UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, ~~COMMISSION~~D.C. 20549

~~Washington, D.C. 20549~~ FORM 10-Q

~~[X] Quarterly Report Pursuant to Section 13 or 15~~(d)Mark ~~of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2007 or~~One)

[ X] Quarterly ~~Transition~~ Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ~~For the transition period from ______________ to ______________~~

~~Commission~~For ~~File~~the ~~Number~~quarterly ~~0-31499~~period ~~Eden~~ended ~~Bioscience~~March ~~Corporation~~31, 2009

~~(Exact name of registrant as specified in its charter)~~or

~~Washington(State~~[ ] Transition orReport ~~other~~Pursuant ~~jurisdiction~~to Section of13 ~~incorporation~~ or ~~organization~~15(d) ~~91-1649604~~of ~~(IRS~~the ~~Employer~~Securities ~~Identification~~Exchange ~~No.)~~Act of 1934

~~11816~~For ~~North~~the ~~Creek~~transition ~~Parkway~~period N.from ~~Bothell,~~__________ ~~Washington 98011-8201 (Address of principal executive offices, including zip~~to ~~code)~~__________

Commission File Number: 1-33510

Eden Bioscience Corporation
(Exact name of registrant as specified in its charter)

(425) 806-7300
(Registrant’s telephone number, including area code)

~~Indicate~~Not byapplicable. ~~check mark whether the registrant~~ (1)Former ~~has~~name, ~~filed~~former ~~all~~address ~~reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports)~~ and ~~(2) has been subject to~~ ~~such~~former ~~filing~~fiscal ~~requirements~~year, ~~for~~if ~~the~~changed ~~past~~since 90last ~~days.~~report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant ishas ~~a large~~submitted ~~accelerated~~electronically ~~filer,~~and anposted ~~accelerated~~on ~~filer~~its corporate Web site, orif ~~non-accelerated~~any, ~~filer.~~every ~~See~~Interactive ~~definition~~Data ofFile ~~“accelerated~~required ~~filer~~to ~~and~~be ~~large~~submitted ~~accelerated~~and ~~filer”~~posted inpursuant to Rule 405 of ~~12b~~Regulation S-2T ofduring the ~~Exchange~~preceding ~~Act.~~12 months (~~Check~~or ~~one):~~for ~~Large~~such ~~accelerated~~shorter ~~filer~~period ~~[ ] Accelerated~~that ~~filer~~the registrant was required to submit and post such files). Yes [ ] ~~Non-accelerated~~ No ~~filer~~ [X ]

Indicate by check mark whether the registrant is a ~~shell~~large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. ~~(as~~See ~~defined~~the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).

~~Yes~~Large accelerated filer [ ] NoAccelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]

~~State~~Indicate ~~the~~by ~~number~~check ofmark ~~shares~~whether ~~outstanding~~the ofregistrant ~~each~~is ofa ~~the~~shell company ~~registrant’s~~(as ~~classes~~defined ofin ~~common~~Rule ~~equity,~~12b-2 as of the ~~latest~~Exchange ~~practicable~~Act). Yes ~~date:~~[ ] No [X]

~~ClassCommon~~Indicate ~~Stock,~~the ~~$.0025~~number ~~Par~~of ~~Value~~shares ~~Outstanding~~outstanding asof each of ~~May~~the issuer’s 2,classes ~~2007~~of 8common stock,~~149,554~~ as of the latest practicable date.

Class				Outstanding as of May 5, 2009
Common Stock, $0.0025 Par Value				2,716,486

Eden Bioscience Corporation
Index to Form 10-Q

		Page
Part I	Financial Information
Part I.	Financial Information
Item 1.	~~Unaudited~~ Financial Statements		2
	Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006		2
	Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008		2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006		3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008		3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008		4
	Notes to Unaudited Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1310
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2316
Item 4.	Controls and Procedures		23
Item 4T.	Controls and Procedures		17
Part II.	Other Information
Item 1A.	Risk Factors		2317
Item 4.	Submission of Matters to a Vote of Security Holders		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		21
Item 6.	Exhibits		2421
Signatures			2422

