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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 June 30, 2003                                            
|                                                       |  |                                                                                         
|or                                                    
|                                                       |  |                                                                                         
|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                                                       |  | 77-0154648                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification number)
|                                                              
|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 August 8, 2003:  25,797,954

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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 June 30, 2003 Table of Contents

|                               |         | Page                                                                                                                 
|------------------------------ | ------- | ---------------------------------------------------------------------------------------------------------------------
|                               |         |                                                                                                                      
|PART I 
FINANCIAL INFORMATION |        
|                               |         |                                                                                                                      
|                               | Item 1. | Financial Statements                                                                                                 
|                               |         |                                                                                                                      
|                               |         | Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 (Unaudited)                          
|                               |         |                                                                                                                      
|                               |         | Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2003 and 2002 (Unaudited)
|                               |         |                                                                                                                      
|                               |         | Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 (Unaudited)          
|                               |         |                                                                                                                      
|                               |         | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                     
|                               |         |                                                                                                                      
|                               | Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations                                
|                               |         |                                                                                                                      
|                               | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                           
|                               |         |                                                                                                                      
|                               | Item 4. | Controls and Procedures                                                                                              
|                               |         |                                                                                                                      
|PART II 
OTHER INFORMATION    |        
|                               |        
|                               | Item 2. | Changes in Securities and Use of Proceeds                                                                            
|                               |         |                                                                                                                      
|                               | Item 4. | Submission of Matters to a Vote of Security Holders                                                                  
|                               |         |                                                                                                                      
|                               | Item 5. | Other Information                                                                                                    
|                               |         |                                                                                                                      
|                               | Item 6. | Exhibits and Reports on Form 8-K                                                                                     
|                               |         |                                                                                                                      
|SIGNATURE                      | 20     



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PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements

Large Scale Biology CorporationCondensed Consolidated Balance Sheets (Unaudited)

|                                                |  | June 30, 2003 |              | December 31, 2002 |  
|----------------------------------------------- |  | ------------- | ------------ | ----------------- | -
|                                                |  |               |              |                   |  
|Assets                                          |  |               |              |                   |  
|Current assets:                                 |  |               |              |                   |  
|Cash and cash equivalents                       |  | $             | 3,983,000    |                   | $
|Marketable securities                           |  |               | 10,996,000   |                   |  
|Prepaid expenses and other current assets       |  |               | 984,000      |                   |  
|                                                |  |               |              |                   |  
|Total current assets                            |  |               | 15,963,000   |                   |  
|Property, plant, and equipment, net             |  |               | 11,729,000   |                   |  
|Patents and intellectual property licenses, net |  |               | 3,745,000    |                   |  
|Other intangible assets, net                    |  |               |             |                   |  
|Other assets                                    |  |               | 590,000      |                   |  
|                                                |  |               |              |                   |  
|                                                |  | $             | 32,027,000   |                   | $
|                                                |  |               |              |                   |  
|Liabilities and Stockholders Equity            |  |               |              |                   |  
|Current liabilities:                            |  |               |              |                   |  
|Accounts payable                                |  | $             | 803,000      |                   | $
|Accrued expenses                                |  |               | 1,069,000    |                   |  
|Current portion of long-term debt               |  |               | 146,000      |                   |  
|Deferred revenue and customer advances          |  |               | 245,000      |                   |  
|                                                |  |               |              |                   |  
|Total current liabilities                       |  |               | 2,263,000    |                   |  
|Long-term debt                                  |  |               | 139,000      |                   |  
|                                                |  |               |              |                   |  
|Total liabilities                               |  |               | 2,402,000    |                   |  
|                                                |  |               |              |                   |  
|Stockholders equity:                           |  |               |              |                   |  
|Common stock; issued and outstanding:           |  |               |              |                   |  
|June 30, 2003  25,771,037 shares;              |  |               |              |                   |  
|December 31, 2002  25,223,753 shares           |  |               | 192,400,000  |                   |  
|Stockholders notes receivable                  |  |               | (28,000      | )                 |  
|Deferred compensation                           |  |               |             |                   |  
|Accumulated deficit                             |  |               | (162,747,000 | )                 |  
|                                                |  |               |              |                   |  
|Total stockholders equity                      |  |               | 29,625,000   |                   |  
|                                                |  |               |              |                   |  
|                                                |  | $             | 32,027,000   |                   | $
|                                                |  |               |              |                   |  

See accompanying notes to condensed consolidated financial statements.

