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

FORM 10-Q

|x                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|                                                               |                                                                                         
|                                                               | For the quarterly period ended March 31, 2003                                           
|                                                               |                                                                                         
|o                                                              | 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 000-31275                              
|                                                              
|LARGE SCALE BIOLOGY CORPORATION                               
|(Exact name of registrant as specified in its charter)        
|                                                              
|Delaware                                                       |                                                                                         
|(State or other jurisdiction of incorporation or organization) |                                                                                         
|                                                               |                                                                                         
|3333 Vaca Valley Parkway, Vacaville, CA  95688                
|(Address of principal executive offices and zip code)         
|                                                              
|(707) 446-5501                                                
|(Registrants telephone number, including area code)          
|                                                               |                                                                                         

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.

|Yes x | No o
|----- | ----

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

|Yes o | No x
|----- | ----

The number of shares outstanding of registrants common stock, $0.001 par value, as of May 9, 2003:  25,526,842

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Some of the statements contained in this report constitute forward-looking statements that involve substantial
risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as may, will, expect, plan, anticipate, believe, or continue
and variations of these words or comparable words. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Our Business section and
Managements Discussion and Analysis of Financial Condition and Results of Operations contain many such forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and situations that may cause
our or our industrys actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. The risk factors
contained in this report, under the heading Factors That May Affect Our Business, as well as any other cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ from the
expectations described or implied in our forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report.
Except as required by law, we do not undertake to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Large Scale Biology Corporation, LSBC, our logo, GENEWARE, PLURIGEN, ProGEx and other product and trade names are trademarks of or registered trademarks of Large
Scale Biology Corporation in the United States and/or other countries. Other product and trade names mentioned herein may be trademarks and/or registered trademarks of their respective companies. References in this report to the Company,
our, we and us refer collectively to Large Scale Biology Corporation, a Delaware corporation, and its predecessors and subsidiaries.



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Large Scale Biology Corporation Form 10-Q For the Quarter Ended March 31, 2003 Table of Contents

|                               |                                                                                                                | Page
|------------------------------ | -------------------------------------------------------------------------------------------------------------- | ----
|                               |                                                                                                                |     
|PART I  FINANCIAL INFORMATION |                                                                                                               
|                               |                                                                                                                |     
|Item 1.                        | Financial Statements                                                                                           |     
|                               |                                                                                                                |     
|                               | Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 (Unaudited)                   | 1   
|                               |                                                                                                                |     
|                               | Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002 (Unaudited) | 2   
|                               |                                                                                                                |     
|                               | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 (Unaudited) | 3   
|                               |                                                                                                                |     
|                               | Notes to Condensed Consolidated Financial Statements (Unaudited)                                               | 4   
|                               |                                                                                                                |     
|Item 2.                        | Managements Discussion and Analysis of Financial Condition and Results of Operations                          | 6   
|                               |                                                                                                                |     
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                                     | 18  
|                               |                                                                                                                |     
|Item 4.                        | Controls and Procedures                                                                                        | 18  
|                               |                                                                                                                |     
|PART II  OTHER INFORMATION    |                                                                                                               
|                               |                                                                                                                |     
|Item 2.                        | Changes in Securities and Use of Proceeds                                                                      | 19  
|                               |                                                                                                                |     
|Item 6.                        | Exhibits and Reports on Form 8-K                                                                               | 19  
|                               |                                                                                                                |     
|SIGNATURE                      | 20                                                                                                            
|                               |                                                                                                               
|CERTIFICATIONS                 | 21                                                                                                            



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PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements

Large Scale Biology CorporationCondensed Consolidated Balance Sheets (Unaudited)

|                                                                                                                |  | March 31, 2003 |              | December 31, 2002 |  
|--------------------------------------------------------------------------------------------------------------- |  | -------------- | ------------ | ----------------- | -
|                                                                                                                |  |                |              |                   |  
|Assets                                                                                                          |  |                |              |                   |  
|Current assets:                                                                                                 |  |                |              |                   |  
|Cash and cash equivalents                                                                                       |  | $              | 6,752,000    |                   | $
|Marketable securities                                                                                           |  |                | 12,369,000   |                   |  
|Prepaid expenses and other current assets                                                                       |  |                | 1,209,000    |                   |  
|                                                                                                                |  |                |              |                   |  
|Total current assets                                                                                            |  |                | 20,330,000   |                   |  
|Property, plant, and equipment, net                                                                             |  |                | 12,410,000   |                   |  
|Patents and intellectual property licenses, net                                                                 |  |                | 4,012,000    |                   |  
|Other intangible assets, net                                                                                    |  |                |             |                   |  
|Other assets                                                                                                    |  |                | 621,000      |                   |  
|                                                                                                                |  |                |              |                   |  
|                                                                                                                |  | $              | 37,373,000   |                   | $
|                                                                                                                |  |                |              |                   |  
|Liabilities and Stockholders Equity                                                                            |  |                |              |                   |  
|Current liabilities:                                                                                            |  |                |              |                   |  
|Accounts payable                                                                                                |  | $              | 1,032,000    |                   | $
|Accrued expenses                                                                                                |  |                | 608,000      |                   |  
|Current portion of long-term debt                                                                               |  |                | 146,000      |                   |  
|Deferred revenue and customer advances                                                                          |  |                | 245,000      |                   |  
|                                                                                                                |  |                |              |                   |  
|Total current liabilities                                                                                       |  |                | 2,031,000    |                   |  
|Long-term debt                                                                                                  |  |                | 152,000      |                   |  
|                                                                                                                |  |                |              |                   |  
|Total liabilities                                                                                               |  |                | 2,183,000    |                   |  
|                                                                                                                |  |                |              |                   |  
|Stockholders equity:                                                                                           |  |                |              |                   |  
|Common stock, issued and outstanding: March 31, 2003  25,564,092 shares; December 31, 2002  25,223,753 shares |  |                | 192,280,000  |                   |  
|Stockholders notes receivable                                                                                  |  |                | (29,000      | )                 |  
|Deferred compensation                                                                                           |  |                | (521,000     | )                 |  
|Accumulated deficit                                                                                             |  |                | (156,540,000 | )                 |  
|                                                                                                                |  |                |              |                   |  
|Total stockholders equity                                                                                      |  |                | 35,190,000   |                   |  
|                                                                                                                |  |                |              |                   |  
|                                                                                                                |  | $              | 37,373,000   |                   | $
|                                                                                                                |  |                |              |                   |  

See accompanying notes to condensed consolidated financial statements.

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Large Scale Biology CorporationCondensed Consolidated Statements of Operations (Unaudited)

|                                                        |  | Three Months Ended March 31, |           
|------------------------------------------------------- |  | ---------------------------- | ----------
|                                                        |  |                              |           
|                                                        |  | 2003                         |           
|                                                        |  |                              |           
|Revenues                                                |  | $                            | 854,000   
|                                                        |  |                              |           
|Costs and expenses:                                     |  |                              |           
|Development agreements                                  |  |                              | 935,000   
|Research and development                                |  |                              | 3,233,000 
|General and administrative                              |  |                              | 2,641,000 
|Impairment of property                                  |  |                              | 1,698,000 
|Amortization of purchased intangibles                   |  |                              | 52,000    
|                                                        |  |                              |           
|Total costs and expenses                                |  |                              | 8,559,000 
|                                                        |  |                              |           
|Loss from operations                                    |  |                              | (7,705,000
|Interest income, net                                    |  |                              | 70,000    
|                                                        |  |                              |           
|Net loss                                                |  | $                            | (7,635,000
|                                                        |  |                              |           
|Net loss per share  basic and diluted                  |  | $                            | (0.30     
|                                                        |  |                              |           
|Weighted average shares outstanding  basic and diluted |  |                              | 25,253,244
|                                                        |  |                              |           

See accompanying notes to condensed consolidated financial
statements.