-1-

PART I — FINANCIAL INFORMATION

Item 1. ~~Unaudited~~ Financial Statements

EDEN BIOSCIENCE CORPORATION AND ~~SUBSIDIARIES~~SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	March 31,2007			December 31,2006
ASSETS
Current assets:
Cash and cash equivalents	$	5,399,370		$	4,185,225
Accounts receivable, net of sales allowances		361,655			186,175
Note receivable		700,751			—
Inventory, current		100,169			2,284,300
Prepaid expenses and other current assets		109,839			289,892
Total current assets		6,671,784			6,945,592
Inventory, non-current		36,449			41,758
Property and equipment, net		99			698,061
Other assets		119,466			287,879
Total assets	$	6,827,798		$	7,973,290
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	170,952		$	279,224
Accrued liabilities		326,944			528,284
Total current liabilities		497,896			807,508
Other long-term liabilities		—			456,722
Total liabilities		497,896			1,264,230
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2007 and December 31, 2006		—			—
Common stock, $.0025 par value, 33,333,333 shares authorized; 8,149,554 issued and outstanding shares at March 31, 2007 and December 31, 2006		20,374			20,374
Additional paid-in capital		132,855,230			132,849,727
Accumulated other comprehensive income		—			91,896
Accumulated deficit		(126,545,702	)		(126,252,937	)
Total shareholders’ equity		6,329,902			6,709,060
Total liabilities and shareholders’ equity	$	6,827,798		$	7,973,290

ASSETS

	March 31, 2009			December 31, 2008
Current assets:
Cash and cash equivalents	$	4,835,399		$	5,099,172
Accounts receivable		8,891			—
Inventory, current		33,953			34,727
Prepaid expenses and other current assets		102,480			42,640
Total current assets		4,980,723			5,176,539
Inventory, non-current		19,559			34,478
Property and equipment		99			99
Other assets		41,648			45,129
Total assets	$	5,042,029		$	5,256,245

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	58,280		$	42,279
Accrued liabilities		147,905			151,401
Total current liabilities		206,185			193,680

Commitments and contingencies

Shareholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2009 and December 31, 2008		—			—
Common stock, $0.0025 par value, 11,111,111 shares authorized; 2,716,486 issued and outstanding shares at March 31, 2009 and December 31, 2008		6,791			6,791
Additional paid-in capital		132,889,012			132,889,012
Accumulated deficit		(128,059,959	)		(127,833,238	)
Total shareholders’ equity		4,835,844			5,062,565
Total liabilities and shareholders’ equity	$	5,042,029		$	5,256,245

The accompanying notes are an integral part of these statements.

-2-

EDEN BIOSCIENCE CORPORATION AND ~~SUBSIDIARIES~~SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended March 31,
	2007			2006
	2009			2008
Product sales, net of sales allowances	$	188,772		$	1,648,387
Product sales	$	49,923		$	80,890
Operating expenses:
Cost of goods sold		~~123~~19,~~242~~292			129,~~015,480~~022
Research and development		136,442			316,538
Selling, general and administrative		271,007			237,565
Selling, general and administrative		399,782			1,558,786
Total operating expenses		290,299			266,587
Gain on sale of equipment		—			(17,578	)
Loss from operations		(240,376	)		(185,697	)
Total operating expenses		659,466			2,873,226
Loss from operations		(470,694	)		(1,224,839	)
Other income:
Gain on sale of Harpin Protein Technology		113,968			—
Interest income		13,655			55,421
Gain on sale of investment		—			99,884
Total other income		13,655			55,421
Interest income		63,961			61,114
Loss before income taxes		(226,721	)		(130,276	)
Total other income		177,929			160,998
Loss before income taxes		(292,765	)		(1,063,841	)
Income taxes		—			—
Net loss	$	(~~292~~226,~~765~~721	)	$	(1130,~~063,841~~276	)
Basic and diluted net loss per share	$	(0.0408	)	$	(0.1305	)
Weighted average shares outstanding used to compute net loss per share		82,~~149~~716,~~554~~486			82,~~135~~716,~~520~~486

The accompanying notes are an integral part of these statements.

