<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-Q

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


                       For Quarter Ended January 31, 1997

                          Commission File Number 1-9579


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



           Delaware                                          22-2487948
           --------                                          ----------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                         Identification Number)



2005 Cabot Boulevard West, Langhorne, Pennsylvania                     19047
--------------------------------------------------                     -----
    (Address of principal executive offices)                         (Zip Code)



Registrant's telephone number,
including area code                                           (2l5) 757-l590


     Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5 (d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:  Yes  X   No    .
                                               ---     ---
         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:

<TABLE>
<CAPTION>
        Class                              Outstanding at March 1, l997
        -----                              ----------------------------
<S>                                        <C>      
Common Stock, $.01 par value                     7,880,169
</TABLE>

<PAGE>   2
                                   ECOGEN INC.


                                      INDEX


                                                                            Page
                                                                            ----

PART I - FINANCIAL INFORMATION

  Item 1 - Financial Statements:

  Unaudited Consolidated Condensed Balance Sheets as of
         January 31, l997 and October 3l, l996..............................  1
                                                                             
  Unaudited Consolidated Condensed Statements of Operations for the
         three months ended January 31, 1997 and 1996.......................  2
                                                                             
  Unaudited Consolidated Condensed Statement of Stockholders'             
         Equity for the three months ended January 31, l997.................  3
                                                                             
  Unaudited Consolidated Condensed Statements of Cash Flows               
         for the three months ended January 31, l997 and l996...............  4
                                                                             
  Notes to Unaudited Consolidated Condensed Financial                     
         Statements.........................................................  6
                                                                             
  Item 2 - Management's Discussion and Analysis of Results                
         of Operations and Financial Condition.............................. 10
                                                                                
                                                                                
PART II - OTHER INFORMATION                                                    

  Item 6(a) - Exhibits...................................................... 14
<PAGE>   3
PART I -- FINANCIAL INFORMATION

                          ECOGEN INC. AND SUBSIDIARIES

                UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                     JANUARY 31,   OCTOBER 31,
ASSETS                                                  1997          1996
-------------------------------------------------------------------------------
<S>                                                  <C>           <C>
Current assets:
  Cash and cash equivalents .......................$   2,842,191 $   5,620,701
  Temporary investments ...........................    2,500,023     3,990,410
  Contract and trade receivables ..................    1,523,827     1,783,605
  Inventory .......................................    7,294,622     6,854,472
  Prepaid expenses and other current assets .......      475,167       493,519
-------------------------------------------------------------------------------
    Total current assets                              14,635,830    18,742,707
-------------------------------------------------------------------------------
Plant and equipment, net ..........................    4,699,467     4,569,327
Intangible and other assets, net ..................      482,290       549,210
-------------------------------------------------------------------------------
                                                   $  19,817,587 $  23,861,244
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------
Current liabilities:
  Accounts payable and accrued expenses .......... $   3,787,892 $   5,172,090
  Deferred contract revenue .......................      713,012     1,101,367
-------------------------------------------------------------------------------
    Total current liabilities                          4,500,904     6,273,457
-------------------------------------------------------------------------------
Long-term debt ....................................    1,203,109     1,297,469
Other long-term obligations .......................    1,925,489     1,887,078
Stockholders' equity:
  Preferred stock, par value $.01 per share;
    authorized 7,500,000 shares
    Series B convertible preferred stock --
      350,000 shares authorized; none and 5,834
      shares issued and outstanding in 1997 and
      1996, respectively (liquidation value
      $20 per share) ..............................      __                 58
  Common stock, par value $.01 per share;
    authorized 42,000,000 shares; issued 7,976,780
    and 7,928,171 shares in 1997 and 1996,
    respectively ..................................       79,768        79,282
  Additional paid-in capital ......................  117,545 074   117,548,065
  Accumulated deficit ............................. (103,968,356) (101,741,946)
  Other ...........................................   (1,468,401)   (1,482,219)
-------------------------------------------------------------------------------
    Total stockholders' equity                        12,188,085    14,403,240
-------------------------------------------------------------------------------
                                                   $  19,817,587 $  23,861,244
===============================================================================
</TABLE>
                See Accompanying Notes To Unaudited Consolidated
                        Condensed Financial Statements.


