employees (including, without limitation for the purposes of hiring such employees) of, such other organization, individual or business entity or any other entity for any period of time or within any geographical area, whether heretofore expired or not ("Pre-existing Agreements"), other than such contracts or agreements as Executive has heretofore disclosed to Company in writing.

12.  INTELLECTUAL PROPERTY AND OWNERSHIP OF BUSINESS

      12.1  Ownership of Records. Executive agrees that all papers, documents, records, business accounts, generated by Executive during the conduct of such business or given to Executive during and in the course of his employment with Company are the exclusive property of the Company and shall remain with the Company upon Executive's termination.

      12.2  Intellectual Property. Executive further agrees to assign without further consideration all intellectual property, including but not limited to inventions, discoveries or any material produced by him during the course of his employment hereunder (including

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modifications or refinements of such materials) to the Company in their entirety. Such assignment and transfer is a complete and total assignment and transfer of any right Executive may have in such intellectual property and includes any patent, copyright, trade or service mark or the right to obtain any such patent, copyright, trade or service mark, and any trade secret rights in such material. This provision does not entitle Executive to any additional compensation, with such compensation, if any, being entirely within the discretion of the Company.
13.  ENTIRE AGREEMENT; NO AMENDMENT
13.1  No agreements or representations, oral or otherwise, express or implied, have been made by either Party, with respect to Executive's employment by any IGI Company, that are not set forth expressly in this Employment Agreement. This Agreement supersedes and cancels any other prior agreement relating to Executive's employment by any IGI Company, except that Executive shall remain liable for any breaches of any provisions relating to restrictive covenants (including non-solicitation, non-compete, non-hire) and confidentiality contained in any such prior agreements. No amendment or modification of this Agreement shall be valid or binding unless made in writing and signed by the Party against whom enforcement thereof is sought.
14.  NOTICES
14.1  All notices, demands and requests of any kind which either Party may be required or may desire to serve upon the other Party hereto in connection with this Agreement shall be delivered only by courier or other means of personal service, which provides written verification of receipt, or by registered or certified mail return receipt requested (each, a "Notice"). Any such Notice delivered by registered or certified mail shall be deposited in the United States mail with postage thereon fully prepaid or if by courier then deposited with the courier. All Notices shall be addressed to the Parties to be served as follows:
(a)	If to the Company, at the Company's address set forth on the first page hereof.
	Copy to:
	William A. Despo
	St. John & Wayne, L.L.C.
	2 Penn Plaza East
	Newark, New Jersey 07105
	William B. Oberdorf
	St. John & Wayne, L.L.C
	2 Penn Plaza East
	Newark, New Jersey 07105
(b)	If to Executive, at Executive's address set forth on the first page hereof

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Either of the Parties hereto may at any time and from time to time change the address to which notice shall be sent hereunder by notice to the other Party given under this Section. All such notices, requests, demands, and other communications shall be effective when received at the respective address set forth above or as then in effect pursuant to any such change.

15. WAIVERS

      15.1  No waiver of any default or breach of this Agreement shall be deemed a continuing waiver or a waiver of any other breach or default.

16.  GOVERNING LAW

      16.1  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF Delaware WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

17.  SEVERABILITY

      17.1  The provisions of this Agreement are intended to be interpreted in a manner which makes them valid, legal, and enforceable. In the event any provision of this Agreement is found to be partially or wholly invalid, illegal or unenforceable, such provision shall be modified or restricted to the extent and in the manner necessary to render it valid, legal, and enforceable. It is expressly understood and agreed between Executive and the Company that such modification or restriction may be accomplished by mutual accord between the Parties or, alternatively, by disposition of a court of law. If such provision cannot under any circumstances be so modified or restricted, it shall be excised from this Agreement without affecting the validity, legality or enforceability of any of the remaining provisions.

18.  ASSIGNMENT

      18.1  Executive may not assign any rights (other than the right to receive income hereunder) under this Agreement without the prior written consent of the Company. This Agreement may be assigned without the consent of Executive, and the provisions of this Agreement shall be binding upon and shall inure to the benefit of the assignee hereof.

19.  MISCELLANEOUS

      19.1  For the avoidance of doubt, the provisions of sections 6, 7, and any other ongoing duties of the parties hereto shall survive termination or expiration of this Agreement.

20.  COUNTERPARTS

      20.1  This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

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21.  HEADINGS

      21.1  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

22.  CONSTRUCTION OF AGREEMENT

      22.1  All Parties agree that this Agreement shall be construed in such a manner so as not to favor one party or the other regardless of which party has drafted this Agreement.

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
	IGI, Inc.
	By:	/s/  Carlene A. Lloyd
		Name:  Carlene A. Lloyd
		Title:  VP of Finance
		Date:  11/15/06    Time:  9:00 AM
		/s/  Rajiv Mathur
		Rajiv Mathur	11/7/06

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EX-10

Exhibit 10.53
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement is entered into as of November ___, 2006 by and between IGI, Inc., a Delaware corporation with an address of 105 Lincoln Avenue, Buena, New Jersey 08310 ("Borrower") and Pharmachem Laboratories, Inc. with an address of 266 Harrison Avenue, Kearny, New Jersey 07032 (together with its successors and assigns, "Lender").
For value received, and in consideration of the granting by Lender of financial accommodations to or for the benefit of Borrower, including without limitation respecting the Obligations (as hereinafter defined), Borrower represents to and agrees with Lender, as of the date hereof and as of the date of each loan, credit and/or other financial accommodation, as follows:
I.	THE LOAN
1.	Revolving Loans. Lender agrees to make revolving loans (the "Revolving Loans") to or for the account of Borrower, upon Borrower's request therefor, in an aggregate amount of a maximum of One Million Dollars ($1,000,000.00) (the "Revolving Loan Amount") or such greater amounts as may from time to time be established by Lender, subject to the terms and conditions set forth herein. The Revolving Loans shall be evidenced by that certain Revolving Note, of even date herewith (the "Revolving Note") by Borrower in favor of Lender in the face amount of the Revolving Loan Amount. This Agreement, the Revolving Note, and any and all documents, amendments or renewals executed and delivered in connection with any of the foregoing are collectively hereinafter referred to as the "Loan Documents." Amounts borrowed and repaid may be reborrowed one or more times.
2.	Revolving Loan Record. Lender shall keep a record of all Revolving Loans, and payments thereon and other appropriate debits and credits as provided by this Agreement.
3.	Interest. Interest respecting the Revolving Loans will be charged to Borrower on the principal amount from time to time outstanding at the rate specified in the Revolving Note.
4.	Maturity. All loans and advances made respecting the Revolving Loans shall be payable to Lender on the twelfth (12) month anniversary of this Agreement.
5.	Overadvances. Any Revolving Loans that may be made, in Lender's sole discretion, in excess of the Revolving Loan Amount shall not affect the obligations of Borrower or any of Lender's rights or remedies hereunder or under the Loan Documents or otherwise. All such Revolving Loans shall be secured by the Collateral, as hereinafter defined, and shall be due and payable in accordance with the terms of the Revolving Note, and shall bear interest at the rate set forth in the Revolving Note.
6.	Authorized Persons; Advances. Any person duly authorized by a general borrowing resolution of Borrower, or in the absence of such a resolution, the President, Treasurer or

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	any Vice President of Borrower, may request discretionary loans hereunder. Such requests shall be in writing. Lender shall incur no liability to Borrower in acting upon any request referred to herein which Lender believes in good faith to have been made by an authorized person or persons. Each loan hereunder may be paid to Borrower or as Borrower directs or may be applied to any Obligations as Lender may elect.
7.	Monthly Statement. Lender will, at the end of each month, render to Borrower a statement of the Revolving Loan Account, showing all applicable credits and debits. Lender's failure or delay in respect of this obligation shall not affect its rights hereunder.
8.	Secured Promissory Note Dated October 9, 2006. Upon execution and delivery of this Loan and Security Agreement and the Revolving Promissory Note by Borrower to Lender, the Secured Promissory Note Dated October 9, 2006 in the amount of $100,000 from Borrower to Lender (the "Secured Note") shall be deemed paid in full and the Lender shall mark the Secured Note paid in full and return the Secured Note to the Borrower together with the Mortgage dated October 9, 2006 filed on              , 2006 with the County Clerk's Office of Atlantic County for the property located on Lot No.     , Block No.      of the tax map of the Township of Buena Vista, Atlantic County, New Jersey endorsed for filing the Mortgage is released and satisfied or other document satisfactory to counsel to the Borrower that is in recordable form to indicate that the Mortgage has been satisfied and released by the Lender. Any principal balance and accrued and unpaid interest owned by Borrower on the Secured Note shall be deemed paid to the Lender by drawing upon the Revolving Promissory Note underlying this Loan Agreement, and such amount should be deemed owed under the Revolving Promissory Note.
II.	GRANT OF SECURITY INTEREST
1.	Grant of Security Interest. In consideration of Lender's extending credit and other financial accommodations to or for the benefit of Borrower, Borrower hereby grants to Lender a security interest in, a lien on the Collateral (as hereinafter defined). The security interest granted by this Agreement is given to and shall be held by Lender as security for the payment and performance of all Obligations, including, without limitation, all amounts outstanding pursuant to the Loan Documents.
2.	Definitions. The following definitions shall apply:
	"Code" shall mean the New Jersey Uniform Commercial Code (N.J.S.A. 12A:1 et seq.) as amended from time to time.
	"Collateral" shall mean all of Borrower's present and future right, title and interest in and to any and all of the personal property of Borrower that was otherwise unencumbered as of September 30, 2006, whether such property is now existing or hereafter created, acquired or arising and wherever located from time to time, including without limitation: accounts; chattel paper; goods; inventory; equipment (including production, analytic and office equipment); instruments; investment property; documents; commercial tort claims;