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Large Scale Biology CorporationCondensed Consolidated Statements of Cash Flows (Unaudited)

|                                                                            |  | Three Months Ended March 31, |           
|--------------------------------------------------------------------------- |  | ---------------------------- | ----------
|                                                                            |  |                              |           
|                                                                            |  | 2003                         |           
|                                                                            |  |                              |           
|Cash flows from operating activities:                                       |  |                              |           
|Net loss                                                                    |  | $                            | (7,635,000
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                              |           
|Depreciation of property, plant and equipment                               |  |                              | 762,000   
|Amortization of intangible assets                                           |  |                              | 276,000   
|Stock compensation expense                                                  |  |                              | 129,000   
|Impairment of property                                                      |  |                              | 1,698,000 
|Write-off of capitalized patent costs                                       |  |                              | 199,000   
|Loss on sale of equipment                                                   |  |                              | 156,000   
|Provision for doubtful accounts receivable                                  |  |                              | 154,000   
|Interest received (accrued) in excess of interest accrued (received)        |  |                              | 40,000    
|Changes in assets and liabilities:                                          |  |                              |           
|Prepaid expenses and other current assets                                   |  |                              | 10,000    
|Other assets                                                                |  |                              | 19,000    
|Accounts payable                                                            |  |                              | 76,000    
|Accrued expenses                                                            |  |                              | 52,000    
|Deferred revenue and customer advances                                      |  |                              |          
|                                                                            |  |                              |           
|Net cash used in operating activities                                       |  |                              | (4,064,000
|                                                                            |  |                              |           
|Cash flows from investing activities:                                       |  |                              |           
|Purchases of marketable securities                                          |  |                              | (3,627,000
|Proceeds from matured marketable securities                                 |  |                              | 6,058,000 
|Capital expenditures                                                        |  |                              | (5,000    
|Increase in patents and intellectual property licenses                      |  |                              |          
|                                                                            |  |                              |           
|Net cash provided by (used in) investing activities                         |  |                              | 2,426,000 
|                                                                            |  |                              |           
|Cash flows from financing activities:                                       |  |                              |           
|Proceeds from issuance of common stock                                      |  |                              | 4,000     
|Proceeds from stockholder loan payments                                     |  |                              | 17,000    
|Change in restricted cash                                                   |  |                              | 143,000   
|Principal payments on long-term debt                                        |  |                              | (12,000   
|                                                                            |  |                              |           
|Net cash provided by (used in) financing activities                         |  |                              | 152,000   
|                                                                            |  |                              |           
|Net decrease in cash and cash equivalents                                   |  |                              | (1,486,000
|Cash and cash equivalents at beginning of period                            |  |                              | 8,238,000 
|                                                                            |  |                              |           
|Cash and cash equivalents at end of period                                  |  | $                            | 6,752,000 
|                                                                            |  |                              |           

See accompanying notes to condensed consolidated financial statements.

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Large Scale Biology CorporationNotes to Condensed Consolidated Financial Statements (Unaudited)

1.  The Company and Summary of Significant Accounting Policies

Large Scale Biology Corporation is a research and development company.  Our goals include the development of therapeutic products using our proprietary
technologies and expertise and the delivery of services to potential customers including protein marker discovery and the biomanufacture of therapeutic proteins, vaccines and industrial biomolecules.  Examples of therapeutic products we are
developing include:

| |  | a proprietary form of human alpha-galactosidase A for the treatment of Fabry disease, a lysosomal storage disorder;
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | a generic form of bovine aprotinin, a protease inhibitor used in cardiac surgery; and                              
| |  | a series of prototype vaccines and prototype products for the expansion of bone marrow and cord blood stem cells.  

The Companys proprietary systems are supported by patents and patent applications.  The Companys corporate office and genomics research facility are
located in Vacaville, California.  The Companys biomanufacturing plant is located in Owensboro, Kentucky, and the Companys proteomics research facility is located in Germantown, Maryland.

The Company incurred net losses of $33,184,000 and $20,689,000 and negative operating cash flows of $23,932,000 and $18,451,000 in the years ended December 31, 2002
and 2001, respectively.  These negative cash flows were financed primarily by proceeds from the Companys IPO in 2000.  If we are unable to generate significant revenues in 2003 or generate other potential sources of working capital
including partnerships, mergers or sales of assets or technologies, the Companys operations may be adversely affected.

Basis of
Presentation  The unaudited condensed consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial information. 
Accordingly, these financial statements and notes thereto do not include certain disclosures normally associated with financial statements prepared in accordance with accounting principles generally accepted in the United States of America. 
This interim financial information should be read in conjunction with the Companys audited consolidated financial statements and notes thereto for the year ended December 31, 2002 included in the Companys Annual Report on Form
10-K.

The unaudited condensed consolidated financial statements include the accounts of Large Scale Biology Corporation and its
subsidiaries.  All intercompany balances and transactions have been eliminated.  In the opinion of the Companys management, the unaudited condensed consolidated financial statements include all adjustments (consisting of only normal
recurring adjustments) and disclosures considered necessary for a fair presentation of the results of the interim periods presented.  This interim financial information is not necessarily indicative of the results of any future interim periods
or for the Companys full year ending December 31, 2003.

Segment Reporting  The Company operates in one
reportable segment.

Stock-Based Compensation  We account for stock-based employee compensation plans using the
intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations.    Stock options issued to non-employees as
consideration for goods or services provided to the Company are accounted for under the fair value method in accordance with SFAS No. 123, Accounting for Stock-Based Compensation, which requires that compensation expense be recognized
for all such options.

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The following table presents the pro forma effect on the Companys reported net loss and net loss per share if
we had applied the fair value method to our stock-based employee compensation plans for all periods presented:

|                                                                                                                |  | Three Months Ended March 31, |           
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------
|                                                                                                                |  |                              |           
|                                                                                                                |  | 2003                         |           
|                                                                                                                |  |                              |           
|Net loss as reported                                                                                            |  | $                            | (7,635,000
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |                              | (798,000  
|                                                                                                                |  |                              |           
|Pro forma net loss                                                                                              |  | $                            | (8,433,000
|                                                                                                                |  |                              |           
|Net loss per share:                                                                                             |  |                              |           
|Basic and diluted  as reported                                                                                 |  | $                            | (0.30     
|                                                                                                                |  |                              |           
|Basic and diluted  pro forma                                                                                   |  | $                            | (0.33     
|                                                                                                                |  |                              |           

The pro forma adjustments assume the
fair value of stock-based employee compensation awards are amortized over the vesting period, typically 3-4 years for stock options. The fair value of stock options are estimated at the date of grant using the Black-Scholes option-pricing model. The
Company did not grant any stock options in the three months ended March 31, 2003 or 2002.

Net Loss Per Share  Basic net
loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period.  Diluted net loss per share is computed by dividing the net loss for the period by the weighted
average number of common shares outstanding during the period plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period.  The weighted average number of
potentially dilutive common shares were 12,028 and 167,373 for the three months ended March 31, 2003 and 2002, respectively.  These shares are excluded from diluted net loss per share because of their anti-dilutive effect.