                                       1

<PAGE>   4

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                                                    THREE MONTHS ENDED
                                                                        JANUARY 31,
                                                                 1997               1996
------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>
Revenues:

  Product  sales,  net .............................        $   912,102         $  707,033
  Contract revenue .................................            710,301             73,867
  License and other income .........................                 --          4,813,049
  Interest income, net .............................             61,450             31,887
------------------------------------------------------------------------------------------
     Total revenues                                           1,683,853          5,625,836
------------------------------------------------------------------------------------------

Costs and expenses:

  Cost of products sold ............................            685,510            456,759
  Research and development:
    Funded by third parties ........................            240,807             73,867
    Self funded ....................................          1,194,444            947,558
  Selling, general and administrative ..............          1,787,689          1,705,159
------------------------------------------------------------------------------------------
     Total  costs and expenses                                3,908,450          3,183,343
------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
Net income (loss)                                           ($2,224,597)        $2,442,493
==========================================================================================

Net income (loss)  per  common  share available to
   common stockholders                                           ($0.28)             $0.39
==========================================================================================

Weighted average number of common shares outstanding          7,844,000          6,052,000
==========================================================================================
</TABLE>


See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.


                                       2
<PAGE>   5
                          ECOGEN INC. AND SUBSIDIARIES

       UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
                      Three months ended January 31, 1997
W
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                  CONVERTIBLE            ADDITIONAL                    
                                                                   PREFERRED   COMMON     PAID-IN        ACCUMULATED   
                                                                     STOCK      STOCK     CAPITAL          DEFICIT     
-----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>      <C>             <C>            
Balance November 1, 1996                                             $ 58      $79,282  $ 117,548,065   ($101,741,946) 

Conversion of 5,834 shares of Series B convertible
     preferred stock to 44,030 shares of common stock ..........      (58)         440           (382)             --  

Dividends on preferred stock ...................................       --           46         12,088          (1,813) 

Transfer of 1,415 shares of Treasury Stock for Employee Benefits       --           --        (14,697)             --  

Net reduction in unrealized gain on securities .................       --           --             --              --  

Net loss .......................................................       --           --             --      (2,224,597) 

-----------------------------------------------------------------------------------------------------------------------
Balance January  31,  1997                                           $  0      $79,768  $ 117,545,074   ($103,968,356) 
=======================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                                       OTHER
                                                                   STOCKHOLDERS'
                                                                      EQUITY          TOTAL
-----------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>         
Balance November 1, 1996                                          ($1,482,219)    $ 14,403,240

Conversion of 5,834 shares of Series B convertible
     preferred stock to 44,030 shares of common stock ..........           --               --

Dividends on preferred stock ...................................           --           10,321

Transfer of 1,415 shares of Treasury Stock for Employee Benefits       18,767            4,070

Net reduction in unrealized gain on securities .................       (4,949)          (4,949)

Net loss .......................................................           --       (2,224,597)

-----------------------------------------------------------------------------------------------
Balance January  31,  1997                                        ($1,468,401)    $ 12,188,085
===============================================================================================
</TABLE>


See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements.