-3-

EDEN BIOSCIENCE CORPORATION AND ~~SUBSIDIARIES~~SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended March 31,
	2007			2006
	2009			2008
Cash flows from operating activities:
Net loss	$	(~~292~~226,~~765~~721	)	$	(1130,~~063,841~~276	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation expense		—			1,675
Depreciation and amortization		—			176,067
Stock compensation expense		5,503			125,129
Gain on sale of Harpin Protein Technology		(113,968	)		—
Recognition of cumulative translation adjustment		103,470			—
Gain on sale of equipment		—			(17,578	)
Gain on sale of investment		—			(99,884	)
Accretion expense		5,672			7,588
Deferred rent payable		(1,406	)		80,864
Changes in assets and liabilities:
Accounts receivable		47(8,~~617~~891	)		(137,~~182,604~~278	)
Inventory		4715,~~358~~693			~~421~~17,~~329~~427
Prepaid expenses and other assets		~~284~~(56,~~716~~359	)		(334,~~536~~152	)
Accounts payable		~~(108~~16,~~272~~001	)		9111,~~403~~590
Accrued liabilities		(~~142~~3,~~166~~496	)		(~~283~~50,~~951~~945	)
Net cash used in operating activities		(~~164~~263,~~241~~773	)		(1221,~~749,014~~959	)
Cash flows from investing activities:
Effect of foreign currency exchange rates on cash and cash equivalents		—			2,723
Proceeds from sale of Harpin Protein Technology		1,396,824			—
Net decrease in cash and cash equivalents		(263,773	)		(219,236	)
Purchase of equipment		—			(16,377	)
Cash and cash equivalents at beginning of period		5,099,172			5,668,239
Proceeds from sale of investment		—			100,000
Cash and cash equivalents at end of period	$	4,835,399		$	5,449,003
Proceeds from sale of equipment		50,000			17,578
Net cash provided by investing activities		1,446,824			101,201
Effect of foreign currency exchange rates on cash and cash equivalents		(68,438	)		18,787
Net increase (decrease) in cash and cash equivalents		1,214,145			(1,629,026	)
Cash and cash equivalents at beginning of period		4,185,225			6,825,652
Cash and cash equivalents at end of period	$	5,399,370		$	5,196,626

The accompanying notes are an integral part of these statements.

-4-

EDEN BIOSCIENCE CORPORATION AND ~~SUBSIDIARIESNOTES~~SUBSIDIARYNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization and Business

Eden Bioscience Corporation (“Eden Bioscience” or the “Company”) was incorporated in the State of Washington on July 18, 1994. OnThe ~~February 28, 2007, the~~ Company ~~sold its~~sells ~~proprietary~~ harpin protein-based ~~technology~~products ~~and~~for ~~substantially~~the ~~all~~protection of ~~its~~plants ~~assets~~and ~~used~~seeds inand the ~~manufacturing~~promotion ~~and distribution~~ of ~~harpin-based~~overall ~~products used~~plant inhealth ~~the worldwide agricultural and horticultural markets~~ to ~~Plant~~the ~~Health~~general ~~Care~~public, ~~Inc.~~to ~~From~~resellers ~~December~~or businesses 1,that ~~2006~~offer ~~through~~its ~~February~~harpin ~~28,~~protein-based ~~2007,~~products weto ~~operated under~~the angeneral ~~Independent~~public ~~Distribution~~and ~~Agreement~~to ~~whereby~~businesses ~~PHC~~that ~~served~~incorporate asharpin ~~the~~protein-based ~~exclusive~~products ~~distributor~~into existing ofor ~~our~~new products ~~for~~to ~~all~~be ~~channels~~sold ofto ~~trade, other than~~ the ~~Home~~ ~~and~~general ~~Garden Market, in substantially all worldwide territories~~public. The Company’s ~~business~~refers ~~strategy after the sale is~~ to ~~sell~~this ~~harpin~~business ~~protein-based products~~as toits ~~the home and garden market (the~~ “Home and Garden Business,”) ~~and~~to this ~~use~~market ~~its~~as ~~available cash and any revenue generated from~~ its “Home and Garden ~~Business~~Market” toand ~~explore whether there may be opportunities~~ to ~~realize~~these ~~potential~~products ~~value~~as ~~from~~ its ~~remaining~~“Home ~~business~~and ~~assets,~~Garden ~~primarily its tax loss carryforwards~~Products.”