2.  Impairment of Property

The Companys proteomics division leases approximately
53,000 square feet of commercial space in Germantown, Maryland.  In 2000 and 2001, we added approximately $5.6 million of improvements to the leased space to construct a laboratory, computer rooms, offices and common areas.  Approximately
44,000 square feet of the leased space is improved and approximately 9,000 square feet remains unimproved.  The leasehold improvements are being amortized on a straight-line basis over the ten-year lease term.

In the first quarter of 2003, the Companys board of directors approved a plan to concentrate the operations of our proteomics division into approximately 10,000
square feet of the improved space and solicit a sublease for the remaining leased space.  As a result, we assessed the carrying value of the leasehold improvements related to the excess laboratory and office space for impairment.  Based
upon a comparison of the carrying value of the leasehold improvements and the future minimum rent payments related to the excess improved space with the market value of similar leased space in the Germantown area, we concluded that the leasehold
improvements were impaired.  Accordingly, we recognized an adjustment of $1,698,000 in the first quarter of 2003 to reduce the carrying value of the excess leasehold improvements to fair market value. If we cannot sublease the excess leased
space or if we sublease such space at rates well below the market value assumed in our impairment calculation, we may realize an additional material impairment charge in the future.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial
statements and related notes included in this Report and our audited consolidated financial statements and related notes for the year ended December 31, 2002 included in our Annual Report on Form 10-K.

Overview

In the first quarter of 2003, the Company continued to realize material negative operating cash
flows although our negative cash flows in the first quarter were significantly lower than the prior year period and comparable to the fourth quarter of 2002.  We expect to reduce our current rate of cash usage by implementing further cost
saving initiatives in 2003.  Such initiatives may include the cancellation of certain internally funded research projects, subleasing excess office and laboratory space at our proteomics facility, headcount reductions and the further delay or
abandonment of certain patent applications.  We may begin realizing such cost savings in the second quarter of 2003.  However, in order for us to approach positive operating cash flows, we must generate significant revenues, and until such
time, we expect to realize material negative operating cash flows in the foreseeable future.

Our working capital balance equaled $18.3
million at March 31, 2003.  Based upon our net operating cash usage of $4.1 million in the first quarter of 2003, we believe that our working capital is sufficient to support our current level of operations through at least March 31,
2004.  The Companys ability to continue as a going concern significantly beyond March 31, 2004 depends on our ability to generate significant revenues, reduce our operating costs and/or pursue other potential sources of working capital
including partnerships, mergers or sales of assets or technologies.  However, we cannot provide any assurance that we will generate significant revenues, reduce our operating costs by a material amount, or that other sources of working capital
will be available to the Company.

Results of Operations

Revenuesincreased $429,000, or 101%, in the three months ended March 31, 2003 compared to the prior year period.  This increase is primarily attributable to our contract with the National Institute of Environmental Health Sciences, or NIEHS, which
commenced in the third quarter of 2002.  We expect revenues in the second quarter of 2003 to be materially consistent with the first quarter, absent any new revenue sources that we may generate in the second quarter.

Development agreement costs consist mainly of personnel expenses, research materials and overhead costs related to activities performed under revenue
generating research agreements or government contracts.  These costs generally increase as we enter into new revenue generating agreements or contracts and generally decrease as such agreements or contracts are completed.  Development
agreement costs increased $808,000 in the three months ended March 31, 2003 compared to the prior year period.  This increase is primarily attributable to our contract with the NIEHS, which commenced in the third quarter of 2002.  We
expect development agreement costs in the second quarter of 2003 to be materially consistent with the first quarter, absent any new research agreements or government contracts that we may enter in the second quarter.

Research and development expensesconsist mainly of personnel expenses, consulting and outside research services, research materials and overhead costs related
to internally funded research activities.  These expenses are directly affected by our revenue generating activities which require a shift of personnel from our internally funded research activities.  Research and development expenses
decreased $3.1 million, or 49%, in the three months ended March 31, 2003 compared to the prior year period.   This decrease is primarily attributable to headcount reductions incurred in June 2002 as part of a company-wide restructuring,
the elimination of several consulting and outside research services and the increased allocation of resources from internally funded research activities to revenue generating projects.  We expect research and development expenses in the second
quarter of 2003 to be materially consistent with the first quarter, absent any cost reduction initiatives that may be implemented in the second quarter and any material change in the allocation of personnel to or from revenue generating agreements
or contracts.

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General and administrative expenses largely consist of non-research personnel.  General and
administrative expenses decreased $947,000, or 26%, in the three months ended March 31, 2003 compared to the prior year period.  This decrease is primarily attributable to headcount reductions incurred in June 2002 as part of a company-wide
restructuring and a reduction of outside legal costs due to the internalization of patent application processes and the abandonment of certain patent applications.  We expect general and administrative expenses in the second quarter of 2003 to
be materially consistent with the first quarter, absent any cost reduction initiatives or restructuring charges that may be implemented or be incurred, respectively, in the second quarter.

Impairment of propertyrepresents a write-down of the carrying value of leasehold improvements at our proteomics division.  We concluded that such
property was impaired as of March 31, 2003 based upon a comparison of the carrying value of the leasehold improvements with the fair market value of similarly improved office and laboratory space in the local area.

Liquidity and Capital Resources

|                                                                                |  | Three Months Ended March 31, |           
|------------------------------------------------------------------------------- |  | ---------------------------- | ----------
|                                                                                |  |                              |           
|                                                                                |  | 2003                         |           
|                                                                                |  |                              |           
|Net cash used in operating activities, excluding marketable securities activity |  | $                            | (4,104,000
|Cash used in investing activities, excluding marketable securities activity     |  |                              | (5,000    
|Net cash provided by (used in) financing activities                             |  |                              | 152,000   
|                                                                                |  |                              |           
|Net decrease in cash, cash equivalents and marketable securities                |  |                              | (3,957,000
|                                                                                |  |                              |           
|Cash, cash equivalents and marketable securities at December 31, 2002           |  |                              | 23,078,000
|                                                                                |  |                              |           
|Cash, cash equivalents and marketable securities at March 31, 2003              |  | $                            | 19,121,000
|                                                                                |  |                              |           

The reduction of cash used in
operating activities in the three months ended March 31, 2003 compared to the prior year period is primarily attributable to a company-wide restructuring in June 2002 as well as other cost saving initiatives implemented throughout 2002.  On a
sequential basis, cash used in operating activities in the first quarter of 2003 was up slightly from $3.8 million in the fourth quarter of 2002 primarily due to a decrease in revenue in the same periods. We expect to continue using cash in
operating activities in the second quarter of 2003, consistent in amount with the first quarter.

Our current rate of cash usage is not
sustainable for a long-term period compared to our balance of cash, cash equivalents and marketable securities at March 31, 2003.  Given our current financial condition and recent financial performance, we believe our ability to attract
additional working capital through equity or debt issuance is limited.  Accordingly, our strategy to improve our operating cash flows and increase our working capital is to generate significant revenues and/or enter into agreements with other
companies to partner the cost of developing specified products.  However, our liquidity position may adversely affect our product development efforts and thereby impair our ability to generate new sources of revenue.  We have delayed
further clinical trials of our non-Hodgkins lymphoma vaccine until we secure funding from a partner.  If we are unsuccessful in partnering the cost of these clinical trials, further development of this product may be delayed
indefinitely.  We are also pursuing a partner to fund the clinical trials of our alpha-galactosidase A product.  We may also delay the further development of other key products or technologies depending on the cost to continue development
and our ability to improve our operating cash flows and/or attract funding from other companies.  Furthermore, our liquidity position may limit our ability to negotiate favorable terms in contract discussions with potential customers or
partners.