                                       3
<PAGE>   6
                          ECOGEN INC. AND SUBSIDIARIES

            UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                               THREE MONTHS ENDED
                                                                                   JANUARY 31,
                                                                            1997                 1996
---------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                 <C>
Cash flows from operating activities:
   Net  income (loss) ..........................................        ($2,224,597)        $  2,442,493
   Adjustments  to  reconcile  net  income (loss)  to  net
      cash provided  by ( used  in ) operating  activities:
         Depreciation  and  amortization  expense ..............             93,664              108,479
         Unrealized  foreign  currency  transaction  gain (loss)             (1,627)             (14,875)
   Changes  in  assets  and  liabilities, net ..................         (1,816,124)           1,466,678

---------------------------------------------------------------------------------------------------------
Net  cash (used in) provided by operating  activities                    (3,948,684)           4,002,775
---------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
   Proceeds from maturities of  temporary  investments .........          1,490,342                   --
   Purchase  of  plant and  equipment ..........................           (223,804)             (74,155)

---------------------------------------------------------------------------------------------------------
Net  cash provided by (used in)  investing  activities                    1,266,538              (74,155)
---------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
   Net proceeds  from  issuance  of  Series C preferred  stock .                 --            2,793,943
   Net proceeds  from  issuance  of  common  stock .............                 --            9,517,276
   Repayment of capital lease obligation .......................            (94,360)                  --

---------------------------------------------------------------------------------------------------------
Net  cash (used in) provided  by  financing  activities                     (94,360)          12,311,219
---------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------
Effect  of  foreign  exchange  rate  changes  on  cash                       (2,004)            (125,810)
---------------------------------------------------------------------------------------------------------

Net increase  (decrease)  in  cash  and  cash  equivalents .....         (2,778,510)          16,114,029

Cash  and  cash  equivalents,  beginning  of  period ...........          5,620,701            1,775,213

---------------------------------------------------------------------------------------------------------
Cash  and  cash  equivalents,  end  of  period                          $ 2,842,191         $ 17,889,242
=========================================================================================================
                                                                                             (Continued)
</TABLE>


                                        4
<PAGE>   7
                          ECOGEN INC. AND SUBSIDIARIES

      UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                                       THREE MONTHS ENDED
                                                                           JANUARY 31,
                                                                    1997               1996
-----------------------------------------------------------------------------------------------
<S>                                                            <C>                 <C>
Changes  in  assets  and  liabilities:
    Increase (decrease) in  prepaid  expenses  and
       other  current  assets .........................        $    18,352         ($  157,829)
    Increase  in  inventory ...........................           (374,131)           (654,007)
    Decrease in  receivables ..........................            259,778             127,885
    Decrease in  other  assets ........................             66,920             205,653
    Decrease in  accounts  payable
       and  accrued  expenses .........................         (1,360,143)         (1,053,758)
    (Decrease) increase in other long-term liabilities             (38,411)             27,879
    (Decrease) increase in  deferred  contract  revenue           (388,489)          2,970,850


-----------------------------------------------------------------------------------------------                  
       Changes  in  assets  and  liabilities,  net             $(1,816,124)        $ 1,466,673
===============================================================================================                           
</TABLE>


--------------------------------------------------------------------------------
Noncash investing and financing activities:
--------------------------------------------------------------------------------

  During the first quarter of fiscal 1996, debt totalling approximately $201,000
  was incurred by the Company for the acquisition of equipment.

  During the first quarter of fiscal 1997 and 1996, the Company issued 1,700
  and 20,552 shares of common stock, respectively, as dividends on the Company's
  preferred stock.

  During the first quarter of fiscal 1997 and 1996, the Company issued 44,030
  and 119,668 shares of its common stock upon conversion of the Company's Series
  B Convertible Preferred Stock and Series C Convertible Preferred Stock.

  During the first quarter of fiscal 1997, the Company transferred 1,415 shares
  of Treasury Stock to outstanding shares pursuant to certain employee benefit
  plans.
================================================================================



See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.


                                       5
<PAGE>   8
                          ECOGEN INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                            JANUARY 31, 1997 AND 1996



(1)    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       ORGANIZATION AND BASIS OF PRESENTATION:

       The consolidated condensed financial statements include the accounts of
       Ecogen Inc. ("Ecogen" or the "Company") and its wholly-owned and
       majority-owned subsidiaries. All intercompany accounts and transactions
       have been eliminated in consolidation.