<PAGE>  2

	deposit accounts; letter-of-credit rights; general intangibles; supporting obligations; intellectual property of any sort (including without limitation all patents, trademarks, tradedress, and licenses fully or partially owned); and proceeds and products of any of the foregoing.
	"Debtors" shall mean Borrower's customers who are indebted to Borrower.
	"Obligations" shall mean, without limitation, all loans, advances, indebtedness, notes, liabilities, and other amounts, liquidated or unliquidated, owing by Borrower to Lender at any time, of each and every kind, nature and description, arising under this Agreement, and whether secured or unsecured, direct or indirect (that is, whether the same are due directly by Borrower to Lender, or are due under this Agreement, indirectly by Borrower to Lender as endorser, guarantor or other surety), absolute or contingent, due or to be come due, now existing or hereafter arising or contracted, including without limitation, payment when due of all amounts outstanding respecting any of the Loan Documents. Said term shall also include all interest and other charges chargeable to Borrower or due from Borrower to Lender from time to time and all costs and expenses referred to in this Agreement.
	"Person" or "Party" shall mean individuals, partnerships, corporations, limited liability companies and all other entities.
3.	All words and terms used in this Agreement other than those specifically defined herein shall have the meanings accorded to them in the Code.
4.	Use of Collateral. Lender hereby authorizes and permits Borrower to hold, process, sell, use or consume Collateral in the ordinary course of Borrower's business . Borrower is specifically authorized to sell its coating line equipment. Lender also hereby authorizes and permits Borrower to receive from Debtors all amounts due as proceeds of the Collateral at Borrower's own cost and expense and risk, if any, subject to the direction and control of Lender at all times; and Lender may at any time, without cause or notice, if an Event of Default has occurred and is continuing, terminate all or any part of the authority and permission herein or elsewhere in this Agreement granted to Borrower with reference to the Collateral. Until an Event of Default has occurred and is continuing, all proceeds of and collections of Collateral shall be retained by Borrower and may be used solely for the ordinary and usual operations of Borrower's business, as contemplated in a Business Plan . From and after an Event of De fault, all proceeds of and collections of the Collateral shall be held in trust by Borrower for Lender and shall not be commingled with Borrower's other funds or deposited in any bank account of Borrower, and Borrower agrees to deliver to Lender on the dates of receipt thereof by Borrower, duly endorsed to Lender or to bearer, or assigned to Lender as may be appropriate, all proceeds of the Collateral in the identical form received by Borrower. Borrower may license its intellectual property constituting Collateral (i) as permitted by a Business Plan; (ii) in accordance with agreements in effect as of the date hereof and approved by the Board of Directors (the "Board"); (iii) with Lender's written consent; (iv) in the ordinary course of business on a non-exclusive basis; (v) on an exclusive basis in the ordinary course of

<PAGE>  3

	business for rights to formulations and/or formulations in combination with the encapsulation in delivery vehicles; or (vi) approved by the Board.
5.	Records. Borrower shall keep books and records relating to the Collateral in a manner satisfactory to Lender, and shall deliver to Lender from time to time promptly at Lender's request copies of documents of title, copies of invoices, contracts, chattel paper, instruments and any other writings relating thereto, and other evidence of performance of contracts or rendering of services; and any other information with respect to the Collateral which Lender shall deem necessary or effectual to evidence any loan hereunder or Lender's security interest in the Collateral.
6.	Inspection. Lender or its representatives shall have the right, at any time and from time to time, to examine, check, and make copies of any of Borrower's books, records and files; to examine the collateral; and to verify Borrower's compliance with this Agreement.
7.	Purchase Money Security Interests. To the extent Borrower uses proceeds of any loans to purchase Collateral, the payment of such loans shall be on a "First in, first out" basis so that the portion of the loan used to purchase a particular item of Collateral shall be repaid in the order in which Borrower purchased such item.
8.	Search Reports. Within thirty days of request by Lender, Lender shall receive UCC search results under all names used by Borrower during the prior five (5) years, from each jurisdiction where any Collateral is located, from Borrower's States of organization and registration, and where Borrower's principal office is located.
III.	REPRESENTATIONS AND WARRANTIES
1.	Organization and Qualification. Borrower is a duly-organized and validly-existing publicly-held corporation under the laws of Delaware with the exact legal name set forth above. Borrower is in good standing under the laws of Delaware, has the power to own its property and conduct its business as it is now conducted and as proposed to be conducted, and is duly qualified to do business under the laws of each state where the nature of the business done or property owned so requires.
2.	Subsidiaries. Borrower has no subsidiaries other than those stated in Exhibit 21 to it Form 10KSB for the year ending December 31, 2005.
3.	Corporate Records. Borrower's corporate charter, articles of organization or incorporation and all amendments thereto have been duly filed and are in proper order. All outstanding capital stock issued by Borrower was and is properly issued and all books and records of Borrower, including but not limited to its minute books, bylaws and books of account, are accurate and up to date and will be so maintained.

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4.	Title to Properties; Absence of Liens. Borrower has good and clear record and marketable title to the Collateral and the Collateral is free and clear of mortgages, liens, pledges, charges, encumbrances and setoffs, other than the security interest herein granted to Lender. Borrower will warrant and defend Lender's right to and interest in the Collateral against all claims and demands of all persons whatsoever. Within ten days of request of Lender, Borrower will provide Lender with a list of leases and licenses of personal property by Borrower.
5.	Places of Business. The address of Borrower's principal office is correctly set forth above, and Borrower shall, during the term of this Agreement, keep Lender currently and accurately informed in writing of any change in such address.
6.	Valid Obligations. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary corporate action and each represents a legal, valid and binding obligation of Borrower and is fully enforceable according to its terms, except as limited by laws relating to the enforcement of creditor's rights.
7.	Conflicts. There is no provision in Borrower's organizational or charter documents, or in any indenture, contract or agreement to which Borrower is a party which prohibits, limits or restricts the execution, delivery or performance of the Loan Documents.
8.	Governmental Approvals. The execution, delivery and performance of the Loan Documents do not require any filing with or approval by any governmental authority.
9.	Litigation. There are no actions, suits or proceedings pending or, to Borrower's knowledge, threatened against Borrower that might materially adversely affect the ability of Borrower to conduct its business or pay or perform the Obligations, except as disclosed in its filings with the Securities and Exchange Commission and with respect to a certain matter previously disclosed to the Lender.
10.	Accounts and Contract Rights. All accounts arise out of legally enforceable and existing contracts.
11.	Location of Collateral. Borrower will keep Lender informed in writing of the location of the Collateral and of its books and records, and shall not remove the same to another state without giving lender thirty (30) days advance written notice.
12.	Third Parties. Lender shall not be deemed to have assumed any liability to any third party for the correctness, validity, or genuineness of any instruments or any documents or instruments that may be released or endorsed to Borrower by Lender, or for the existence, character, quantity or quality of any assets represented by such instruments or documents, and Lender, by accepting or releasing any security interest in the Collateral shall not be deemed to have assumed any liability or obligation to any supplier or Debtor or any other third party. Borrower agrees to indemnify and defend Lender against all costs arising out of any matter referred to in this paragraph.