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Large Scale Biology CorporationCondensed Consolidated Statements of Operations (Unaudited)

|                                                        |  | Three Months Ended June 30, |            | Six Months Ended June 30, |  
|------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | -
|                                                        |  |                             |            |                           |  
|                                                        |  | 2003                        |            | 2002                      |  
|                                                        |  |                             |            |                           |  
|Revenues                                                |  | $                           | 903,000    |                           | $
|                                                        |  |                             |            |                           |  
|Costs and expenses:                                     |  |                             |            |                           |  
|Development agreements                                  |  |                             | 1,245,000  |                           |  
|Research and development                                |  |                             | 2,773,000  |                           |  
|General and administrative                              |  |                             | 3,140,000  |                           |  
|Impairment of property                                  |  |                             |           |                           |  
|Amortization of purchased intangibles                   |  |                             |           |                           |  
|                                                        |  |                             |            |                           |  
|Total costs and expenses                                |  |                             | 7,158,000  |                           |  
|                                                        |  |                             |            |                           |  
|Loss from operations                                    |  |                             | (6,255,000 | )                         |  
|Interest income, net                                    |  |                             | 48,000     |                           |  
|                                                        |  |                             |            |                           |  
|Net loss                                                |  | $                           | (6,207,000 | )                         | $
|                                                        |  |                             |            |                           |  
|Net loss per share - basic and diluted                  |  | $                           | (0.24      | )                         | $
|                                                        |  |                             |            |                           |  
|Weighted average shares outstanding - basic and diluted |  |                             | 25,567,201 |                           |  
|                                                        |  |                             |            |                           |  

See accompanying notes to condensed consolidated financial statements.

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

|                                                                            |  | Six Months Ended June 30, |            
|--------------------------------------------------------------------------- |  | ------------------------- | -----------
|                                                                            |  |                           |            
|                                                                            |  | 2003                      |            
|                                                                            |  |                           |            
|Cash flows from operating activities:                                       |  |                           |            
|Net loss                                                                    |  | $                         | (13,842,000
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                           |            
|Depreciation of property, plant and equipment                               |  |                           | 1,443,000  
|Amortization of intangible assets                                           |  |                           | 503,000    
|Stock compensation expense                                                  |  |                           | 765,000    
|Impairment of property                                                      |  |                           | 1,698,000  
|Write-off of capitalized patent costs                                       |  |                           | 239,000    
|Loss on sale of equipment                                                   |  |                           | 156,000    
|Provision for doubtful accounts receivable                                  |  |                           | 154,000    
|Interest received in excess of interest accrued                             |  |                           | 141,000    
|Changes in assets and liabilities:                                          |  |                           |            
|Prepaid expenses and other current assets                                   |  |                           | 235,000    
|Other assets                                                                |  |                           | 50,000     
|Accounts payable                                                            |  |                           | (153,000   
|Accrued expenses                                                            |  |                           | 513,000    
|Deferred revenue and customer advances                                      |  |                           |           
|                                                                            |  |                           |            
|Net cash used in operating activities                                       |  |                           | (8,098,000 
|                                                                            |  |                           |            
|Cash flows from investing activities:                                       |  |                           |            
|Purchases of marketable securities                                          |  |                           | (8,984,000 
|Proceeds from matured marketable securities                                 |  |                           | 12,687,000 
|Capital expenditures                                                        |  |                           | (5,000     
|Increase in patents and intellectual property licenses                      |  |                           |           
|                                                                            |  |                           |            
|Net cash provided by investing activities                                   |  |                           | 3,698,000  
|                                                                            |  |                           |            
|Cash flows from financing activities:                                       |  |                           |            
|Proceeds from issuance of common stock                                      |  |                           | 9,000      
|Proceeds from stockholder loan payments                                     |  |                           | 18,000     
|Change in restricted cash                                                   |  |                           | 143,000    
|Principal payments on long-term debt                                        |  |                           | (25,000    
|                                                                            |  |                           |            
|Net cash provided by financing activities                                   |  |                           | 145,000    
|                                                                            |  |                           |            
|Net decrease in cash and cash equivalents                                   |  |                           | (4,255,000 
|Cash and cash equivalents at beginning of period                            |  |                           | 8,238,000  
|                                                                            |  |                           |            
|Cash and cash equivalents at end of period                                  |  | $                         | 3,983,000  
|                                                                            |  |                           |            

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 $13,842,000, $33,184,000 and $20,689,000 and negative operating cash flows of $8,098,000, $23,932,000 and $18,451,000 in the six
months ended June 30, 2003 and 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 public or private equity offerings, 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 Statement of Financial Accounting Standard No. 123 (SFAS 123), Accounting for Stock-Based Compensation, which requires that compensation expense be recognized for all such
options.