       The accompanying consolidated condensed financial statements include all
       adjustments (consisting of normal recurring accruals) which are, in the
       opinion of management, necessary for a fair presentation of the
       consolidated results of operations and financial position for the interim
       periods presented. The consolidated condensed financial statements have
       been prepared in accordance with the requirements for Form l0-Q and,
       therefore, do not include all disclosures of financial information
       required by generally accepted accounting principles. These consolidated
       condensed financial statements should be read in conjunction with the
       Company's October 31, l996 consolidated financial statements and notes
       thereto included in the Company's Annual Report on Form 10-K.

       The results of operations for the interim period ended January 31, 1997
       are not necessarily indicative of the operating results for the full
       year.

       OPERATIONS:

       The Company is a biotechnology company specializing in the development
       and marketing of environmentally compatible products for the control of
       pests in agricultural and related markets. The Company has not yet
       achieved profitable operations and there is no assurance that profitable
       operations, if achieved, could be sustained on a continuing basis.
       Further, the Company's future operations are dependent, among other
       things, on the success of the Company's commercialization efforts and
       market acceptance of the Company's products.

                                                                     (Continued)


                                       6
<PAGE>   9
                          ECOGEN INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
                             STATEMENTS, CONTINUED


       NET INCOME (LOSS) PER COMMON SHARE:

       Net income (loss) per common share adjusted for preferred stock dividends
       of $1,815 and $52,975, in the three months ended January 31, 1997 and
       1996, respectively, is computed using the weighted average number of
       shares outstanding during the period. Common stock equivalents are not
       included in the computation of weighted average shares outstanding using
       the modified treasury stock method since the effect would be
       anti-dilutive for both primary and fully diluted earnings per share.

(2)    INVENTORY

       At January 31, l997, inventory consisted of raw materials of $2,605,321,
       work-in-progress of $1,629,448 and finished products of $3,059,853.

(3)    MONSANTO TRANSACTION

       In January 1996, the Company entered into an agreement with Monsanto
       Company ("Monsanto") for an equity investment, purchase of technology and
       joint research and development arrangement relating to the Company's
       proprietary Bacillus thuringiensis ("Bt") technology for in-plant
       applications (collectively, the "Monsanto Transaction"). The transaction
       included (i) the acquisition by Monsanto of certain rights in the
       Company's Bt technology for an aggregate purchase price of $5.0 million
       in cash which was recorded as license and other income in the first
       quarter of 1996; (ii) the sale by the Company to Monsanto of 943,397
       shares of Common Stock at $10.60 per share for an aggregate purchase
       price of $10.0 million in cash during the first quarter; and (iii) a
       four-year research and development collaboration arrangement with
       Monsanto for the further development of the Company's Bt gene library for
       a minimum of $10.0 million, of which $.3 million and $3.0 million was
       received in the first quarter of 1997 and 1996, respectively and recorded
       as deferred contract revenue. Such contract revenue will be recorded as
       earned under the terms of the agreement. Under this agreement, the
       Company recognized as contract revenue approximately $.7 million and none
       in the three months ended January 31, 1997 and 1996, respectively.

                                                                     (Continued)


                                       7
<PAGE>   10
                          ECOGEN INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
                                  (CONTINUED)


(3)    MONSANTO TRANSACTION (CONTINUED)

       As part of the agreement, Monsanto has agreed to maintain its ownership
       position during the term of the research and development agreement and
       Monsanto is prohibited, during the first three years following the
       closing, from acquiring more than 25% of the Company's voting stock
       without the Company's consent, except in certain circumstances primarily
       related to a change of control of the Company. Monsanto was granted
       certain demand and piggyback registration rights with respect to its
       shares. In addition, Monsanto has a right of first refusal to purchase
       securities of the Company so as to maintain its ownership percentage in
       the Company except in certain circumstances defined in the applicable
       agreement.