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13.	Notification of Damage. Borrower will immediately notify Lender of any loss or damage to, or material diminution of, or any occurrence that would adversely affect the value of, the Collateral.
14.	Taxes. Borrower has timely filed all applicable tax returns and is not in arrears on any tax payments.
IV.	AFFIRMATIVE COVENANTS
1.	Payments and Performance. Borrower will duly and punctually pay and perform all Obligations.
2.	Books and Records; Inspection. Borrower will at all times keep proper books of account in which full, true and correct entries shall be made of its transactions in accordance with GAAP, consistently applied. Borrower will at all reasonable times make its books and records available in its offices for Lender's inspection, and shall render from time to time such statements as Lender shall reasonably request.
3.	Financial Statements. Borrower is a publicly held company that is required to disclose its financial information as required by SEC regulations. If not filed on Edgar, Borrower will furnish to Lender as soon as available, but in any case no later than the date of the public disclosure of its financial statements.
4.	Taxes. Borrower will promptly pay all taxes due which may give rise to a lien upon the Collateral.
5.	Maintenance. Lender may at any time, take such reasonable measures as it deems necessary to preserve and maintain the value of the Collateral, particularly with respect to the Borrower's intellectual property.
6.	Insurance. Borrower shall maintain in force casualty and liability insurance sufficient at all times to preserve the value of the Collateral.
7.	Environmental. Borrower agrees to indemnify and hold Lender harmless from all liability arising from any violation of federal or state environmental laws and regulations by Borrower or from the presence or emanation of hazardous materials from any premises owned or leased by Borrower.
V.	DEFAULT
1.	"Event of Default" shall mean the occurrence of one or more of any of the following not cured within five business days of written notice from Lender in the case of a payment default, or fifteen days in the case of any other default:

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		failure in the timely payment or performance of any Obligation; material breach of any representation, warranty, or covenant of Borrower made herein; the liquidation, termination, or dissolution, or merger or consolidation, of Borrower; the failure of Borrower to pay its debts as they become due, or the filing of a voluntary or involuntary petition in bankruptcy by or against borrower, or similar State proceeding; or the failure to clear or satisfy any final judgment for the payment of money by Borrower within thirty (30) days without stay of execution.
2.	Acceleration. If an Event of Default shall occur, Lender may declare all Obligations immediately due and payable.
Lender is hereby authorized, at its election, after an Event of Default, has occurred and is continuing, and after declaring all Obligations immediately due and payable, upon fifteen (15) business days' written notice to Borrower, to take possession of and/or sell or otherwise dispose of any or all of the Collateral as may be permitted by the Code. Any excess over the Obligations realized by Lender, deducting reasonable costs of collection, shall be paid over to Borrower.
VI.	MISCELLANEOUS
1.	Severability. If any provision of this Agreement is found to be unenforceable, the remainder of this Agreement shall not be affected thereby.
2.	Indemnity. Borrower shall indemnify, defend and hold Lender harmless from any claim against Lender arising from Lender's relationship from Borrower. This indemnity shall survive payment of the Obligations.
3.	Integration. This Agreement and the other Loan Documents constitute the entire agreement of the parties with respect to the subject matter hereof.
4.	Counterparts. This Agreement may be signed in one or more counterparts, all of which shall constitute a single agreement.
5.	Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto.
6.	Further Assurances. The Parties agree to execute and deliver such further documents as may be required to effectuate the intent hereof.
7.	Amendment. This Agreement may only be amended by a writing signed by both parties. No waiver, delay or failure to enforce any provision hereof shall be construed as a continuing waiver of the same or of any other provision.
8.	Notices. All notices shall be deemed delivered when deposited with FedEx or US Express Mail for next day delivery, to the parties at the addresses given above. Lender shall send copies of all notices to William Despo, Seiden Wayne LLC, 2 Penn Plaza East, Newark, NJ 07105.

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9.	Governing Law. This Agreement shall be governed by the laws of New Jersey, and be enforceable only in the State of New Jersey.
10.	Jury Waiver. Borrower, each endorser and guarantor and Lender each hereby knowingly, voluntarily and intentionally, and after an opportunity to consult with legal counsel, (A) waives any and all rights to a trial by jury in any action or proceeding in connection with this Note, any of the obligations of Borrower, each endorser and guarantor to Lender, and all matters contemplated hereby and documents executed in connection herewith, and (B) agrees not to seek to consolidate any such action with any other action in which a jury trial can not be, or has not been, waived. Borrower, each endorser and guarantor and Lender each certifies that neither Lender nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Lender would not in the event of any such proceeding seek to enforce this waiver of right to trial by jury.
11.	Release of Collateral. Upon payment by Borrower of all Obligations, and termination by Borrower of its rights to borrow under this Agreement, Lender's security interest in the Collateral shall automatically be released, and be of no further force and effect.
[Signature page(s) attached]

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EXECUTED as a sealed instrument as of November 30, 2006.
	BORROWER:
	IGI, INC.
	By:	/s/  Frank Gerardi
	Name:	Frank Gerardi
	Title:	Chairman & CEO
	LENDER:
	PHARMACHEM LABORATORIES, INC.
	By:	/s/ David A. Holmes
	Name:	David A. Holmes
	Title:	President & CFO
		Chairman, Board of Directors

<PAGE>  9

EX-10

Exhibit 10.54
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement is entered into as of January 29, 2007 by and between IGI, Inc., a Delaware corporation with an address of 105 Lincoln Avenue, Buena, New Jersey 08310 ("Borrower") and Pinnacle Mountain Partners LLC, a New Hampshire limited liability company with an address of 206 Pinnacle Road, Lyndeborough, New Hampshire 03082 (together with its successors and assigns, "Lender").
For value received, and in consideration of the granting by Lender of financial accommodations to or for the benefit of Borrower, including without limitation respecting the Obligations (as hereinafter defined), Borrower represents to and agrees with Lender, as of the date hereof and as of the date of each loan, credit and/or other financial accommodation, as follows:
I.	THE LOAN
1.	Revolving Loans. Lender agrees to make revolving loans (the "Revolving Loans") to or for the account of Borrower, upon Borrower's request therefor, in an aggregate amount of a maximum of One Million Dollars ($1,000,000.00) (the "Revolving Loan Amount") or such greater amounts as may from time to time be established by Lender, subject to the terms and conditions set forth herein. The Revolving Loans shall be evidenced by that certain Revolving Demand Note, of even date herewith (the "Revolving Note") by Borrower in favor of Lender in the face amount of the Revolving Loan Amount. This Agreement, the Revolving Note, and any and all documents, amendments or renewals executed and delivered in connection with any of the foregoing are collectively hereinafter referred to as the "Loan Documents." Amounts borrowed and repaid may be reborrowed one or more times.
2.	Revolving Loan Record. Lender shall keep a record of all Revolving Loans, and payments thereon and other appropriate debits and credits as provided by this Agreement.
3.	Interest. Interest respecting the Revolving Loans will be charged to Borrower on the principal amount from time to time outstanding at the rate specified in the Revolving Note.
4.	Maturity. All loans and advances made respecting the Revolving Loans shall be payable to Lender on the eighteen month anniversary of this Agreement.
5.	Overadvances. Any Revolving Loans that may be made, in Lender's sole discretion, in excess of the Revolving Loan Amount shall not affect the obligations of Borrower or any of Lender's rights or remedies hereunder or under the Loan Documents or otherwise. All such Revolving Loans shall be secured by the Collateral, as hereinafter defined, and shall be due and payable in accordance

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	with the terms of the Revolving Note, and shall bear interest at the rate set forth in the Revolving Note.
6.	Authorized Persons; Advances. Any person duly authorized by a general borrowing resolution of Borrower, or in the absence of such a resolution, the President, Treasurer or any Vice President of Borrower, may request discretionary loans hereunder. Such requests shall be in writing. Lender shall incur no liability to Borrower in acting upon any request referred to herein which Lender believes in good faith to have been made by an authorized person or persons. Each loan hereunder may be paid to Borrower or as Borrower directs or may be applied to any Obligations as Lender may elect.
7.	Monthly Statement. Lender will, at the end of each month, render to Borrower a statement of the Revolving Loan Account, showing all applicable credits and debits. Lender's failure or delay in respect of this obligation shall not affect its rights hereunder.
II.	GRANT OF SECURITY INTEREST
1.	Grant of Security Interest. In consideration of Lender's extending credit and other financial accommodations to or for the benefit of Borrower, Borrower hereby grants to Lender a security interest in, a lien on and a pledge of the Collateral (as hereinafter defined). The security interest granted by this Agreement is given to and shall be held by Lender as security for the payment and performance of all Obligations, including, without limitation, all amounts outstanding pursuant to the Loan Documents.
2.	Definitions. The following definitions shall apply:
	"Code" shall mean the New Hampshire Uniform Commercial Code (RSA 382-A) as amended from time to time.
	"Collateral" shall mean all of Borrower's present and future right, title and interest in and to any and all of the personal property of Borrower that was otherwise unencumbered as of September 30, 2006, whether such property is now existing or hereafter created, acquired or arising and wherever located from time to time, including without limitation: accounts; chattel paper; goods; inventory; equipment (including production, analytic and office equipment); instruments; investment property; documents; commercial tort claims; deposit accounts; letter-of-credit rights; general intangibles; supporting obligations; intellectual property of any sort (including without limitation all patents, trademarks, tradedress, and licenses fully or partially owned); and proceeds and products of any of the foregoing.