We are evaluating whether to adopt SFAS 123 for our stock-based employee compensation plans.   We expect to make a
decision regarding such adoption in the third quarter of 2003.

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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 June 30, |            | Six Months Ended June 30, |  
|--------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | -
|                                                                                                                |  |                             |            |                           |  
|                                                                                                                |  | 2003                        |            | 2002                      |  
|                                                                                                                |  |                             |            |                           |  
|Net loss as reported                                                                                            |  | $                           | (6,207,000 | )                         | $
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |                             | (2,117,000 | )                         |  
|                                                                                                                |  |                             |            |                           |  
|Pro forma net loss                                                                                              |  | $                           | (8,324,000 | )                         | $
|                                                                                                                |  |                             |            |                           |  
|Net loss per share:                                                                                             |  |                             |            |                           |  
|Basic and diluted  as reported                                                                                 |  | $                           | (0.24      | )                         | $
|                                                                                                                |  |                             |            |                           |  
|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 values of stock options are estimated at the date of grant using the Black-Scholes option-pricing
model.  The Company granted 1,246,500 and 1,322,250 stock options to employees and directors in the six months ended June 30, 2003 and 2002, respectively.

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 25,645 and 559,471 for the three months ended June 30, 2003 and 2002,
respectively, and 12,702 and 797,034 for the six months ended June 30, 2003 and 2002, respectively.  These shares are excluded from diluted net loss per share because of their anti-dilutive effect.

2.  Restructuring





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 six months ended June 30, 2003, the Company continued to realize material negative
operating cash flows, though our negative cash flows in this period were significantly lower than the prior year period.  Although we cannot assure you that this trend will continue, we expect to further reduce our current rate of cash usage by
cost saving initiatives that have or may be implemented in 2003.  Such initiatives have included or may include employee headcount reductions, the cancellation of certain internally funded research projects, and subleasing excess office and
laboratory space at our proteomics facility.  We may realize an improvement in our operating cash flows in the third quarter of 2003 as a result of these initiatives.  However, in order for us to approach or achieve 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 $13.7 million at June 30, 2003.  Based upon our projected net operating cash usage that incorporates our recent cost saving
initiatives and our planned and contingency cost reductions, we believe that our working capital is sufficient to support our

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current level of operations through June 30, 2004.  The Companys ability to continue as a going concern beyond June 30, 2004 depends on our ability to generate
significant revenues and pursue other potential sources of working capital including a public or private equity offering, partnerships, mergers or sales of assets or technologies.  However, we cannot assure you that we will generate significant
revenues or that other sources of working capital will be available to the Company.

We believe that the Companys best near-term
opportunity for significant revenue growth and/or a potential source of working capital is agreements with other companies for the joint development and commercialization of our alpha-galactosidase and aprotinin products.  The commercialization
of both products will require pre-approval by the FDA as well as a scale-up of the Companys biomanufacturing infrastructure to meet FDA requirements.  Accordingly, the development period for each of these products may be up to three
years.  Given the Companys financial position and the amount of time and cost to develop these products, the structure of potential collaborations for the development of these products will require that the Company receive funding for the
costs of clinical trials and/or infrastructure scale-up and for general working capital purposes.  Absent any collaboration, the Companys ability to further develop these products will be adversely affected and our business may suffer or
fail.

We are evaluating whether to change the method of accounting we use for stock-based employee compensation plans to the fair
value method.  We expect to make a decision regarding such change in the third quarter of 2003.  If we adopt the fair value method, this change will increase our employee-related expenses as a component of our future development agreement
costs, research and development expenses and general and administrative expenses.