(4)    LONG-TERM DEBT

       The Company has obtained a $2.1 million line of credit to be used for the
       leasing of production equipment. At January 31, 1997 and 1996, the
       Company had borrowed approximately $1.9 million and $.8 million under the
       line of credit. The Company is required to pay interest only until the
       equipment is delivered at which time the notes are converted to a capital
       lease obligation. The lease facility requires a 15% security deposit
       which has been made.

       In July 1996, the Company established a two year revolving working
       capital line of credit with a commercial bank for up to $5,000,000.
       Borrowings under this line are required to be fully collateralized by
       certain of the Company's investments. As of January 31, 1997 there have
       been no borrowings under this agreement.

(5)    STOCKHOLDERS' EQUITY

       PREFERRED STOCK


       In November 1995, the Company raised $2.8 million, net of expenses, from
       institutional investors from the private placement of 122,000 shares of
       8% Series C Convertible Preferred Stock (the "Series C Preferred Stock").
       All of the Series C Preferred Stock have been converted into shares of 
       the Company's Common stock in accordance with its terms.
       

                                                                     (Continued)


                                       8
<PAGE>   11
                          ECOGEN INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
                                   CONTINUED


       STOCKHOLDERS' EQUITY (CONTINUED)

       During the first quarter of fiscal 1997 and 1996, the Company issued
       44,030 and 119,668 shares of its common stock upon conversation of the
       Company's Series B Convertible Preferred Stock and Series C Convertible
       Preferred Stock. Further, in the first quarter of fiscal 1997 and 1996,
       the Company issued 1,700 and 20,552 shares of its common stock,
       respectively, in payment of dividends on its preferred stock.

       COMMON STOCK

       In January 1996, the shareholders approved an amendment to the Company's
       Restated Certificate of Incorporation (the "Amendment") which effected a
       one-for-five reverse stock split (the "Reverse Split") of the Company's
       outstanding shares of common stock.

       In April 1996, the Company's Board of Directors authorized a program to
       purchase up to 350,000 shares of the Company's common stock over a two
       year period. As of January 31, 1997, 92,000 shares have been purchased in
       the open market pursuant to this program.

       In December 1997, the Board of Directors granted the Company's U.S.
       employees, excluding officers, the right to exchange 224,360 options at
       exercise prices from $2.75 to $15.63 for new options at an exercise price
       of $2.56, the fair market value at the new grant date. The new options
       generally vest over a three year period.


                                       9
<PAGE>   12
                          ECOGEN INC. AND SUBSIDIARIES

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                  THREE MONTHS ENDED JANUARY 31, 1997 AND 1996


OVERVIEW

For the first three months of fiscal 1997, total revenues decreased from $5.6
million in 1996 to $1.7 million in 1997, due to a nonrecurring upfront fee from
the Monsanto Company of $4.8 million recorded in the first quarter of 1996.
Total revenues excluding this nonrecurring fee in 1996 more than doubled during
the first quarter of 1997. Product sales increased 29% from $.7 million to $.9
million for the three months ended January 31, 1996 and 1997, respectively. For
the three months ended January 31, 1997, the Company reported a net loss of
($2.2) million or ($.28) per share compared to net income of $2.4 million or
$.39 per share in 1996 on weighted average shares of 7.8 million and 6.1 million
in 1997 and 1996, respectively. The difference between the net loss of ($2.2)
million for the three month period ended January 31, 1997 and the net income of
$2.4 million for the same period in 1996 is principally the $4.8 million in
other revenue recognized in January 1996 from the Company's strategic alliance
with Monsanto.