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	"Debtors" shall mean Borrower's customers who are indebted to Borrower.
	"Obligations" shall mean, without limitation, all loans, advances, indebtedness, notes, liabilities, and other amounts, liquidated or unliquidated, owing by Borrower to Lender at any time, of each and every kind, nature and description, arising under this Agreement, and whether secured or unsecured, direct or indirect (that is, whether the same are due directly by Borrower to Lender, or are due under this Agreement, indirectly by Borrower to Lender as endorser, guarantor or other surety), absolute or contingent, due or to be come due, now existing or hereafter arising or contracted, including without limitation, payment when due of all amounts outstanding respecting any of the Loan Documents. Said term shall also include all interest and other charges chargeable to Borrower or due from Borrower to Lender from time to time and all costs and expenses referred to in this Agreement.
	"Person" or "Party" shall mean individuals, partnerships, corporations, limited liability companies and all other entities.
3.	All words and terms used in this Agreement other than those specifically defined herein shall have the meanings accorded to them in the Code.
4.	Use of Collateral. Lender hereby authorizes and permits Borrower to hold, process, sell, use or consume Collateral in the ordinary course of Borrower's business or as permitted by Article V. Lender also hereby authorizes and permits Borrower to receive from Debtors all amounts due as proceeds of the Collateral at Borrower's own cost and expense and risk, if any, subject to the direction and control of Lender at all times; and Lender may at any time, without cause or notice, if an Event of Default has occurred and is continuing, terminate all or any part of the authority and permission herein or elsewhere in this Agreement granted to Borrower with reference to the Collateral. Until an Event of Default has occurred and is continuing, all proceeds of and collections of Collateral shall be retained by Borrower and may be used solely for the ordinary and usual operations of Borrower's business, as contemplated in a Business Plan or as permitted by Article V. From and after an Event of Default, all proce eds of and collections of the Collateral shall be held in trust by Borrower for Lender and shall not be commingled with Borrower's other funds or deposited in any bank account of Borrower, and Borrower agrees to deliver to Lender on the dates of receipt thereof by Borrower, duly endorsed to Lender or to bearer, or assigned to Lender as may be appropriate, all proceeds of the Collateral in the identical form received by Borrower. Borrower may license its intellectual property constituting Collateral (i) as permitted by a Business Plan; (ii) in accordance with agreements in effect as of the date hereof and approved by the Board of Directors; (iii) with Lender's written consent; (iv) in the ordinary course of business on a non-exclusive basis; (v) on an exclusive basis in the ordinary course of business for

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	rights to formulations and/or formulations in combination with the encapsulation in delivery vehicles; or (vi) approved by the Board of Directors.
5.	Records. Borrower shall keep books and records relating to the Collateral in a manner satisfactory to Lender, and shall deliver to Lender from time to time promptly at Lender's request all invoices, original documents of title, contracts, chattel paper, instruments and any other writings relating thereto, and other evidence of performance of contracts or rendering of services; and any other information with respect to the Collateral which Lender shall deem necessary or effectual to evidence any loan hereunder or Lender's security interest in the Collateral.
6.	Inspection. Lender or its representatives shall have the right, at any time and from time to time, to examine, check, and make copies of any of Borrower's books, records and files; to examine the collateral; and to verify Borrower's compliance with this Agreement.
7.	Purchase Money Security Interests. To the extent Borrower uses proceeds of any loans to purchase Collateral, the payment of such loans shall be on a "First in, first out" basis so that the portion of the loan used to purchase a particular item of Collateral shall be repaid in the order in which Borrower purchased such item.
8.	Search Reports. Within thirty days of request by Lender, Lender shall receive UCC and USPTO search results under all names used by Borrower during the prior five (5) years, from each jurisdiction where any Collateral is located, from Borrower's States of organization and registration, and where Borrower's principal office is located.
9.	Borrower agrees to sign documents to perfect and record Lender's security interest.
III.	REPRESENTATIONS AND WARRANTIES
1.	Organization and Qualification. Borrower is a duly-organized and validly-existing publicly-held corporation under the laws of Delaware with the exact legal name set forth above. Borrower is in good standing under the laws of Delaware, has the power to own its property and conduct its business as it is now conducted and as proposed to be conducted, and is duly qualified to do business under the laws of each state where the nature of the business done or property owned so requires.
2.	Subsidiaries. Borrower has no subsidiaries other than those stated in Exhibit 21 to it Form 10KSB for the year ending December 31, 2005.

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3.	Corporate Records. Borrower's corporate charter, articles of organization or incorporation and all amendments thereto have been duly filed and are in proper order. All outstanding capital stock issued by Borrower was and is properly issued and all books and records of Borrower, including but not limited to its minute books, bylaws and books of account, are accurate and up to date and will be so maintained.
4.	Title to Properties; Absence of Liens. Borrower has good and clear record and marketable title to the Collateral and the Collateral is free and clear of mortgages, liens, pledges, charges, encumbrances and setoffs, other than the security interest herein granted to Lender. Borrower will warrant and defend Lender's right to and interest in the Collateral against all claims and demands of all persons whatsoever. Within ten days of request of Lender, Borrower will provide a lender with a list of leases of personal property by Borrower.
5.	Places of Business. The address of Borrower's principal office is correctly set forth above, and Borrower shall, during the term of this Agreement, keep Lender currently and accurately informed in writing of any change in such address.
6.	Valid Obligations. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary corporate action and each represents a legal, valid and binding obligation of Borrower and is fully enforceable according to its terms, except as limited by laws relating to the enforcement of creditor's rights.
7.	Conflicts. There is no provision in Borrower's organizational or charter documents, or in any indenture, contract or agreement to which Borrower is a party which prohibits, limits or restricts the execution, delivery or performance of the Loan Documents.
8.	Governmental Approvals. The execution, delivery and performance of the Loan Documents do not require any filing with or approval by any governmental authority.
9.	Litigation. There are no actions, suits or proceedings pending or, to Borrower's knowledge, threatened against Borrower that might materially adversely affect the ability of Borrower to conduct its business or pay or perform the Obligations, except as disclosed in its filings with the Securities and Exchange Commission and with respect to a certain matter previously disclosed to the Lender.
10.	Accounts and Contract Rights. All accounts arise out of legally enforceable and existing contracts.
11.	Location of Collateral. Borrower will keep Lender informed in writing of the location of the Collateral and of its books and records, and shall not remove the

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	same to another state without giving lender thirty (30) days advance written notice.
12.	Third Parties. Lender shall not be deemed to have assumed any liability to any third party for the correctness, validity, or genuineness of any instruments or any documents or instruments that may be released or endorsed to Borrower by Lender, or for the existence, character, quantity or quality of any assets represented by such instruments or documents, and Lender, by accepting or releasing any security interest in the Collateral shall not be deemed to have assumed any liability or obligation to any supplier or Debtor or any other third party. Borrower agrees to indemnify and defend Lender against all costs arising out of any matter referred to in this paragraph.
13.	Notification of Damage. Borrower will immediately notify Lender of any loss or damage to, or material diminution of, or any occurrence that would adversely affect the value of, the Collateral.
14.	Taxes. Borrower has timely filed all applicable tax returns and is not in arrears on any tax payments.
IV.	AFFIRMATIVE COVENANTS
1.	Payments and Performance. Borrower will duly and punctually pay and perform all Obligations.
2.	Books and Records; Inspection. Borrower will at all times keep proper books of account in which full, true and correct entries shall be made of its transactions in accordance with GAAP, consistently applied and which are, in the opinion of a Certified Public Accountant acceptable to Lender, adequate to determine fairly Borrower's financial condition. Borrower will at all reasonable times make its books and records available in its offices for Lender's inspection, and shall render from time to time such statements as Lender shall reasonably request.
3.	Financial Statements. Borrower is a publicly held company that is required to disclose its financial information as required by SEC regulations. If not filed on Edgar, Borrower will furnish to Lender as soon as available, but in any case no later than the date of the public disclosure of its quarterly and annual financial statements as required by law.
4.	Conduct of Business. Borrower will maintain its existence in good standing, shall conduct its business in accordance with a code of business conduct appropriate for a public company, and shall comply with all laws and regulations applicable to a publicly held company, including without limitation all securities laws and the Sarbanes-Oxley Act of 2002.