Results of Operations

Revenues increased $413,000 and $842,000 in the three and six months ended June 30, 2003, respectively, compared to the prior year periods.  These
increases are primarily attributable to our contract with the National Institute of Environmental Health Sciences (NIEHS), which commenced in the third quarter of 2002.  We expect revenues in the third quarter of 2003 to be
materially consistent with the second quarter, absent any new revenue sources that we may generate in the third 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 $1.1 million and $1.9 million in the three and six months ended June 30, 2003,
respectively, compared to the prior year periods.  These increases are primarily attributable to our contract with the NIEHS, which commenced in the third quarter of 2002.  We expect development agreement costs in the third quarter of 2003
to be materially consistent with the second quarter, absent any new research agreements or government contracts that we may enter in the third quarter.

Research and development expenses consist 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 and $6.2 million in the three and six months ended June 30, 2003, respectively, compared to the prior year periods.   These decreases are primarily attributable to employee headcount reductions (through
restructurings and attrition), 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 third quarter of 2003 to be materially consistent with the second quarter, absent any material change in the allocation of personnel to or from revenue generating agreements or contracts.

General and administrative expenses largely consist of non-research personnel.  General and administrative expenses decreased $885,000 and $1.8 million in
the three and six months ended June 30, 2003, respectively, compared to the prior year periods.  These decreases are primarily attributable to employee headcount reductions (through restructurings and attrition) 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 third quarter of 2003 to be lower than the second quarter, allowing for
cost savings associated with headcount reductions in the second quarter of 2003.

Impairment of property represents 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.

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Liquidity and Capital Resources

|                                                                                |  | Six Months Ended June 30, |           
|------------------------------------------------------------------------------- |  | ------------------------- | ----------
|                                                                                |  |                           |           
|                                                                                |  | 2003                      |           
|                                                                                |  |                           |           
|Net cash used in operating activities, excluding marketable securities activity |  | $                         | (8,239,000
|Cash used in investing activities, excluding marketable securities activity     |  |                           | (5,000    
|Net cash provided by financing activities                                       |  |                           | 145,000   
|                                                                                |  |                           |           
|Net decrease in cash, cash equivalents and marketable securities                |  |                           | (8,099,000
|                                                                                |  |                           |           
|Cash, cash equivalents and marketable securities at December 31, 2002           |  |                           | 23,078,000
|                                                                                |  |                           |           
|Cash, cash equivalents and marketable securities at June 30, 2003               |  | $                         | 14,979,000
|                                                                                |  |                           |           

The reduction of cash used in operating
activities in the six months ended June 30, 2003 compared to the prior year period is primarily attributable to cost saving initiatives implemented throughout 2002 and in 2003.  On a sequential basis, cash used in operating activities in the
second quarter of 2003 was $4.1 million, the same as the first quarter of 2003.  Absent any new sources of cash flow and the implementation and/or benefit of further cost saving initiatives in the third quarter of 2003, we expect to continue
using cash in operating activities in the third quarter of 2003, consistent in amount with the first and second quarters.

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 June 30, 2003.  Given our current financial condition and recent financial performance, we believe our
ability to attract additional working capital through equity issuance will need to be in combination with our strategy to improve our operating cash flows and increase our working capital by partnering 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.  For instance, we have delayed further clinical trials of our
non-Hodgkins lymphoma (NHL) 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.  We are also pursuing a partner
to fund the development of our alpha-galactosidase and aprotinin products.  We may also delay the further development of other key products or technologies depending on the cost to continue development and/or our ability to improve our
operating cash flows and 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:

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

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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 exceeded the exercise price of the option on the grant date.  Any 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.

We are evaluating whether to adopt SFAS 123 for our stock-based employee
compensation plans.  We expect to make a decision regarding such adoption in the third quarter of 2003.

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Factors That May Affect Our Business

Risks Related To Our Business

| | We have a history of significant net losses and negative cash flows. Our working capital is declining rapidly and we may not have sufficient cash to fund our product
development initiatives or to continue operations beyond June 30, 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have realized significant net losses
and negative operating cash flows in recent years and in the six months ended June 30, 2003.  Our working capital balance at June 30, 2003 equaled $13.7 million.  Based upon our current rate of negative operating cash flows, we cannot
assure you that the Company will be able to continue as a going concernbeyond June 30, 2004.