Critical Accounting Policies

We consider the following accounting
policies to be critical given they involve estimates and judgments made by management and are important for our investors understanding of our operating results and financial condition.

Revenue Recognition  We may earn revenues from several sources including:  1) research and collaboration agreements and government grants that
consist of one or more revenue sources including technology access fees, milestone payments and research funding; 2) license fees; and 3) royalties.  We recognize revenues for each of these components as follows:

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Technology access fees are typically up-front, non-refundable payments and represent consideration from our
collaboration partners for access and rights to the Companys technologies for the term of the research agreement.  The Companys technologies are normally integral to the objectives of the research collaboration and, therefore,
receipt of a technology access fee does not represent the culmination of an earnings process.  Accordingly, we recognize revenue from technology access fees on a straight-line basis over the original term of the agreement, not including renewal
periods unless renewal is assured at the time the agreement is executed.  The unrecognized portion of technology access fees is reported as deferred revenue.

Milestone payments are triggered by the Companys achievement of performance objectives that are defined in research agreements.  Milestone achievements
typically require acceptance or approval by our collaboration partners.  Also, our collaboration partners retain access to the technologies underlying the milestone achievement for the remaining term of the agreement.  Accordingly, we
recognize revenue from milestone payments on a straight-line basis from the date of completion of the applicable performance objective to the end of the original term of the agreement, not including renewal periods unless renewal is assured at the
time the agreement is executed.  The unrecognized portion of milestone payments is reported as deferred revenue.

We receive
funding for sponsored research or feasibility studies from commercial companies, government agencies and educational institutions.  Funding for sponsored research or feasibility studies is typically non-refundable and not based upon performance
objectives or customer acceptance.  Also, we may receive funding in the form of periodic payments or reimbursement of actual costs.  Accordingly, revenue from sponsored research and feasibility studies is recognized using the percentage of
completion method or recognized as expenses are incurred depending on the form of funding.  Under the percentage of completion method, the total contract value is multiplied by the percentage of actual research costs incurred to date compared
to the estimated total costs to complete the contract as a whole.  If collection of any funding is not assured, revenue recognized is limited to the lesser of the percentage of completion calculation or actual cash received to date. 
Revenue received for equipment purchases is deferred and recognized as revenue over the life of the agreement.

We provide licenses to
third parties for the exclusive or non-exclusive access to certain of the Companys technologies for commercial development purposes.  We may receive fees from such licenses in the form of up-front payments, additional payments upon
achievement of milestones, and royalty rights upon the successful commercialization by the licensee of a product containing the licensed technology.  License agreements normally provide immediate access by the licensee to the Companys
technology and do not require the Company to provide any research services or other support toward the licensees commercial development efforts.  Accordingly, we recognize up-front license fees as revenue upon the effective date of the
licensees first access to the Companys technologies.  Additional license fees payable upon achievement of milestones are recognized as revenue upon such achievement and royalty payments are recognized as revenue when earned by the
Company.

Intangible and Long Lived Assets  The Companys intangible and long-lived assets include
capitalized costs of filing patent applications that relate to commercially viable technologies, capitalized license fees for rights to specified intellectual property, and property and equipment related to our research facilities in California and
Maryland and our biomanufacturing facility in Kentucky.  All intangible and long lived assets are amortized or depreciated over the shorter of (1) their estimated useful lives, (2) the estimated period that the assets will generate revenue, or
(3) the statutory or contractual term in the case of patents and intellectual property licenses.  Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon
managements judgment.  We evaluate our intangible assets and our long-lived assets for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable.  If any of our intangible assets or long-lived assets are considered to be impaired, the amount of impairment to be recognized is equal to the excess of the
carrying amount of the assets over the fair value of the assets.

Stock-Based Compensation  The Company normally grants
stock options having fixed exercise prices and a fixed number of shares of common stock that may be acquired.  We account for stock options granted to employees and directors, as well as other stock-based employee compensation plans, using the
intrinsic value method of accounting.  As such, we recognize compensation expense for stock options only if the quoted market value of the Companys common stock exceeds the exercise price of the option on the grant date. 
Any

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compensation expense realized per the intrinsic value method is amortized over the vesting period of the option.   Stock options issued to non-employees as
consideration for goods or services provided to the Company are accounted for under the fair value method, which requires that compensation expense be recognized for all such options.

Factors That May Affect Our Business

Risks Related To Our Business

| | In an environment of diminished revenue, we may not be able to preserve working capital and extend the viability of the Company
| | -------------------------------------------------------------------------------------------------------------------------------

Because we are not presently generating significant revenues and cash flows, we are funding virtually all of our product development initiatives internally.
At the same time, because our cash flow is substantially reduced compared to the last three years, we are experiencing increasing pressure to curtail spending and otherwise reduce costs.  We implemented a major reorganization in June 2002 to
reduce costs.  If we cannot increase our cash flow in the very near term, we will be required to take one or more of the following actions: further restructure our operations and potentially incur significant one-time charges; delay, reduce the
scope of, or eliminate one or more of our research and development programs; further reduce patent-related expenses, effectively foregoing our rights to future technologies or products; obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to certain of our technologies, product candidates or products that we would otherwise seek to develop or commercialize on our own; or sell or license the rights to certain of our products or
technologies on terms that are worse than we might have been able to obtain in a different environment.  If our cash flows continue to deteriorate or we take significant steps to reduce our expenses, potential collaborators may question our
ability to operate as a going concern and to perform and choose not to do business with us, which would make it harder for us to improve our cash flows.

| | We have negative cash flows and may not have sufficient cash to continue operations.  Or, even if we can continue operations, we may not have sufficient cash to
effectively manage our working capital requirements and fund our operations for the period required to achieve profitability.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Since our inception, we have never generated enough cash to cover our expenses and we will need to continue to spend substantial funds to continue our product
development programs. We do not know with certainty whether our cash reserves and any cash flows from operations or financing will be sufficient to fund our operations significantly beyond 2003. We may be unsuccessful in entering into any new
collaboration that results in significant revenues or cash flow. We have limited cash and credit available, and may be unable to raise additional financing or establish additional lines of credit to meet our anticipated and unanticipated working
capital requirements.  Our future capital requirements depend upon many factors, including:

| |  | our ability to increase revenues;                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the number of products we have under development;                                                                                                     
| |  | the timing of, and extent to which we are faced with, unanticipated development or technological challenges or regulatory pressures;                  
| |  | our ability to successfully transfer liability for or restructure long-term facility leases for facilities that exceed our present capacity needs; and
| |  | the willingness of pharmaceutical and biopharmaceutical companies to partner with us.                                                                 

In the event we raise capital via equity financing, existing stockholders could experience significant dilution, as our stock price currently fluctuates near $1.00
and we expect that the amount of additional capital we will require would be substantial.  We may raise this capital through public or private financings or additional collaborations, strategic partnerships or licensing arrangements.  If
adequate funds are not available to satisfy either short- or long-term capital requirements, we might be required to significantly limit or cease our operations or delay or abandon some of our planned future expenditures, any of which actions would
likely harm our business.