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5.	Taxes. Borrower will promptly pay all taxes due which may give rise to a lien upon the Collateral.
6.	Maintenance. Lender may at any time, take such reasonable measures as it deems necessary to preserve and maintain the value of the Collateral, particularly with respect to the Borrower's intellectual property.
7.	Insurance. Borrower shall maintain in force casualty and liability insurance sufficient at all times to preserve the value of the Collateral.
8.	Notice of Default. Within five (5) days of becoming aware of the existence of any condition or event which constitutes an Event of Default, Borrower shall give Lender written notice thereof.
9.	Notice of Change in Representations and Warranties. Borrower will promptly notify Lender in writing if any of the representations or warranties made herein become materially untrue.
10.	Environmental. Borrower agrees to indemnify and hold Lender harmless from all liability arising from any violation of federal or state environmental laws and regulations by Borrower or from the presence or emanation of hazardous materials from any premises owned or leased by Borrower.
11.	President and Chief Executive Officer. The President and Chief Executive Officer of the Borrower, Rajiv Mathur, must remain President and Chief Executive Officer while this Agreement is in effect.

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V.	DEFAULT
1.	"Event of Default" shall mean the occurrence of one or more of any of the following not cured within five business days of written notice from Lender in the case of a payment default, or fifteen days in the case of any other default:
		failure in the timely payment or performance of any Obligation; material breach of any representation, warranty, or covenant of Borrower made herein; the liquidation, termination, or dissolution, or merger or consolidation, of Borrower; the failure of Borrower to pay its debts as they become due, or the filing of a voluntary or involuntary petition in bankruptcy by or against borrower, or similar State proceeding; or the failure to clear or satisfy any final judgment for the payment of money by Borrower within thirty (30) days without stay of execution.
2.	Acceleration. If an Event of Default shall occur, Lender may declare all Obligations immediately due and payable.
Lender is hereby authorized, at its election, after an Event of Default, has occurred and is continuing, and after declaring all Obligations immediately due and payable, upon fifteen (15) business days' written notice to Borrower, to take possession of and/or sell or otherwise dispose of any or all of the Collateral as may be permitted by the Code. Any excess over the Obligations realized by Lender, deducting reasonable costs of collection, shall be paid over to Borrower.
VI.	MISCELLANEOUS
1.	Severability. If any provision of this Agreement is found to be unenforceable, the remainder of this Agreement shall not be affected thereby.
2.	Indemnity. Borrower shall indemnify, defend and hold Lender harmless from any claim against Lender arising from Lender's relationship from Borrower. This indemnity shall survive payment of the Obligations.
3.	Integration. This Agreement and the other Loan Documents constitute the entire agreement of the parties with respect to the subject matter hereof.
4.	Counterparts. This Agreement may be signed in one or more counterparts, all of which shall constitute a single agreement.

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5.	Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto.
6.	Further Assurances. The Parties agree to execute and deliver such further documents as may be required to effectuate the intent hereof.
7.	Amendment. This Agreement may only be amended by a writing signed by both parties. No waiver, delay or failure to enforce any provision hereof shall be construed as a continuing waiver of the same or of any other provision.
8.	Notices. All notices shall be deemed delivered when deposited with FedEx or US Express Mail for next day delivery, to the parties at the addresses given above. Lender shall send copies of all notices to William Despo, Seiden Wayne LLC, 2 Penn Plaza East, Newark, NJ 07105.
9.	Governing Law. This Agreement shall be governed by the laws of, and enforceable only in, the State of New Hampshire.
10.	Jury Waiver. Borrower, each endorser and guarantor and Lender each hereby knowingly, voluntarily and intentionally, and after an opportunity to consult with legal counsel, (A) waives any and all rights to a trial by jury in any action or proceeding in connection with this Note, any of the obligations of Borrower, each endorser and guarantor to Lender, and all matters contemplated hereby and documents executed in connection herewith, and (B) agrees not to seek to consolidate any such action with any other action in which a jury trial can not be, or has not been, waived. Borrower, each endorser and guarantor and Lender each certifies that neither Lender nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Lender would not in the event of any such proceeding seek to enforce this waiver of right to trial by jury.
11.	Release of Collateral. Upon payment by Borrower of all Obligations, and termination by Borrower of its rights to borrow under this Agreement, Lender's security interest in the Collateral shall automatically be released, and be of no further force and effect.
[Signature page(s) attached]

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EXECUTED as a sealed instrument as of January 30, 2007.
	BORROWER:
	IGI, INC.
	By:	/s/  Rajiv Mathur
	Name:	Rajiv Mathur
	Title:	President and Chief Executive Officer
	LENDER:
	PINNACLE MOUNTAIN PARTNERS LLC
	By:	/s/ Jane E. Hager
	Name:	Jane E. Hager
	Title:	President

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EX-10

Exhibit 10.55
IGI, INC.
SUBSCRIPTION AGREEMENT (the "Agreement")
Date: February 5, 2007
To:	IGI, Inc.
	105 Lincoln Avenue
	Buena, NJ 08310
	Attention:	Carlene Lloyd
		Vice President of Finance
Reference is made to (a) IGI, Inc.'s 10-K for the Year ended December 31, 2005 and its filings under the Securities Exchange Act of 1934, as amended since the date of such Form 10-K (the "Exchange Act Filings").
1.     The undersigned subscriber (the "undersigned") hereby subscribes (the "Subscription") for 1,500,000 shares ("Shares") of common stock, $.01 par value (the "Common Stock"), of IGI, Inc. (the "Company") at a price of $1.00 per share, for an aggregate purchase price of $1,500,000.
In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, in each case prior to the earlier of the (i) payment of the purchase price and (ii) the termination of this Agreement, the purchase price per share and the number of Shares shall be appropriately adjusted by the Company to the extent the Board shall determine, in good faith, that such an adjustment is necessary and appropriate.
The undersigned agrees to deliver the One Million, Five Hundred Thousand Dollar Subscription price for the securities subscribed for herein in immediately available funds within three days of the notification of the approval of the listing of the Shares on the American Stock Exchange.
The undersigned agrees that this Subscription is and shall be irrevocable, but that it may be rejected, in whole or in part, by the Company, and that the obligations of the undersigned hereunder will terminate if this Subscription is not accepted by the Company. The undersigned understands that the Company will notify it if this Subscription has been rejected for any reason. The undersigned further understands that this subscription is subject to the unconditional approval of the listing of the Shares on the American Stock Exchange (unless such condition is waived by the Company). IF THE SHARES ARE NOT APPROVED FOR LISTING ON THE AMERICAN STOCK EXCHANGE BY APRIL 1, 2007, THEN THIS AGREEMENT SHALL BE TERMINATED AND NO PARTY SHALL BE ENTITLED TO DAMAGES ARISING FROM SUCH TERMINATION.
2.    The undersigned understands and agrees that an investment in the Shares is not a liquid investment. In particular, the undersigned recognizes, acknowledges and agrees that:

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The undersigned must bear the economic risk of investment in the Shares for an indefinite period of time, since the Shares have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or applicable state securities laws ("State Acts"), and, therefore, cannot be resold or otherwise disposed of sold unless either they are subsequently registered under the Securities Act and applicable State Acts, or an exemption from registration is available.
3.    The undersigned represents to and agrees with the Company that:
(a)   The undersigned and his, her or its purchaser representative(s), if any, have carefully reviewed and understand the risks of and other considerations relating to a purchase of the Shares.
(b)   The undersigned and his, her or its purchaser representative(s), if any, have had all of their inquiries to the Company answered in full, and have been furnished all requested materials relating to the Company, the offering and sale of the Shares.
(c)   Neither the undersigned nor his, her or its purchaser representative(s), if any, have been furnished any offering literature by the Company or any of its affiliates, associates or agents, other than the Exchange Act Filings (including the exhibits and attachments thereto), and the undersigned has not received or heard any print or electronic media advertising with respect to this offering.
(d)   The undersigned is acquiring the Shares for which it hereby subscribes as principal for its own investment account, and not (1) with a view to the resale or distribution of all or any part thereof or (2) on behalf of another person who has not made the foregoing representation. The undersigned agrees not to resell or otherwise dispose of the Shares, except as permitted by applicable law, including, without limitation, any applicable regulation under the Securities Act or any State Act.
(e)   The undersigned is an "accredited investor", as defined in Rule 501(a) of Regulation D promulgated pursuant to the Act by virtue of the fact that (INITIAL APPLICABLE CHOICES):
	______   (i)   The undersigned had individual income (exclusive of any income attributable to spouse) of more than $200,000 in each of the most recent two years or joint income with the undersigned's spouse in excess of $300,000 in each of such years and reasonably expects to have income of at least the same level for the current year.
	______   (ii)   The undersigned has an individual net worth, or a combined net worth with the undersigned's spouse, in excess of $1,000,000. For purposes of this Subscription Agreement, "individual net worth" means the excess of total assets at fair market value, including home and personal property, over total liabilities.