~~The~~On December 4, 2008, the Company’s Board isof ~~subject~~Directors toapproved a ~~number~~plan of ~~risks~~ ~~including~~complete dissolution and liquidation (“Plan of Dissolution”), ~~among~~subject ~~others:~~to ~~realizing~~shareholder ~~potential~~approval. The ~~value~~proposed ~~from~~Plan ~~tax~~of ~~loss~~Dissolution ~~carryforwards~~provides isfor ~~highly~~the ~~speculative~~voluntary liquidation and dissolution of the Company and, subject to ~~numerous~~the ~~material~~requirements of Washington ~~uncertainties;~~law, ~~dependence~~distribution onof ~~one~~any ~~manufacturer~~available ~~for~~cash and other assets to the ~~supply~~Company’s shareholders. If the Plan of ~~harpin~~Dissolution ~~protein-based~~is ~~products;~~approved ~~dependence~~by onthe Company’s ashareholders, ~~limited~~the ~~number~~Company intends to file articles of ~~products~~dissolution ~~and~~with the Secretary of State of the State of Washington as soon as ~~commercialization~~reasonably practicable after receipt of ~~those~~the ~~products,~~required ~~which~~revenue ~~may~~clearance ~~not~~certificate from the Department of Revenue of the State of Washington. The dissolution will be ~~successful;~~effective ~~reliance~~on the date on ~~independent~~which ~~distributors~~the ~~and~~Company ~~retailers~~files tothe ~~sell~~articles of dissolution or a later date specified in the articles of dissolution. Thereafter, the Company’s will not carry on any business activities except those appropriate to winding up and liquidating its business and ~~products;~~affairs, ~~ability~~including the collection of assets and the disposal of properties that will be applied toward the satisfaction of liabilities or will not otherwise be distributed in kind to ~~retain~~its ~~existing~~shareholders, ~~personnel;~~the satisfaction of liabilities, the distribution of any remaining assets to its shareholders and the ~~competition~~taking ~~from~~of all other ~~companies~~actions ~~with~~necessary ~~greater~~to ~~financial,~~wind ~~technical~~up and ~~marketing~~liquidate its business and affairs, in accordance with the Plan of ~~resources~~Dissolution.

If the Company’s shareholders approve the Plan of Dissolution, the Company will change its basis of accounting from the going-concern basis, which contemplates realization of assets and satisfaction of liabilities in the normal course of business, to the liquidation basis. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts. Recorded liabilities will include the estimated expenses associated with carrying out the Plan of Dissolution. The financial information presented in this Quarterly Report on Form 10-Q does not include any adjustments necessary to reflect the possible future effects on recoverability of the assets or settlement of liabilities that may result from adoption of the Plan of Dissolution or the Company’s potential to complete such a plan in an orderly manner.

The Company is subject to a number of risks including, risks related to the proposed Plan of Dissolution; and, if the Plan of Dissolution is not approved or implemented, risks related to the highly speculative and uncertain nature of the Company’s ability to realize potential value from its net operating loss carryforwards or other strategic alternatives that may be available to the Company and the risks related to the Home and Garden Business. These latter risks include dependence on one manufacturer for the supply of harpin protein-based products; dependence on a limited number of products and the commercialization of those products, reliance on independent distributors and retailers to sell the Company’s products; ability to retain existing employees; and competition from other companies with greater financial, technical and marketing resources.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. The balance sheet at December 31, ~~2006~~2008 has been derived from the audited financial statements at that date but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. These financial statements and notes should be read in conjunction with the financial statements and notes as of and for the ~~year~~years ended December 31, ~~2006~~2008 and 2007 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 3027, ~~2007~~ 2009.

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial information set forth therein. Results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results expected for the full fiscal year or for any future period. Since the Company is continuing to sell harpin protein-based products to the home and garden market and historically has had one asset group for purposes of assessing asset impairment and one operating segment, the condensed consolidated financial statements properly do not present discontinued operations.

~~On April 17, 2006, the Company amended its Restated Articles of Incorporation to reduce the Company’s number of authorized shares of common stock from 100,000,000 to 33,333,333 and to effect a 1~~-~~for-3 reverse stock split of the Company’s outstanding common stock. The reverse stock split was effective with respect to shareholders of record at~~ 5:00p.m., Pacific daylight time, on April 18, 2006 and the Company’s common stock began trading as adjusted for the reverse stock split on April 19, 2006. As a result of the reverse stock split, each three shares of common stock were exchanged for one share of common stock and the total number of shares outstanding was reduced from 24,406,870 million shares to 8,135,554 million shares. The Company has retroactively adjusted all the share information to reflect the reverse stock split in the accompanying condensed consolidated financial statements and footnotes.-

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

forth therein and to make the financial statements not misleading. Results of operations for the three months ended March 31, 2009 are not necessarily indicative of the results expected for the full fiscal year or for any future period.