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| | If our common stock ceases to be listed for trading on the NASDAQ National Market, the value and liquidity of your investment may be adversely affected.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

We are in danger of being delisted from the NASDAQ National Market.  On January 24, 2003, we received a notice from the NASDAQ
Qualifications Department that indicated that our common stock had closed for 30 consecutive trading days below the applicable minimum bid price of $1.00. Under current NASDAQ National Market listing requirements, we have until July 23, 2003 to
demonstrate that the market price for our common stock has closed at or above a bid price of $1.00 per share for at least ten consecutive trading days.   To ensure continued listing on the NASDAQ National Market, the Company must regain
compliance with the minimum bid price requirement and thereafter maintain compliance with the minimum bid price requirement and the other NASDAQ National Market listing requirements.  We cannot assure you that we will regain or maintain
compliance with these requirements.  If we do not meet these requirements, we expect that our common stock would be traded on the NASDAQ SmallCap Market or the NASD Over-The-Counter Bulletin Board.  In the event of delisting from the
NASDAQ National Market, we expect to pursue listing on the NASDAQ SmallCap Market.  Further, if we fail to comply with the NASDAQ National Market listing requirements, the ability of stockholders to buy and sell shares of our common stock might
be affected, and the efficiency of the trading market for our common stock could significantly impair our ability to raise capital in the public markets should we desire to do so in the future. In addition, our stock could also potentially be
subject to what are known as the penny stock rules, which place additional requirements on broker-dealers who sell or make a market in such securities. Consequently, if we were removed from the NASDAQ National Market, the ability or
willingness of broker-dealers to sell or make a market in our common stock might decline.

We have a history of losses and cannot predict when we will become
profitable, if at all

We have realized net losses in each year since our inception in 1987 and we had an accumulated deficit of
$156.5 million as of March 31, 2003.  From September 1998 through August 2001, almost all of our revenues came from our research collaboration with Dow. The research collaboration with Dow ended on August 31, 2001 and we expect no additional
revenues under our contract with Dow for the foreseeable future. We have not yet entered into any new collaborations of a magnitude that could make up for the decrease in cash flow and revenues resulting from the completion of our research
collaboration with Dow. We expect to continue to spend significant amounts to develop products and to fund our operations. As a result we will need to generate significant additional revenues from collaborations and the commercialization of our
products and technologies to achieve profitability. We expect to incur substantial losses in the foreseeable future. If we are unable to enter into major new collaborations, control our operating expenses and successfully commercialize our products
and technologies, we may never become profitable and we may fail.

We most likely will require additional capital

In order for us to develop profitable and cash-positive operations, we must generate revenue from our products under development and our technologies.  Since our
inception, we have never generated enough cash to cover our expenses and we expect to continue to spend substantial funds to continue our product development programs and to fund our operations. In addition, the risks inherent in developing
innovative products, such as NHL vaccines, make it difficult to forecast with certainty the capital required to commercialize our products. If our capital resources are insufficient to meet future capital requirements and expenses, we will have to
raise additional funds. If we raise additional funds by issuing equity securities, existing stockholders may be diluted. We may raise this capital through public or private financings or additional collaborations, strategic partnerships or licensing
arrangements. We expect that the amount of additional capital we will require would be substantial.  Our access to capital markets may be restricted by depressed stock valuations or other factors over an extended period of time.  We may be
unsuccessful in entering into any new collaboration that results in significant revenues or cash flow. If we are unable to raise sufficient additional capital or generate sufficient cash flows, we will have to curtail or cease operations.

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| | We may be unable to recruit and retain senior management and other key scientific personnel on whom we are dependent
| | --------------------------------------------------------------------------------------------------------------------

The loss of one or more of our senior management or other key scientific personnel could significantly harm our business, cause collaborators to cease dong business
with us or potential collaborators to decline to do business with us, and could otherwise inhibit our research and development and commercialization efforts.  None of our key personnel are subject to employment agreements. We face competition
for research scientists and technical staff from other companies, academic institutions, government entities, nonprofit laboratories and other organizations.  We have implemented 10% cash salary reductions substituting non-cash stock
compensation for over twenty of our highest paid employees to conserve cash.  Failure to recruit and retain senior management and scientific personnel on acceptable terms may prevent us from achieving our business objectives.

| | Our previous or future workforce reductions and management restructurings may hurt the performance of our continuing personnel, and make it more difficult to retain the
services of key personnel.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We restructured our operations in 2002, resulting in substantial workforce
reductions.  These reductions were effected in all functional areas.  Our top management was restructured in April 2003.  These changes and reductions or future changes and reductions may create concerns in our employee base about job
security, our direction or focus, and the continued viability of the Company.  Such concerns could lower productivity, make it more likely that some of our key employees will seek new employment and require us to hire replacements, and cause
concern among collaborators or potential collaborators about doing business with us. These factors also may make the management of our business more difficult and make it harder for us to attract employees in the future.

| | We are at an early stage of product commercialization, and we may not be able to successfully develop our products and technologies nor sustain commercial use of our
technology
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are in an early stage of commercialization, and we are subject to all the risks inherent in the
development of a business enterprise, including the need for substantial capital to support the development of our products and technologies.

Our anticipated products, most likely will require that we enter into new collaborations before we can manufacture and/or market them.  One of our products, our
vaccines for the treatment of non-Hodgkins lymphoma, cannot be further developed without a collaboration in the foreseeable future. Vaccines are also subject to the governmental regulatory process. Because we are in new and developing fields,
and our research focuses on new and unproven products, our therapeutic vaccines, proteins and other therapeutics under development may not be effective in humans, or may not meet regulatory requirements for safety and efficacy. In addition, even if
we successfully develop a product, there may not be a substantial commercial market for that product at commercially viable prices.

We are in new and developing
fields and there may not be a market for our technologies

Our technologies, including our ProGEx system and GENEWARE technology,
have limited commercial precedent. Much of our research is fundamentally unique and we cannot assure the acceptance of its scientific merit or the benefits of products produced by it, nor that the public will react favorably to it. The usefulness of
the information and products generated by our proteomics, functional genomics and bioinformatics technologies is unproven, and our collaborators and potential collaborators may determine that they are not useful, cost-effective, or otherwise
unacceptable to them. We generate large amounts of data from our research with genes and proteins and we may not be able to mine or integrate this data in a timely manner, or turn it into commercially viable information. In addition, because our
fields are characterized by rapid innovation, we must complete development of our technologies in time to meet market demand, if any. If we fail to do so, it is likely that other technologies and companies will predominate and we will not be able to
earn a sufficient return on our investment.

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| | General economic conditions cause uncertainty with respect to other companies and entities collaborating with us or otherwise dealing with us, and this can have
an adverse effect on our revenues and cash flows
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

To a large extent, decisions by businesses and other entities
to collaborate or otherwise do business with us are discretionary, and the decision making process typically takes many months to complete. We believe that the prolonged slowdown in the U.S. and global economies generally, and the biotechnology and
pharmaceutical industries in particular, has caused, and may continue to cause potential collaborators and customers to defer decisions to work with us or to access our technologies. As a result, we expect that revenues and cash flows will be
uncertain for the next several quarters. Therefore, it is difficult to accurately assess and predict the future demand for our products, technologies and services. If these economic conditions continue, such conditions will likely have a continuing,
adverse effect on our revenues and operating results.

Alternative technologies may supersede our technologies or make them non-competitive

Genomics, proteomics, biomanufacturing and bioinformatics are intensely competitive fields. They are characterized by extensive research efforts, which
result in rapid technological progress that can render existing technologies obsolete or economically noncompetitive. If our competitors succeed in developing products or technologies that are more effective than ours or that render our products or
technologies obsolete or noncompetitive, our business will suffer. Many universities, public agencies and established pharmaceutical, biotechnology, chemical and other life sciences companies with substantially greater resources than we have are
developing and using technologies and are actively engaging in the development of products similar to or competitive with our products and technologies. Like us, our competitors are using proteomics and genomics technologies to identify potential
drug targets, therapeutic proteins and diagnostic marker proteins.  To remain competitive, we must continue to invest in new technologies and improve existing technologies.  If our revenues and cash flows do not improve significantly, we
will not have the resources to continue such investment.