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	______   (iii)      The undersigned is a director or executive officer of the Company.
Accredited partnership, corporation, trust or other entity investors must initial at least one of the following statements.
	______   (iv)   The undersigned is a bank as defined in section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; an insurance company as defined in section 2(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of the Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of $5, 000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.
	______   (v)   The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940.
	______    (vi)   The undersigned is an organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed of the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
	______   (vii)   The undersigned is a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.
	______   (viii)   All of the equity owners of the undersigned qualify as accredited investors under one of the statements set forth in (e) above.
(f)   The undersigned has evaluated the risks of investing in the Company and has substantial experience in making investment decisions of this type or is relying on his,

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her or its professional advisors or purchaser representative(s), if applicable, in making this investment decision.

      (g)      The undersigned understands the fundamental aspects of and risks involved in an investment in the Company, including, without limitation, (i) the speculative nature of the investment, (ii) the financial hazards involved, including the risk of losing the entire investment, (iii) the lack of liquidity and the restrictions on transferability of the Shares, (iv) the business of the Company, (v) the lack of registration rights regarding the Shares, (vi) the fact that the Company has a recent history of losses, limited capital resources and may require additional financing within the next twelve months, (vii) that the Company is subject to a notice of delisting by the American Stock Exchange, (viii) that the Company's sale leaseback transaction and sale of real property in Buena, New Jersey has not closed and may not close; that such sale-leaseback/sale is terminable by will by either party; however if the Company wish es to terminate said transaction in may be subject to litigation (including, without limitation, by reason of detrimental reliance), and there can be no assurance the Company will prevail in any such suit and (ix) that in connection with this transaction, a financial advisor (which the undersigned represents is not an affiliate of the undersigned) will receive a fee of $25,000 in common stock plus an additional $112,500 (7.5% of $1,500,000) plus a warrant to purchase 150,000 shares of the Company's Common Stock at an exercise price of $1, expiring three years from issuance and that proceeds of the Subscription will be used to pay the cash amounts listed above.

      (h)   The address set forth on the Subscription Agreement Signature Page hereof is the undersigned's true and correct principal address, and the undersigned has no present intention of becoming a resident of any other state or jurisdiction.

      (i)   The undersigned (i) is authorized and otherwise duly qualified to purchase and hold the Shares, (ii) has its principal place of business at its residence address set forth on the Subscription Agreement Signature Page hereof, (iii) has not been formed for the specific purpose of acquiring the Shares, and (iv) has submitted and executed all documents required pursuant to the Certificate of Corporate Purchaser. The person executing this Subscription Agreement and all other documents related to the offering hereby represents that he is duly authorized to execute all such documents on behalf of the entity.

      (j)   All of the information that the undersigned has heretofore furnished to the Company, or that is set forth herein with respect to itself, its financial position, and its business and investment experience, is correct and complete as of the date hereof, and, if there should be any material change in such information prior to the closing of the sale of the Shares, the undersigned will immediately furnish the revised or corrected information to the Company.

      (k)   No person other than the undersigned will have a direct or indirect interest in the Shares subscribed for hereby.

      (l)   The undersigned consents to the placement of a legend on any certificate or other document evidencing the Shares stating that they have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale thereof.

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The undersigned is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such securities.

      4.    The foregoing representations are true and accurate as of the date hereof, shall be true and accurate as of the date of the closing of this offering, and shall survive such closing. If, in any respect, such representations shall not be true and accurate prior to or upon the closing of this offering and the sale of the Shares, the undersigned shall give written notice of such fact to the Company, specifying which representations are not true and accurate and the reasons therefor, with a copy to his, her or its purchaser representative(s), if any.

      5.    Subject to Section 14 hereof, the undersigned agrees to indemnify and hold harmless the Company, its affiliates and respective legal counsel, and each of the officers, directors, partners and shareholders of each, from and against any loss, damage or liability in excess of $50,000 due to or arising out of a breach of any of the foregoing representations, up to the amount of the Subscription. NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL THE UNDERSIGNED BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES OR EXPENSES, INCLUDING DAMAGES FOR LOST PROFITS, LOSS OF OPPORTUNITY OR USE OF ANY KIND, SUFFERED BY THE COMPANY, WHETHER IN CONTRACT, TORT OR OTHERWISE.

      6.    If the undersigned is more than one person or entity, the obligations of the undersigned shall be joint and several and the representations and the indemnification obligation herein contained shall be deemed to be made by and be binding upon each such person and his, her or its heirs, executors, administrators, successor and assigns.

      7.    Promptly upon receipt and acceptance of all subscription documents and payment (collected funds) for the Shares, the Company shall issue and mail the stock certificates so purchased to investors.

      8.    By acceptance of this Subscription, the Company represents and warrants as follows as of the date hereof:

      a.   The Company is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation, is in good standing as a domestic corporation under the laws of such jurisdiction and has the requisite corporate power and authority to own its properties and to conduct its business as now being conducted.

      b.   The Company has all requisite legal and corporate power and authority, and has taken all requisite corporate action to duly authorize, execute and deliver this Agreement, to sell and issue the Shares and to carry out and perform all of its other obligations set forth herein. The Company's execution, delivery and performance of this Agreement and the issuance and sale of the Shares do not and will not conflict with, or result in any breach or violation of or constitute a material default under any provision of the charter or by-laws of the Company or any agreement, or any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company except for any such defaults that would not have a material adverse effect. Upon the execution and delivery of this Agreement by the Company, and assuming the valid execution and delivery hereof by the undersigned, this Agreement will

<PAGE>  5

constitute the valid and binding obligation of the Company, enforceable in accordance with its terms.

      c.   When issued and paid for in accordance with the terms hereof, the Shares will be validly issued and outstanding, fully paid and non-assessable, will have been issued in compliance with all federal and state securities laws (assuming the accuracy of the undersigned's representations and warranties herein) and will not have been issued in violation of any preemptive right, anti-dilution right, resale right, right of first refusal or similar right and will not trigger any anti-dilution or similar right.

      d.    Except as otherwise disclosed, since the date of the latest quarterly financial statements included within the Company's filings with Securities and Exchange Commission (the "Commission"), there has not been any change in the assets, liabilities, results of operations, conditions (financial or otherwise), business or prospects of the Company or any of the subsidiaries which are, either individually or in the aggregate, materially adverse to the Company and its subsidiaries, taken as a whole. As of their respective filing dates, no documents that the Company filed with the Commission under the Exchange Act (including pursuant to Sections 13, 14 and 15(d) of the Exchange Act) for the two years preceding the date hereof contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which th ey were made, not misleading.

      8A.Subject to Section 14 hereof, the Company agrees to indemnify and hold harmless the undersigned, its affiliates and respective legal counsel, and each of the officers, directors, partners and shareholders of each, from and against any loss, damage or liability in excess of $50,000 due to or arising out of a breach of any of the foregoing representations, up to the amount of the Subscription. NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL THE COMPANY BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES OR EXPENSES, INCLUDING DAMAGES FOR LOST PROFITS, LOSS OF OPPORTUNITY OR USE OF ANY KIND, SUFFERED BY THE UNDERSIGNED, WHETHER IN CONTRACT, TORT OR OTHERWISE

      9.     By acceptance of this Subscription the Company covenants as follows:

      If after the date hereof (but prior to January 1, 2010) the Company proposes to register any of its common stock under the Securities Act in a primary offering (other than pursuant to a demand registration or pursuant to a registration on Forms S-4 or S-8 or any successors to such forms) and the registration form to be used may be used for the registration and contemplated disposition of the Shares (a "Piggyback Registration"), the Company will give prompt written notice to the undersigned. The Company will include in such registration all Shares with respect to which the Company has received written requests for inclusion therein within 30 days after the receipt of the Company's notice, subject to the right of the Company to cutback Shares (excluded Shares, being the "Cutback Shares") to be included, if the inclusion of such shares, in the reasonable opinion of the Company or the underwriter, in an underwritten offering, would adversely affect the offer ing. If any other person also has piggyback registration rights with respect to such offering then the cut-back shall be on a pro-rata basis according to the number of shares to which each party is entitled to register. The Piggyback Registration Rights

<PAGE>  6

shall only be exercisable once (unless there are Cutback Shares, in which case, they shall be exercisable the minimum number of times necessary to register all Cutback Shares). Notwithstanding the foregoing, the Piggyback Registration rights shall terminate on January 1, 2010 (whether or not there remain any unregistered Cutback Shares).