On February 22, 2008, the Company amended its Restated Articles of Incorporation, as amended, to reduce the Company’s number of authorized shares of common stock from 33,333,333 to 11,111,111 and to effect a 1-for-3 reverse stock split of the Company’s outstanding common stock. The reverse stock split was effective at 5:00 p.m., Pacific Time, on February 22, 2008 and the Company’s common stock began trading as adjusted for the reverse stock split on February 25, 2008. As a result of this reverse stock split, each three shares of common stock were exchanged for one share of common stock, with cash being issued for any fractional shares, and the total number of shares outstanding was reduced from 8.1 million shares to approximately 2.7 million shares.

Liquidity

The Company’s operating expenditures have been significant since its inception. The Company currently anticipates that its operating expenses in ~~2007~~2009, ~~although~~if ~~substantially~~it continues ~~less~~operations, will be greater than its operating expenses in ~~2006~~2008, and will significantly exceed net sales of its ~~harpin~~Home ~~protein-based~~and ~~home~~Garden ~~and~~Products ~~garden~~to ~~products~~the (“Home and Garden Market and that net losses and working capital requirements will consume a significant amount of its cash resources in 2009. The ~~Garden~~Company’s ~~Products”)~~future capital requirements are expected to ~~retail~~be ~~distributors~~insignificant if shareholders approve, and ~~consumers~~the (Company implements, the “proposed Plan of Dissolution. If the proposed Plan of Dissolution is not approved or implemented, the Company’s future capital requirements will depend on the success of its Home and Garden ~~Market”)~~Business. The Company does not plan to make a substantial investment toward the development of its Home and Garden Business. Management of the Company believes that the balance of its cash and cash equivalents at March 31, 2009 will be sufficient to meet its anticipated cash needs for net losses, working capital and ~~working~~ capital expenditures for more than the next 12 months, although there can be no assurance in that regard.

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

requirements will consume a material amount of its cash resources in 2007. The Company’s future capital requirements will depend on the success of its Home and Garden Business and its ability to successfully implement its strategy of realizing potential value from its remaining business assets, primarily its tax loss carryforwards. The Company does not plan to make a substantial investment toward the development of its Home and Garden Business. Management of the Company believes that the balance of its cash and cash equivalents at March 31, 2007 will be sufficient to meet its anticipated cash needs for net losses, working capital and capital expenditures for more than the next 12 months, although there can be no assurance in that regard.

Estimates Used in Financial Statement Preparation

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include ~~fair value and depreciable lives of property and equipment;~~ expense accruals; provisions for sales allowances, warranty claims, inventory valuation and classification; ~~cash flow projections used in evaluating whether asset impairment loss is recorded; fair value of stock compensation arrangements~~ and bad debts. Such estimates and assumptions are based on historical experience, where applicable, management’s plans, ~~use of a third-party valuation specialist~~ and other assumptions. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements prospectively when they are determined to be necessary. Actual results could differ from these estimates.

Accounts Receivable

In determining the adequacy of the allowance for doubtful accounts, the Company considers a number of factors, including the aging of the accounts receivable portfolio, customer payment trends, the financial condition of its customers, historical bad debts and current economic trends. Based upon an analysis of outstanding ~~net~~ accounts receivable, no allowance for doubtful accounts was recorded at March 31, ~~2007 or December 31, 2006~~2009.

Inventory

Inventory is valued at the lower of average cost or market. Costs include material, labor and overhead. The Company estimates inventory cost reductions based on expected sales value, including expected bulk sale, the results of quality control testing and the amount and age of product in the Company’s inventory.

Property and Equipment

~~Equipment~~Property and ~~leasehold~~equipment ~~improvements~~ are ~~stated~~recorded at estimated fair value asusing aan ~~result~~orderly ofliquidation ~~asset~~method. ~~impairment~~Property ~~charges~~and ~~recorded~~equipment asconsist of ~~June~~assets ~~30,~~used ~~2006~~ in the ~~amount~~Home ~~of $4,901,955. Prior to June 30, 2006, equipment~~ and ~~leasehold~~Garden ~~improvements were stated at historical cost~~Business. Improvements and replacements are capitalized. Maintenance and repairs are expensed when incurred. The provision for depreciation and amortization is determined using straight-line and units-of-production methods, which allocate costs less salvage value over their estimated useful lives of two to twenty years. Leasehold improvements are amortized over the shorter of their estimated useful lives or lease term, which range between two to ten years.