Our competitors may devise faster, more complete or more accurate methods to
obtain proteomic and functional genomic information than our technologies and systems, including our ProGEx and GENEWARE systems. There has been and continues to be substantial academic and commercial research effort devoted to the development of
such methods. If a successful competitive method is developed, it would undermine the commercial basis for the products and technologies we intend to provide.

| | We may not be able to enter into collaborations necessary to fully develop and commercialize our products and technologies, and we will be dependent on our collaborators if
we do
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are independently pursuing some therapeutic product applications into the development stage. However,
we expect to develop and commercialize most of our future products in collaboration with pharmaceutical and biotechnology companies. For example, our strategy concerning our NHL vaccine involves seeking a partner to complete the development of this
product. We cannot assure you that such collaborative arrangements will be available to us on acceptable terms, or at all.  If our cash flows continue to deteriorate or we take significant steps to reduce our expenses, potential partners may
question our ability to perform and choose not to do business with us, which would make it harder for us to find a partner and would harm our ability to commercialize our products.  Our success will depend in large part on our ability to enter
into future collaborations with other companies for the financing of development and/or regulatory approval and commercialization of our products. Our reliance upon these companies for these capabilities will reduce our control over such activities
and could make us dependent upon them. To date, we have entered into only a limited number of collaborations. Generally, the scope of these collaborations has been to demonstrate the function of plant genes and the feasibility of using viral vectors
to create proteins in plants and to identify marker proteins for drug development and diagnostics. Some of our existing agreements provide us with rights to participate financially in the commercial development of products resulting from the use of
our technologies. We may be unable to obtain such rights in future collaborations. In addition, unforeseen delays or complications could arise and result in the breach of our contractual obligations with our collaborators and others, or render our
technologies unable to perform at the quality and capacity levels required for success.

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Conflicts with collaborators or licensees could harm our business

Conflicts with collaborators could have a negative impact on our relationships with them, including on our revenues to be derived from certain of these relationships,
and impair our ability to enter into future collaborations, either of which could adversely affect our business. Collaborators could develop competing products, preclude us from entering into collaborations with their competitors or terminate their
agreements with us prematurely. Moreover, disagreements could arise with collaborators or licensees over rights to our intellectual property, our rights to share in any of the future revenues from products or technologies resulting from use of our
technologies, our rights to payments for achievement of milestones or our performance of research and development activities on behalf of collaborators, or our activities in separate fields may conflict with other business plans of our collaborators
or licensees.

| | We must enter into agreements with third parties to provide sales and marketing services, or develop these capabilities on our own, if we are to successfully commercialize
our products and technologies
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although we plan to enter into sales and marketing arrangements with third
parties, we may not be able to enter into these arrangements on favorable terms, if at all.  We must also continue to develop a business development force with sufficient technical expertise to generate demand for our products and technologies.
Our possible inability to develop business development personnel, or contract for effective sales and marketing capabilities would significantly impair our ability to develop and commercialize our products and technologies.

We may not be able to successfully manufacture products in commercial quantities or at acceptable costs

The failure of our technologies to provide safe, effective, useful or commercially viable approaches to the discovery, development and/or production of drug targets
and proteins which can be used as therapeutics would significantly limit our business plan and future growth.

| | Concentration of ownership among our existing executive officers, directors and principal stockholders may enable them to collectively influence  significant corporate
transactions that require stockholder approval
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our directors, our executive officers and principal stockholders
affiliated with our directors and executive officers beneficially own, in the aggregate, approximately 29% of our outstanding common stock as of April 30, 2003.  The concentration of ownership in combination with other common stockholders may
collectively influence significant corporate transactions such as mergers, changes in control, consolidation or sale of some or all of our assets, and other significant corporate transactions requiring shareholder approval.

| | Our stockholder rights plan and provisions of our charter documents and Delaware law may inhibit a takeover, which could adversely affect our stock price
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

We have adopted a stockholder rights plan and declared a dividend distribution of one right for each outstanding share of common
stock to stockholders of record as of May 4, 2001. Subject to certain specified exceptions and limitations under the rights plan, we will continue to issue one right for each share of common stock that becomes outstanding after May 4, 2001. Each
right entitles the holder to purchase one unit consisting of one one-hundredth of a share of our Series A Junior Participating Preferred Stock for $45 per unit. Under certain circumstances, if a person or group acquires 15% or more of our
outstanding shares of common stock, holders of the rights (other than the person or group causing their exercisability) will be able to purchase, in exchange for the $45 exercise price, shares of our common stock or of any company into which we are
merged having a value of $90. In addition, the board of directors has the option, under certain circumstances, to exchange each right (other than rights held by the person or group triggering the board of directors option) for a share of
common stock for no additional consideration on the part of the holder of the right. The rights expire on April 27, 2011. Our rights plan could make it more difficult for a third party to acquire us (or a significant percentage of our outstanding
capital stock) by causing substantial dilution of the stock ownership of a person or group attempting to acquire control of us. Our rights plan may have the effect of discouraging takeover attempts because a potential acquirer would have to
negotiate with our board of directors to avoid suffering dilution.

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Provisions in our charter and bylaws and applicable provisions of the Delaware General Corporation Law may also
make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions may make it more difficult or expensive for a third party to acquire a majority of our common stock or delay, prevent
or deter a merger, acquisition, tender offer or proxy contest, which may adversely affect our stock price.

Risks Related to Our Industry

| | If companies in the pharmaceutical, biotechnology and life sciences industries do not succeed or their demand for our products and technologies decreases, then our revenues
could be reduced
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect to derive our revenues primarily from products and technologies provided to the
pharmaceutical, biotechnology and life sciences industries. Accordingly, our success will depend directly on the success of companies in these industries and their demand for our products, services and technologies. Our operating results may
fluctuate substantially due to reductions and delays in expenditures by companies in those industries, or their unwillingness or inability to use our products and technologies. These reductions and delays may result from factors that are not within
our control, such as:

| |  | changes in economic conditions generally;                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the extent to which companies in these industries conduct research and development involving proteomics and functional genomics in-house or through industry
consortia;
| |  | the extent to which genomic information is or is not made publicly available;                                                                                          
| |  | consolidation within one or more of these industries;                                                                                                                  
| |  | changes in the regulatory environment affecting these industries;                                                                                                      
| |  | pricing pressures;                                                                                                                                                     
| |  | market-driven pressures on companies to consolidate and reduce costs; and/or                                                                                           
| |  | other factors affecting spending in these industries.                                                                                                                  

If competitive
products are better than our products, then our business may fail

The markets for protein development and production, including
human and veterinary therapeutics and vaccines such as the ones we are developing, are highly competitive. We face significant competition in our protein product development and production efforts from entities using alternative, and in some cases
higher volume and larger scale, approaches for the same purpose. Competitors with substantially greater resources are actively developing products similar to or competitive with our products and potential products. Our competitors may succeed in
developing products or obtaining regulatory approval before we do or in developing products that are more effective than those we develop or propose to develop. A large number of universities and other not-for-profit institutions, many of which are
funded by the U.S. and foreign governments, are also conducting research to discover genes and their functions. Any one or more of these entities may discover and establish a patent position in one or more of the genes or proteins that we wish to
commercialize.

In addition, several pharmaceutical, biotechnology, chemical and other life sciences companies engage in research and
development in the use of unique gene expression systems to produce therapeutic proteins. These competitors may develop products earlier or obtain regulatory approvals faster than we may be able to, or develop products that are more effective than
ours. New developments are expected to continue, and discoveries by others may render our products and technologies noncompetitive, which could lead to the failure of our business.