THREE MONTHS ENDED January 31, 1997 AND 1996

REVENUES

Net product sales increased 29% to $.9 million compared with $.7 million in the
first quarter of 1996, the first quarter typically being the Company's slowest
quarter, due to the seasonality of the agricultural marketplace. Sales of the
Company's Bt product line, representing 55% of total sales, increased 13% due to
increased volume in the first quarter of 1997 from the comparable period in 1996
due principally to higher international sales. Pheromone product sales,
representing 19% of total sales, decreased 36% principally due to decreased
volume including decreased sales of NoMate (R) TPW, for control of tomato
pinworm on tomatoes, and a decrease in government contracts for trap and lure
products. The Company expects that both shortfalls will be made up during the
remainder of fiscal 1997. Biofungicide sales, representing 27% of total sales 
in the first quarter of 1997, were not sold by the Company in the same period 
in 1996. Such sales are the result of the resumption of sales of AspireTM
biofungicide into the post harvest market. During the fourth quarter of fiscal 
1996, the Company had announced manufacturing problems associated with this
product. Subsequent to the end of the first quarter, the Company has filled 
the balance of a 1996 purchase order from its distributor in the post
harvest market.

Other revenues decreased $4.1 million in the current period, due primarily to
$4.8 million in nonrecurring upfront fees from


                                       10
<PAGE>   13
REVENUES (CONTINUED)

revenue recognized in the first quarter of 1996 pursuant to the Company's
strategic alliance with Monsanto partially offset by higher research contract
revenue from Monsanto in the first quarter of fiscal 1997. Research contract
revenue increased from $.1 million to $.7 million in the first fiscal quarter of
1997 when compared to the same quarter in 1996, since 1997 represents the first
full year of the Monsanto Research and Development Contract.

COSTS AND EXPENSES

Cost of products sold increased 50% due principally to the increase in product
sales. Gross margins decreased to 25% in 1997 compared to 35% in 1996. This
decrease was due primarily to changes in product mix and higher costs on initial
production of new products.

Research and development costs increased $.4 million or 41% principally as a
result of start-up costs associated with process development for CRYMAXTM and
Aspire, two of the Company's new products. After the announcement of
manufacturing problems associated with equipment design failures, the Company
began working on developing alternative processes for the manufacturing of its
new water dispersible granule products. Selling, general and administration
expenses increased $.1 million or 5% primarily as a result of higher public
relations and investor relations costs in the current quarter.

Net loss for the three months ended January 31, 1997 was ($2.2) million,
compared to net income of $2.4 million for the same period in 1996. Net loss per
share for the three months ended January 31, 1997 was ($.28), compared to net
income per share of $.39 on weighted average shares outstanding of 7.8 million
and 6.1 million in the first quarter of 1997 and 1996, respectively. Excluding
the Monsanto other income in 1996, the net loss for the first fiscal quarter
improved 6% from ($2.4) million in 1996 to ($2.2) million in the first quarter
of fiscal 1997.

SEASONALITY OF BUSINESS

The bulk of the Company's current products are presently marketed for
agricultural applications in the northern hemisphere, where the growing season
generally runs from spring through fall. Commercial introduction of the
Company's new products is contingent on, among other factors, completion of
field testing and receipt of required regulatory approvals. Unusual weather
conditions during field tests or failure to receive regulatory approvals prior
to the growing season may require additional field tests in subsequent growing
seasons, with resulting delays in product development and commercialization. In
addition, because of the seasonal nature of its business, the Company's product
revenues are likely to be concentrated in the fiscal quarters prior to and
during a particular growing season which


                                       11
<PAGE>   14
SEASONALITY OF BUSINESS (CONTINUED)

may result in substantial variations in quarter-to-quarter financial results.
Product sales from year-to-year are also affected by unusual weather conditions,
such as droughts or floods, and the level of insect pressure in grower areas.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 1997, the Company had cash and liquid investments of $5.3
million, representing a net decrease of $4.3 million from October 31, 1996. The
decrease was due to $3.9 million of cash used in operations, $.2 million
used for capital expenditures and $.1 million for repayment of capital lease
obligations for the purchase of equipment. Negative cash flows from operations
during the three months ended January 31, 1997 of $3.9 million principally
funded the net loss of $2.2 million and a reduction in accounts payable and
accrued expenses of $1.4 million.

The Company has financed its working capital needs primarily through private and
public offerings of equity securities, research revenues and license and other
fees from research and development contracts and product sales.