      10.   This Subscription is not transferable or assignable by the undersigned.

      11.  This Subscription, upon acceptance by the Company, shall be binding upon the heirs, executors, administrators, successors and assigns of the undersigned.

      12.  This Subscription Agreement and the rights of the parties hereunder shall be governed in all respects by the laws of the State of New Jersey, wherein the terms of this Agreement were negotiated, excluding to the greatest extent permitted by law any rule of law that would cause the application of the laws of any jurisdiction other than the State of New Jersey.

      13.  This Subscription Agreement waiver may be executed in one or more counterparts and by different parties hereto in separate counterparts, including by facsimile, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.

      14.  The representations and warranties of the parties hereto shall survive for one year from the date hereof.

      15.  This Agreement represents the entire agreement between the parties hereto with respect to the subject matter hereof. The parties agree and acknowledge that there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company is or may be obligated to issue any equity securities of any kind to the undersigned or its affiliates, except for the Shares being sold under this Agreement, and there are no voting agreements, buy-sell agreements, options, warrants or rights of first purchase agreements, rights of first refusal, or other agreements of any kind among the Company and the undersigned or its affiliates relating to the securities of the Company. This Agreement may only be amended in a writing signed by each party.

16.      This Agreement has no intended third party beneficiaries.

Next Page is the Signature Page

<PAGE>  7

IGI, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned hereby subscribes for the principal amount of the Shares set forth below. Capitalized terms used herein have meanings ascribed to them in the Subscription Agreement. Your subscription is subject to the Shares being unconditionally approved for listing by the American Stock Exchange.
1.    Dated: February 6, 2007
2.    Principal amount of Shares: $1,500,000 (1,500,000 Shares)
Pharmachem Laboratories, Inc.
Name of Person/Entity Subscribing
Pharmachem Laboratories, Inc.
Name in which the Shares are to
be registered
Signature of Subscriber
By: /s/ David Holmes
Name:  David Holmes	Taxpayer Identification Number
Title:    Chief Executive Officer
Address:
266 Harrison Avenue
Kearny, New Jersey 07032
Subscription for 1,500,000 Shares at an aggregate price of $1,500,000 accepted as of Feb 6, 2007
IGI, INC.
	By:  /s/ Rajiv Mathur
	Name:  Rajiv Mathur
	Title:    Chief Executive Officer

<PAGE>  8

CERTIFICATE OF CORPORATE PURCHASER
I HEREBY CERTIFY THAT:
	a.   The investor has been duly formed and is validly existing and has full power and authority to invest in IGI, Inc. (the "Company"). The investor has not been formed for the purpose of investing in the Shares.
	b.   The investor's Subscription Agreement has been duly and validly authorized, executed, and delivered by the investor and, upon acceptance by the Company, will constitute the valid, binding, and enforceable obligation of the investor.
Dated: February 5th , 2007		Pharmachem Laboratories, Inc.
		By:  /s/ David Holmes
		Name:  David Holmes
		Title:    Chief Executive Officer

<PAGE>  9

EX-10

Exhibit 10.56
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
IGI, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. 1	150,000 shares
Original Issue Date: March 7, 2007
THIS CERTIFIES THAT, FOR VALUE RECEIVED, LANDMARK FINANCIAL CORPORATION or its registered assigns ("Holder") is entitled to purchase, on the terms and conditions hereinafter set forth, at any time or from time to time from the date hereof until 5:00 p.m., Eastern Time, on the second anniversary of the Original Issue Date set forth above, or if such date is not a day on which the Company (as hereinafter defined) is open for business, then the next succeeding day on which the Company is open for business (such date is the "Expiration Date"), but not thereafter, to purchase up to one hundred and fifty thousand (150,000) shares of the Common Stock, $.01 par value (the "Common Stock"), of IGI, Inc., a Delaware corporation (the "Company"), at $1.00 per share (the "Exercise Price"), such number of shares and Exercise Price being subject to adjustment upon the occurrence of the contingencies set forth in this Warrant. Each shar e of Common Stock as to which this Warrant is exercisable is a "Warrant Share" and all such shares are collectively referred to as the "Warrant Shares."
Section     Exercise of Warrant; Conversion of Warrant.
(a)    This Warrant may, at the option of Holder, be exercised in whole or in part from time to time by delivery to the Company at its principal office, Attention: Vice President of Finance, on or before 5:00 p.m., Eastern Time, on the Expiration Date, (i) a written notice of such Holder's election to exercise this Warrant (the "Exercise Notice"), which notice may be in the form of the Notice of Exercise attached hereto, properly executed and completed by Holder or an authorized officer thereof, (ii) a check or other funds (the "Funds") payable to the order of the Company, in an amount equal to the product of the Exercise Price multiplied by the number of Warrant Shares specified in the Exercise Notice, and (iii) this Warrant (the items specified in (i), (ii), and (iii) are collectively the "Exercise Materials").
(b)    As promptly as practicable, and in any event within five (5) business days after the later of (i) its receipt of the Exercise Materials and (ii) clearing of Funds, the Company shall execute or cause to be executed and delivered to Holder a certificate or certificates representing the number of Warrant Shares specified in the Exercise Notice, together with cash in lieu of any fraction of a share, and if this Warrant is partially exercised, a new warrant on the same terms for the unexercised balance of the Warrant Shares. The stock certificate or certificates shall be registered in the name of Holder or such other name or names as shall be designated in the Exercise Notice. The date on which the Warrant shall be deemed to have been exercised (the "Effective Date"), and the date the person in whose name any

<PAGE>

certificate evidencing the Common Stock issued upon the exercise hereof is issued shall be deemed to have become the holder of record of such shares, shall be the later of (i) the date the Company receives the Exercise Materials and (ii) the dates the Funds clear, irrespective of the date of delivery of a certificate or certificates evidencing the Common Stock issued upon the exercise or conversion hereof, provided, however, that if the Exercise Materials are received by the Company on a date on which the stock transfer books of the Company are closed, the Effective Date shall be the next succeeding date on which the stock transfer books are open. All shares of Common Stock issued upon the exercise or conversion of this Warrant will, upon issuance, be fully paid and nonassessable and free from all taxes, liens, and charges with respect thereto.
Section     Adjustments to Warrant Shares.  The number of Warrant Shares issuable upon the exercise hereof shall be subject to adjustment as follows:
	(a)    In the event the Company is a party to a consolidation, share exchange, or merger, or the sale of all or substantially all of the assets of the Company to, any person, or in the case of any consolidation or merger of another corporation into the Company in which the Company is the surviving corporation, and in which there is a reclassification or change of the shares of Common Stock of the Company, this Warrant shall after such consolidation, share exchange, merger, or sale be exercisable for the kind and number of securities or amount and kind of property of the Company or the corporation or other entity resulting from such share exchange, merger, or consolidation, or to which such sale shall be made, as the case may be (the "Successor Company"), to which a holder of the number of shares of Common Stock deliverable upon the exercise (immediately prior to the time of such consolidation, share exchange, merger, or sale) o f this Warrant would have been entitled upon such consolidation, share exchange, merger, or sale; and in any such case appropriate adjustments shall be made in the application of the provisions set forth herein with respect to the rights and interests of Holder, such that the provisions set forth herein shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to the number and kind of securities or the type and amount of property thereafter deliverable upon the exercise of this Warrant. The above provisions shall similarly apply to successive consolidations, share exchanges, mergers, and sales. Any adjustment required by this Section 2(a) because of a consolidation, share exchange, merger, or sale shall be set forth in an undertaking delivered to Holder and executed by the Successor Company which provides that Holder shall have the right to exercise this Warrant for the kind and number of securities or amount and kind of property of the Successor Company or to which th e holder of a number of shares of Common Stock deliverable upon exercise (immediately prior to the time of such consolidation, share exchange, merger, or sale) of this Warrant would have been entitled upon such consolidation, share exchange, merger, or sale. Such undertaking shall also provide for future adjustments to the number of Warrant Shares and the Exercise Price in accordance with the provisions set forth in Section 2 hereof.
	(b)    In the event the Company should at any time, or from time to time after the Original Issue Date, fix a record date for the effectuation of a stock split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, or securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split, or subdivision if no record date is fixed), the number of Warrant