We and our collaborators may not obtain FDA and other approvals for our products in a timely manner, or at all

Drugs and diagnostic products are subject to an extensive and uncertain regulatory approval process by the FDA and comparable agencies in other countries. The
regulation of new products is extensive, and the required process of laboratory testing and human studies is lengthy, expensive and uncertain. The burden of these regulations will fall on us to the extent we are developing proprietary products. We
may not be able to obtain the clearances and approvals necessary for the clinical testing, field-testing, manufacturing or marketing of our products. If the products

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are the result of a collaborative effort, these burdens may fall on our collaborators or we may share these burdens with them. We may not obtain FDA or other approvals for
those products in a timely manner, or at all. We may encounter significant delays or excessive costs in our efforts to secure necessary approvals or licenses. Even if we obtain FDA regulatory approvals, the FDA extensively regulates manufacturing,
labeling, marketing, promotion and advertising after product approval. Further, once a manufacturer obtains regulatory approval, a marketed product and its manufacturer are subject to continual review, and discovery of previously unknown problems
with a product or manufacturer may result in restrictions on the product, manufacturer or manufacturing facility, including withdrawal of the product from the market. In some countries, regulatory agencies also set or approve the sale prices for
drug products. Additionally, several of our product development areas may involve relatively new technology that has not been the subject of extensive product testing in humans. The regulatory requirements governing these products and related
clinical procedures remain uncertain and the products themselves may be subject to substantial review by the FDA and foreign governmental regulatory authorities that could prevent or delay approval. Regulatory requirements ultimately imposed on our
products could limit our ability to test, manufacture and commercialize our products.

USDA rules could adversely affect us or our collaborators

We must comply with USDA regulations for outdoor releases of genetically engineered organisms as well as other products designed for use on or with
agricultural products. In addition, the USDA prohibits growing and transporting genetically modified plants except pursuant to an exemption or under special permits. We may use genetically modified plants as screening or production hosts. Changes in
USDA policy regarding the movement or field release of genetically modified plant hosts could adversely affect our business by increasing the cost of our products and technologies or decreasing consumer demand for those products and technologies or
causing the government to prohibit their sale or use.  If we fail to comply with such rules or policies, we may be subject to financial loss or be liable for costs incurred as a result of non-compliance.

| | If there is negative public reaction to the use of genetically engineered products and technologies, then the market for certain products and technologies we develop will be
adversely affected
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Future commercial success of some of our products and of the products of some of our
collaborators, will depend in part on public acceptance of the use of genetically engineered products including drugs, plants and plant products. Claims that genetically engineered products are unsafe for consumption or pose a danger to the
environment may influence public attitudes. Negative public reaction to genetically modified organisms and products could result in greater government regulation of genetic research and resultant products, including stricter labeling requirements,
and could cause a decrease in the demand for our products, even if such products do not result from GMO organisms.

We may be sued for product liability and our
product liability insurance may not be adequate

The testing, marketing and sale of our and our collaborators products will
entail a risk of allegations of product liability, and third parties may assert substantial product liability claims against us. While we have limited product liability insurance to protect against this risk, adequate insurance coverage may not be
available at an acceptable cost, if at all, in the future and a product liability claim or product recall could materially and adversely affect our business. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to
protect against potential product liability claims could prevent or inhibit the commercialization of the products we or our collaborators develop. If we are sued for any injury allegedly caused by our products or our collaborators products,
our liability could exceed our total assets and our ability to pay the liability.

| | If we use hazardous materials in our business in a manner that causes injury or violates laws, we may be liable for substantial damages
| | ---------------------------------------------------------------------------------------------------------------------------------------

Our research and development processes involve the use of hazardous materials, including chemicals and radioactive and biological materials. Our
operations also produce hazardous waste products. The chemicals we use include, but are not limited to, flammable solvents such as methanol and ethanol, ethidium dye which is a commonly used fluorescent dye for visualizing DNA, and buffer solutions
used in the purification of DNA, and various organic solvents, acids and bases.  We also use several radioisotopes including phosphorous-32, carbon-14, sulfur-35,

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phosphorous-33, iodine-125 and hydrogen-3. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state
and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to civil damages and criminal penalties in the event of an improper or unauthorized release of, or exposure of
individuals to, hazardous materials. Further, it is possible that the materials we use could contaminate another partys property. In addition, claimants may sue us for injury or contamination that results from our use or the use by third
parties of these materials, and our liability may exceed our total assets and our ability to pay the liability. In addition, compliance with environmental laws and regulations is expensive, and current or future environmental regulations may impair
our research and development and production efforts. Although we have general liability insurance, these policies do not cover claims arising from pollution from chemical, radioactive or biological materials. Our collaborators may also be working
with various types of hazardous materials in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury we or our collaborators cause to persons or property by exposure to, or release
of, any hazardous materials.

Healthcare reform and restrictions on reimbursements may limit the financial returns from our products

Our ability and that of our collaborators to commercialize therapeutics and diagnostic products may depend in part on the extent to which government health
administration authorities, private health insurers and other organizations will pay the cost of these products. These third parties are increasingly challenging both the need for and the price of new medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved therapeutics and diagnostics, and adequate third party reimbursement may not be available for any product to enable us to maintain price levels sufficient to realize an appropriate
return on our investment in research and product development.

Risks Related to Our Intellectual Property

| | Patent protection in the biotechnology industry is uncertain, which may result in a decrease in the value of our products and technologies
| | ------------------------------------------------------------------------------------------------------------------------------------------

We are involved in overlapping and rapidly evolving areas of biotechnology, pharmaceutical development and basic research involving viral vectors,
plant transgenics, proteomics, functional genomics, protein transformation, and immunotherapy. Each of these areas has been the subject of intense research and patenting activity throughout the world by our commercial competitors, actual and
potential collaborators, academic institutions and government researchers. We cannot determine whether or not there are patents currently pending that, if issued, would prevent us from practicing our core technologies, commercializing them or
developing commercially viable products based upon them.

The patent positions of biotechnology firms generally are highly uncertain and
involve complex legal and factual questions that will determine who has the right to develop a particular product. Changes in, or different interpretations of, patent laws in the United States and other countries might allow others to use our
discoveries or to develop and commercialize products and technologies similar to our products and technologies without any compensation to us. Our potential collaborators or customers may conclude that uncertainties about patent protection decrease
the value of our databases, products and services.

Throughout the world there are numerous issued patents, as well as published foreign
patent applications which may issue as patents, many of which relate to our current operations, our anticipated future operations and the products we are likely to develop. The scope of these patents is a matter of legal interpretation and is
subject to uncertainty. We have not obtained, but we may in the future obtain, opinions from our patent counsel that we have freedom to conduct our commercial activities free of claims of patent infringement from third parties. For example, we are
aware of one company, Enzon, Inc., that through its subsidiary, SCA Ventures, Inc., owns or has licensed a broad portfolio of patents to single-chain antigen binding proteins. Enzon, in a letter mailed to numerous companies including us, has stated
that it would like to discuss providing a license under these patents. In addition, Dow owns or controls certain patent rights in the field of viral vectors covering the infection of plant cells and the expression of foreign genes in plant cells,
and has informed us that it believes that some of our plant viral activities may fall within the scope of its patents. Two patents issued to us in October 2001 reference the Dow-controlled patents and conclude that they do not constitute prior art.
If we are unable to resolve this matter, and are found to have infringed

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upon Dows rights, our product development and research activities related to plant viruses which fall within the scope of Dows patents may be delayed or
terminated. These kinds of disagreements could result in costly and time-consuming litigation and divert our financial and managerial resources.  Epicyte Pharmaceuticals, Inc., in a letter mailed to several companies, invited us to participate
in a licensing program under their patent for marking immunoglobulins in plants.  Maxygen, Inc. sent us a cautionary letter regarding our GRAMMR  molecular evolution technology.  Maxygen owns several patents to its own proprietary
methods.  We are not aware of any overlap between our activities and the Maxygen patents.  If it turns out that we require a license from either of these companies, it would increase the cost of doing business in these areas.  If a
dispute should arise between LSBC and either of these companies, it could result in delay or termination of these activities.