Our future capital requirements
depend upon many factors, including:

| |  | our ability to raise capital through a public or private equity offering;                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to increase revenues;                                                                                                         
| |  | our ability to control operating costs;                                                                                                   
| |  | the cost and timeline for development of potential products, including unanticipated development,  technological or regulatory challenges;
| |  | our ability to successfully transfer liability for, or restructure, facility leases that exceed our present capacity needs; and           
| |  | the willingness of companies to partner with us.                                                                                          

Given
our current working capital balance and the expected cost to complete the development of our products including our NHL vaccine and our alpha-galactosidase and aprotinin products, we require additional working capital. The amount of additional
capital we require is substantial.  Our recent operating results and our current stock price may limit our opportunity for issuance of additional equity securities.  Further, if we raise additional working capital by issuing equity
securities, existing stockholders could experience significant dilution.

Our revenues in the six months ended June 30, 2003 and for the
year ended December 31, 2002 were not significant.  If we are unable to significantly increase our revenues, we will not be able to achieve profitability or positive operating cash flows, our working capital will continue to erode, and our
business will suffer.

We are experiencing increasing pressure to curtail spending and reduce costs.  We implemented several cost
saving initiatives in 2002 and 2003 to reduce costs.  If we cannot increase our cash flow in the very near term, we will be required to further reduce our operating costs by, among other things, further restructure our operations and
potentially incur significant charges or delay, reduce the scope of, or eliminate one or more of our research and development programs.  These actions may adversely affect our ability to generate new sources of revenue.

We will need to continue to spend substantial funds to continue our product development programs.  Certain of our potential products including our NHL
vaccine and our alpha-galactosidase and aprotinin products require clinical trials to prove their efficacy and safety.  We may not have sufficient working capital to initiate Phase I and/or secondary clinical trials for these products.  We
are dependent on funding from a potential collaborator or partner to fund these trials.  If we are unable to raise sufficient funding to initiate and/or complete the development of these products, we might be required to delay or abandon some
of our product development initiatives, any of which actions would likely harm our business.

We currently lease excess office and lab
space at our proteomics facility in Germantown, Maryland.  Our facility lease in Germantown expires in 2010.  We are attempting to sublease approximately 75% of our Germantown facility for the remainder of the lease term. If we are unable
to sublease this excess space, we will not realize a material portion of our planned cost saving initiatives in 2003.

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Given our financial position and operating results, potential collaborators or partners may question our ability to
continue as a going concern and choose not to do business with us.  If we are unable to enter into collaborations to fund the development of certain of our products, we might be required to delay or abandon some of our product development
initiatives, any of which actions would likely harm our business.

| | We require additional capital
| | -----------------------------

We require substantial working capital 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.  We may raise this capital through public or private equity financings or through
collaborations or strategic partnerships.  Our access to equity markets may be restricted by depressed stock valuations or other factors.  Also, if we raise additional funds by issuing equity securities, existing stockholders may be
significantly diluted.  We may be unsuccessful in entering into any new collaboration or strategic partnership that results in significant working capital or revenue.  If we are unable to raise sufficient additional capital, we may have to
curtail or cease operations.







| | 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.  Furthermore, obtaining funds through arrangements with collaborative partners or others 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 to 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.  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.

| | 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.  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 concerns 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.

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| | We are at an early or middle 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 or middle stage of commercialization, and we are subject to all of 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.  Our NHL vaccine 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.

| | 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.

| | 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

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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.

| | 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.

| | Our stock could be delisted from the NASDAQ National Market if it does not meet NASDAQs minimum bid price
| | ----------------------------------------------------------------------------------------------------------

Under the NASDAQ National Market s listing maintenance standards, our stock must maintain a minimum bid price of $1.00.  Within the last 45 days, the bid
price for our stock closed below $1.00 per share.  If the bid price for our stock declines and remains below $1.00 for 30 trading days, NASDAQ may choose to notify us that it may delist our stock from the NASDAQ National Market. 
After the initial 30-day trading period, we would have a 90-day probationary period during which our stock must meet the $1.00 minimum bid price requirement.  If our stock price does not trade above $1.00 for at least ten consecutive days
during the 90-day probationary period, we would be entitled to a hearing before the NASDAQ National Market.  However, we can provide no assurance regarding the outcome of that hearing and our stock could be delisted from the NASDAQ National
Market following such hearing.  Delisting from the NASDAQ National Market may, among other things, limit the liquidity and adversely affect the trading price of our stock.  If our common stock ceases to be listed on the NASDAQ National
Market, we expect that our common stock would then be traded on the NASDAQ SmallCap Market.  If our stock is potentially subject to delisting from the NASDAQ National Market, we may have the ability to increase our stock price through certain
capital transactions including a reverse stock split or share repurchases.

| | 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 36% of our outstanding common stock as of July 31, 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.