<PAGE>

	Shares issuable upon the exercise hereof shall be proportionately increased and the Exercise Price shall be appropriately decreased by the same proportion as the increase in the number of outstanding Common Stock Equivalents of the Company resulting from the dividend, distribution, split, or subdivision. Notwithstanding the preceding sentence, no adjustment shall be made to decrease the Exercise Price below $.01 per Share.
	(c)    In the event the Company should at any time or from time to time after the Original Issue Date, fix a record date for the effectuation of a reverse stock split, or a transaction having a similar effect on the number of outstanding shares of Common Stock of the Company, then, as of such record date (or the date of such reverse stock split or similar transaction if no record date is fixed), the number of Warrant Shares issuable upon the exercise hereof shall be proportionately decreased and the Exercise Price shall be appropriately increased by the same proportion as the decrease of the number of outstanding Common Stock Equivalents resulting from the reverse stock split or similar transaction.
	(d)    In the event the Company should at any time or from time to time after the Original Issue Date, fix a record date for a reclassification of its Common Stock, then, as of such record date (or the date of the reclassification if no record date is set), this Warrant shall thereafter be convertible into such number and kind of securities as would have been issuable as the result of such reclassification to a holder of a number of shares of Common Stock equal to the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such reclassification, and the Exercise Price shall be unchanged.
	(e)    The Company covenants and agrees that all Warrant Shares which may be issued will, upon issuance, be validly issued, fully paid, and non-assessable. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant in full.
Section 3.    No Stockholder Rights.  This Warrant shall not entitle Holder hereof to any voting rights or other rights as a stockholder of the Company.

<PAGE>

Section 4.    Transfer of Securities.
(a)    This Warrant and the Warrant Shares and any shares of capital stock received in respect thereof, whether by reason of a stock split or share reclassification thereof, a stock dividend thereon, or otherwise, shall not be transferable except upon compliance with the provisions of the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws with respect to the transfer of such securities. The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of Section 4 hereof and to indemnify and hold harmless the Company against any loss or liability arising from the disposition of this Warrant or the Warrant Shares issuable upon exercise hereof or any interest in either thereof in violation of the provisions of this Warrant.
(b)    Each certificate for the Warrant Shares and any shares of capital stock received in respect thereof, whether by reason of a stock split or share reclassification thereof, a stock dividend thereon or otherwise, and each certificate for any such securities issued to subsequent transferees of any such certificate shall (unless otherwise permitted by the provisions hereof) be stamped or otherwise imprinted with a legend in substantially the following form:
	"NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER."
Section 5.    Miscellaneous.
(a)    The terms of this Warrant shall be binding upon and shall inure to the benefit of any successors or permitted assigns of the Company and Holder.
(b)    Except as otherwise provided herein, this Warrant and all rights hereunder are transferable by the registered holder hereof in person or by duly authorized attorney on the books of the Company upon surrender of this Warrant, properly endorsed, to the Company. The Company may deem and treat the registered holder of this Warrant at any time as the absolute owner hereof for all purposes and shall not be affected by any notice to the contrary.
(c)    Notwithstanding any provision herein to the contrary, Holder may not exercise, sell, transfer, or otherwise assign this Warrant unless the Company is provided with an opinion of counsel satisfactory in form and substance to the Company, to the effect that such exercise, sale, transfer, or assignment would not violate the Securities Act or applicable state securities laws.
(d)    This Warrant may be divided into separate warrants covering one share of Common Stock or any whole multiple thereof, for the total number of shares of Common Stock then subject to this Warrant at any time, or from time to time, upon the request of the registered holder of this Warrant and the surrender of the same to the Company for such purpose. Such subdivided Warrants shall be issued promptly by the Company following any such request and shall be of the same form and tenor as this Warrant, except for any requested change in the name of the registered holder stated herein.

<PAGE>  

      (e)    Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered (a) upon receipt, when delivered personally, (b) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified mail, return receipt requested, (c) three (3) days after being sent by U.S. certified mail, return receipt requested, or (d) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.

      If to Holder, to the registered address of Holder appearing on the books of the Company. Each party shall provide five (5) days prior written notice to the other party of any change in address, which change shall not be effective until actual receipt thereof

      (f)    The corporate laws of the State of New Jersey shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the State of New Jersey, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that i t is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant in that jurisdiction or the validity or enforceability of any provision of this Warrant in any other jurisdiction.

<PAGE>  

SIGNATURE PAGE TO IGI, INC. COMMON STOCK PURCHASE WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed in its name by its duly authorized officers under seal, and to be dated as of the date first above written.
	IGI, INC.
	By:	/s/ Rajiv Mathur
		Name: Rajiv Mathur Title: Chief Executive Officer

<PAGE>  

ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers unto ______________________ the foregoing Warrant and the rights represented thereto to purchase shares of Common Stock of IGI, INC. in accordance with terms and conditions thereof, and does hereby irrevocably constitute and appoint ________________ Attorney to transfer the said Warrant on the books of the Company, with full power of substitution.
	Holder:
	Address
	Dated:	, 20__
	In the presence of:

<PAGE>  

EXERCISE OR CONVERSION NOTICE
[To be signed only upon exercise of Warrant]
To:    IGI, INC.
The undersigned Holder of the attached Warrant hereby irrevocably elects to exercise the Warrant for, and to purchase thereunder, _________ shares of Common Stock of IGI, INC., issuable upon exercise of said Warrant and hereby surrenders said Warrant.
The undersigned herewith requests that the certificates for such shares be issued in the name of, and delivered to the undersigned, whose address is ________________________________.
If electronic book entry transfer, complete the following:
Account Number:
Transaction Code Number:
Dated:
	Holder:
	By:
		Name:
		Title:
NOTICE
The signature above must correspond to the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever.

<PAGE>  

EX-23

Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
IGI, Inc. and Subsidiaries
We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-35047, 33-43212, 333-47006 and 333-61716) and Form S-8 (Nos. 33-35047, 33-43212, 33-63700, 33-65249, 333-28183, 333-65553, 333-67565, 333-79333, 333-79341 and 333-52312) of our report dated March 31,2007 relating to the consolidated balance sheet of IGI, Inc. and Subsidiaries as of December 31, 2006 and the related consolidated statements of operations, cash flows, stockholders' equity and comprehensive (loss) for each of the years in the two year period then ended, which appears in the December 31, 2006 Annual Report on Form 10-KSB of IGI, Inc. and Subsidiaries.
	/s/ Amper, Politziner & Mattia, P.C.
Edison, New Jersey
April 2, 2007

<PAGE>

EX-31

Exhibit 31.1
CERTIFICATION OF
RAJIV MATHUR
PRESIDENT & CHIEF EXECUTIVE OFFICER
OF
IGI, INC.
___________________
I, Rajiv Mathur, Chief Executive Officer of IGI, Inc., certify that:
1.    I have reviewed this annual report on Form 10-KSB of IGI, Inc.;
2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.    The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
	a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)   evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)   disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5.    The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing equivalent functions):
	a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
	b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: April 2, 2007
		/s/ Rajiv Mathur
		Rajiv Mathur
		Chairman & Chief Executive Officer

<PAGE>

EX-31

Exhibit 31.2
CERTIFICATION OF
CARLENE A. LLOYD
VICE PRESIDENT OF FINANCE
OF
IGI, INC.
___________________
I, Carlene A. Lloyd, Vice President of Finance of IGI, Inc., certify that:
1.    I have reviewed this annual report on Form 10-KSB of IGI, Inc.;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.    The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
	a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)   evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)   disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5.    The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing equivalent functions):
	a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
	b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: April 2, 2007
		/s/ Carlene A. Lloyd
		Carlene A. Lloyd
		Vice President of Finance

<PAGE>

EX-32

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED UNDER
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of IGI, Inc. (the "Company") on Form 10-KSB for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Rajiv Mathur, Chairman and Chief Executive Officer of the Company, state and certify, pursuant to 18 U.S.C. [SECTION] 1350, as enacted under [SECTION] 906 of the Sarbanes-Oxley Act of 2002, that:
	(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date:  April 2, 2007
		/s/ Rajiv Mathur
		Rajiv Mathur
		Chairman & Chief Executive Officer

<PAGE>

EX-32

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED UNDER
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of IGI, Inc. (the "Company") on Form 10-KSB for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carlene A. Lloyd, Vice President of Finance, state and certify, pursuant to 18 U.S.C. [SECTION] 1350, as enacted under [SECTION] 906 of the Sarbanes-Oxley Act of 2002, that:
	(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date:  April 2, 2007
		/s/ Carlene A. Lloyd
		Carlene A. Lloyd
		Vice President of Finance

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