Our patent applications may not result
in issued patents that are enforceable

Our disclosures in our patent applications may not be sufficient to meet the statutory
requirements for patentability in all cases. As a result, we do not know which of our patent applications will result in enforceable patents. Our patent applications may not issue as patents, and any patents that are issued to us may not provide
commercially meaningful protection against competitors. Any issued patent may not provide us with competitive advantages. Others may challenge our patents or independently develop similar products which could result in an interference proceeding in
the U.S. Patent and Trademark Office. Others may be able to design around our issued patents or develop products similar to our products. In addition, others may discover uses for genes or proteins other than those uses covered in our patents, and
these other uses may be separately patentable.

Public disclosure and patents relating to genes and gene sequences held by others may limit our proprietary rights

The Human Genome Project and many companies and institutions have identified genes and deposited those sequences in public
databases and are continuing to do so. These public disclosures might limit the scope of our claims or make unpatentable subsequent patent applications on full-length gene sequences. We are aware of issued patents and patent applications containing
subject matter such that we or our licensees or collaborators may require a license or rights in order to research, develop or commercialize some of our products and technologies. We may find that licenses relating to such subject matter will not be
available on acceptable terms, or at all.

| | Patent infringement or enforcement litigation or interference proceedings could be costly and disrupt our business and may prevent us from commercializing our
products
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The technology that we use to develop our products and key resources, and those that we incorporate in
our products and technologies, may be subject to claims by third parties, including our collaborators, that they infringe the patents or proprietary rights of others. Technologies of our collaborators may also be subject to infringement or similar
claims which could impair our collaborative product development and commercialization efforts. We also may need to enforce our patent rights in actions against others, which could be expensive. The risk of such events occurring will tend to increase
as the fields of proteomics, genomics and the biotechnology industry expand, more patents are issued and other companies attempt to discover genes and proteins and engage in other proteomics, genomics and biotechnology-related businesses.

With respect to identifying proteins uniquely associated with disease states or as targets for drug therapy, we are aware that
companies have published patent applications relating to nucleic acids encoding specific proteins. If the U.S. Patent and Trademark Office issues patents to these companies, their patents may limit our ability and the ability of our collaborators to
practice under any patents that may be issued to us. Also, even if the U.S. Patent and Trademark office issues us a patent, the scope of coverage or protection afforded to the patent may be limited.

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We may not be able to protect our know-how and trade secrets

We generally control the disclosure and use of our know-how and trade secrets using confidentiality agreements. It is possible, however, that:

| |  | Some or all confidentiality agreements will not be honored;                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | Third parties will independently develop equivalent technology;                                                             
| |  | Disputes might arise with our consultants, collaborators or others concerning the ownership of intellectual property; and/or
| |  | Unauthorized disclosure of our know-how or trade secrets will occur                                                         

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Companys exposures to market risks are fully explained in our Annual Report on Form 10-K for the year ended December 31, 2002.  No material changes to
the information provided in our Annual Report have occurred subsequent to December 31, 2002 through March 31, 2003.

Item 4.  Controls and Procedures

(a) Evaluation of
disclosure controls and procedures.Regulations under the Securities Exchange Act of 1934 require public companies, including our company, to maintain disclosure controls and procedures, which are defined to mean a companys
controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms.  Our chief executive officer and our chief financial officer, based upon their evaluation of our disclosure controls and procedures within 90 days before the
filing date of this report, concluded that as of their evaluation date, our disclosure controls and procedures were effective for this purpose.

(b) Changes in internal controls.There were no significant changes in the Companys internal controls or in other factors that could significantly
affect these controls subsequent to the date our chief executive officer and chief financial officer carried out their evaluation as referenced in the above paragraph.

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PART II  OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

(d) Use
of Proceeds. During the third quarter of 2000, the Company received net proceeds of approximately $89 million from an initial public offering of the Companys common stock.  Provided below is a reasonable estimate of the amount of IPO
net proceeds used in each of the following categories, through March 31, 2003:

|Construction of plant, building and facilities |  | $ | 2,329,000  | 
|---------------------------------------------- |  | - | ---------- | 
|Purchase of machinery and equipment            |  |   | 7,706,000  | 
|Construction of leasehold improvements         |  |   | 5,993,000  | 
|Repayment of indebtedness                      |  |   | 3,676,000  | 
|Purchase of intellectual property licenses     |  |   | 3,264,000  | 
|Capitalized patent costs                       |  |   | 1,680,000  | 
|Working capital                                |  |   | 47,814,000 | 
|Cash and investments                           |  |   | 16,294,000 | 

The use of proceeds for working
capital includes expenses for research and development and general and administrative activities.  Cash and investments consist of money market funds, commercial paper, corporate and U.S. government agency notes, and bank certificates of
deposit.

None of the IPO net proceeds were paid directly or indirectly to directors, officers, or their associates, persons owning
10 percent (10%) or more of any class of our equity securities, or our affiliates.  The use of IPO net proceeds set forth above does not represent a material change from the anticipated use of proceeds described in the prospectus contained
in our Registration Statement on Form S-1 (SEC Registration No. 333-34198), declared effective on August 9, 2000.

Item 6.  Exhibits and Reports on Form 8-K

(a)          List of
Exhibits:

|Exhibit Number |   | Exhibit Title or Description                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.01          |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                
|99.02          |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               | * | As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange
Commission and is not incorporated by reference in any filing of Large Scale Biology Corporation under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general
incorporation language in any filings

(b)          Reports on Form 8-K:

No reports on Form 8-K were filed during the period covered by this Report.

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SIGNATURE

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.

|                    | LARGE SCALE BIOLOGY CORPORATION
|------------------- | -------------------------------
|                    |                                
|Date:  May 14, 2003 | By:                            
|                    |                                
|                    |                                

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CERTIFICATIONS

I, Kevin J. Ryan, Chief Executive Officer, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Large Scale Biology Corporation;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Based on my knowledge, this quarterly 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 quarterly report;                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | c)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|6. | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|Date:  May 14, 2003 | /s/ KEVIN J. RYAN                    
|------------------- | -------------------------------------
|                    |                                      
|                    | Kevin J. Ryan Chief Executive Officer

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I, Ronald J. Artale, Chief Financial Officer, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Large Scale Biology Corporation;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Based on my knowledge, this quarterly 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 quarterly report;                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | c)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                          
|6. | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|Date:  May 14, 2003 | /s/ RONALD J. ARTALE                    
|------------------- | ----------------------------------------
|                    |                                         
|                    | Ronald J. Artale Chief Financial Officer

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Exhibit Index

|Exhibit Number |   | Exhibit Title or Description                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.01          |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                
|99.02          |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               | * | As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange
Commission and is not incorporated by reference in any filing of Large Scale Biology Corporation under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general
incorporation language in any filings