To date, the Company has not generated positive cash flow from operations. The
Company believes that its existing working capital and cash flow generated from
total revenues in 1997 should be sufficient to meet its capital and liquidity
requirements for fiscal 1997 based on reduced spending levels, if necessary. The
Company's working capital and working capital requirements are affected by
numerous factors and there is no assurance that such factors will not have a
negative impact on the Company's liquidity. Principal among these are the
success of its product commercialization and marketing efforts and the efforts
of its strategic partners in commercializing and selling products based on the
Company's technology, the technological advantages and pricing of the Company's
products, economic and environmental considerations which impact agricultural
crop production and the agricultural sector generally, competitive conditions in
the agricultural pest control market, and access to capital markets that can
provide the Company with the resources necessary to fund its strategic
priorities. The Company may need additional financing to support current levels
of product development and commercialization in 1997. There is no assurance that
such financing will be available on terms acceptable to the Company or at all.
Over the long term, the Company's liquidity is dependent on market acceptance of
its products and technology.

The Company has a $2.1 million line of credit to be used for the leasing of
equipment. To date, approximately $1.9 million has been borrowed under the line
of credit. The Company has commitments for $.2 million of capital expenditures
as of March 3, 1997.


                                       12
<PAGE>   15
ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY

Inventory increased $.4 million as a result of building inventories for sales in
the second quarter. Accounts payable and accrued expenses decreased $1.4 million
due to timing of payments to vendors and refunds paid to distributors in the
first quarter of fiscal 1997 for product returns in the fourth quarter of fiscal
1996. Deferred contract revenue decreased $.4 million during the three months
ended January 31, 1997 due to amounts earned under the Monsanto Research and
Development Agreement relating to certain Bt technology for use in plants.

In late February 1997 the Financial Accounting Standards Board issued FASB
Statement No. 128 "Earnings per Share". The Company is beginning to assess the
effect of this statement but does not believe the statement will have
significant impact because the Company's common stock equivalents are presently
anti-dilutive and therefore are excluded from earnings per share calculations.

The discussion set forth in this document contains forward looking statements
that involve a number of risks and uncertainties that could cause actual results
to differ materially from expected results. The Company intends to market and
sell a number of newly introduced products over the next several weeks and
months. These products, some of which utilize new formulations, have not to date
been produced on a commercial scale or produced on a commercial scale that has
been replicated. Certain of the manufacturing processes for such products
include newly developed equipment and techniques which may not be successfully
incorporated into the manufacturing process in time to meet targeted sales
opportunities. Additional risks and uncertainties include: (i) the market
acceptance of the Company's current and newly introduced products; (ii) the
efficacy, pricing, ease of use and performance of the Company's products; (iii)
the successful development, registration, commercialization and marketing of
technologically advanced new products; (iv) the continued and uninterrupted
supply of the Company's products from third party toll manufacturers and the
continued financial viability of such manufacturers; (v) economic and
environmental considerations which impact agricultural crop production and
agricultural crop protection including the amount of acres of target crops
planted, the cost and efficacy of competitive products, weather conditions and
the level of insect and disease infestation on target crops, and (vi) the
ability of the Company to fund its strategic priorities through operations or
access to capital markets.


                                       13
<PAGE>   16
PART II - OTHER INFORMATION


Item 6(a)         Exhibits

Exhibit No.       Description

10.125            Form of Indemnification Agreement for Directors and Officers

27                Financial Data Schedule




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<PAGE>   17
                                   Signatures


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


Date:    March 17, 1997


                                ECOGEN INC.



                                By: /s/ JAMES P. REILLY, JR.
                                   ---------------------------------------------
                                    James P. Reilly, Jr.
                                    Chairman and Chief Executive
                                    Officer



                                By: /s/ MARY E. PAETZOLD
                                   ---------------------------------------------
                                    Mary E. Paetzold
                                    Vice President and Chief Financial Officer







                                       15