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| | 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.

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

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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 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.

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| | 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, 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.

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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.  From time to time, we receive letters from
third parties that allege patent infringement on our part.  Disagreements arising from these letters could result in costly and time-consuming litigation and divert our financial and managerial resources.    In addition, if we
are ever determined to infringe the patent of any third party, we may be required to obtain a license to use this patent, which would increase our cost of doing business.

| | 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 June 30, 2003.

Item 4.  Controls and Procedures

(a) Evaluation of
disclosure controls and procedures.  We have carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of the end of the period covered by this report are effective in timely alerting them to material information relating to the Company required to be included in periodic SEC filings.

(b) Changes in internal controls over financial reporting.  There has been no change in our internal controls over financial reporting during the period
covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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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 June 30, 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                      |  |   | 3,689,000  | 
|Purchase of intellectual property licenses     |  |   | 3,264,000  | 
|Capitalized patent costs                       |  |   | 1,680,000  | 
|Working capital                                |  |   | 52,860,000 | 
|Cash and investments                           |  |   | 11,235,000 | 

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

On May 29, 2003, we held our Annual Meeting of Stockholders to submit the following matters to a vote of the Companys security holders.

(1) Election of the entire board of five (5) directors of the Company, to hold office until the 2004 Annual Meeting of Stockholders or until their successors
are duly elected:

|Director                 |  | Votes For  |  | Votes Withheld
|------------------------ |  | ---------- |  | --------------
|                         |  |            |  |               
|Robert L. Erwin          |  | 20,979,415 |  | 580,384       
|Marvyn Carton            |  | 20,960,562 |  | 599,237       
|Bernard I. Grosser, M.D. |  | 21,373,075 |  | 186,724       
|Sol Levine               |  | 21,178,381 |  | 381,418       
|Kevin J. Ryan            |  | 20,976,321 |  | 583,478       

There were no abstentions, votes
against or broker non-votes with respect to this proposal.

(2) Ratification of the appointment of Deloitte & Touche LLP as the
Companys independent auditors for the year ending December 31, 2003:

|Votes For  |  | Votes Against |  | Abstentions
|---------- |  | ------------- |  | -----------
|           |  |               |  |            
|21,322,258 |  | 59,300        |  | 178,241    

There were no votes
withheld or broker non-votes with respect to this proposal.

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Item 5.  Other Information

On April 14, 2003 Kevin J. Ryan
replaced Robert L Erwin and John D. Fowler Jr. as Chief Executive Officer and President, respectively, of the Company.  Mr. Erwin remains as Chairman of the Board of Directors.  Mr. Fowler ended his term as a director on May 29,
2003.

Item 6.  Exhibits and Reports on Form 8-K

(a)List
of Exhibits:

|Exhibit Number |  | Exhibit Title or Description                                                                                           
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                        
|10.1           |  | Separation of Employment Agreement between registrant and Robert L. Erwin.                                             
|10.2           |  | Separation of Employment Agreement between registrant and David R. McGee.                                              
|31.1           |  | Certification of Chief Executive Officer.                                                                              
|31.2           |  | Certification of Chief Financial Officer.                                                                              
|32.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

On April 29, 2003,
the Company filed a current report on Form 8-K, dated April 22, 2003, to report under Item 12: Results of Operations and Financial Condition, our quarterly earnings release and investor conference call and related financial and operating information
and Item 7: Financial Statements and Exhibits, with respect to earnings release and conference call transcript exhibits.

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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:  August 14, 2003 | By:                            
|                       |                                
|                       |                                

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Exhibit Index

|Exhibit Number |  | Exhibit Title or Description                                                                                           
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                        
|10.1           |  | Separation of Employment Agreement between registrant and Robert L. Erwin.                                             
|10.2           |  | Separation of Employment Agreement between registrant and David R McGee.                                               
|31.1           |  | Certification of Chief Executive Officer.                                                                              
|31.2           |  | Certification of Chief Financial Officer.                                                                              
|32.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.