~~Long~~-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the Company compares the carrying value of such assets to the undiscounted cash flows expected from the use of the assets and their eventual disposition. When necessary, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value.6-

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Assets

As of March 31, ~~2007,~~2009 ~~other~~and ~~non-current assets consist of prepaid insurance. As of~~ December 31, ~~2006~~ 2008, other non-current assets ~~consist~~consisted principally of ~~restricted~~prepaid ~~investments held as deposits in connection with the Company’s operating lease~~insurance. ~~In the first quarter of 2006, the Company sold a minority stock investment for $100,000 that resulted in a gain of $99,884.~~

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenues

The Company recognizes revenue from product sales, ~~net of sales allowances,~~ when product is delivered to its distributors and all significant obligations of the Company have been satisfied, unless acceptance provisions or other contingencies or arrangements exist. If acceptance provisions or contingencies exist, revenue is deferred and recognized later if such provisions or contingencies are satisfied. As part of the analysis of whether all significant obligations of the Company have been satisfied or situations where acceptance provisions or other contingencies or arrangements exist, the Company considers the following elements, among others: sales terms and arrangements, historical experience and current incentive programs. Distributors do not have price protection or product-return rights. The Company provides an allowance for warranty claims based on historical experience and expectations. Shipping and handling costs related to product sales that are paid by the Company are included in cost of goods sold.

Sales allowances represent allowances granted to independent distributors for sales and marketing support and are estimated based on the terms of the distribution arrangements or other arrangements. Sales allowances are estimated and accrued when the related product sales are recognized or when services are provided and are paid in accordance with the terms of the then-current distributor program arrangements or other arrangements. Distributor program arrangements expire annually, generally on December 31.

Gross product sales and sales allowances are as follows:

	Three Months Ended March 31,
	2007		2006
Gross product sales	$	188,108	$	1,953,536
Sales allowances		—		(347,178	)
Elimination of previously recorded sales allowance liabilities		664		42,029
Product sales, net of sales allowances	$	188,772	$	1,648,387

Net product sales by geographical region were:

	Three Months Ended March 31,
	2007		2006
United States	$	177,664	$	1,624,750
Spain		11,108		—
Other regions		—		23,637
Product sales, net of sales allowances	$	188,772	$	1,648,387

Accounting for Stock Compensation

The Company maintains a stock equity incentive plan under which it may grant non-qualified stock options, incentive stock options or restricted stock to employees, non-employee directors and consultants. Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). Total stock-based compensation expense recognized in the condensed consolidated statement of operations for the quarters ended March 31, 2007 and 2006 was $5,503 and $125,129, respectively. As of March 31, 2007, total unrecognized stock-based compensation expense related to nonvested stock options was approximately $20,000 and the Company expects to recognize approximately $14,000 in the remainder of 2007 and approximately $6,000 in 2008.

The expected life of each award granted was calculated using the “simplified method” in accordance with Staff Accounting Bulletin No. 107. Expected stock price volatility is based on historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future.

Income Taxes

The Company accounts for income taxes under the provisions of ~~FASB~~Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS No. 109”). SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and operating loss and tax credit carryforwards using enacted tax rates in effect for the year in which the differences and carryforwards are expected to reverse.

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

carryforwards using enacted tax rates in effect for the year in which the differences and carryforwards are expected to reverse.

Foreign Currency Translation

The Company ~~conducts~~conducted its operations in two primary functional currencies as of March 31, 2008: the U.S. dollar and the euro. Balance sheet accounts of the Company’s foreign operations were ~~are~~ translated from foreign currencies into U.S. dollars at period-end exchange rates while income and expenses ~~are~~were translated at average exchange rates during the period. Cumulative translation gains or losses related to net assets located outside the U.S. are shown as a component of shareholders’ equity. Gains and losses resulting from foreign currency transactions, which are denominated in a currency other than the entity’s functional currency, are included in the consolidated statements of operations. As of February 28, 2007, the cumulative translation adjustment related to the Company’s European subsidiary totaling $103,470 was reclassified from accumulated other comprehensive income and reported as part of the gain on sale of Harpin Protein Technology as this subsidiary was substantially liquidated as a result of the sale to PHC. There were no significant gains or losses on foreign currency transactions in the three months ended March 31, ~~2006~~2008. As of December 31, 2008, the Company closed and dissolved its European subsidiary.

Net Loss per Share

Basic net loss per share is the net loss divided by the average number of shares outstanding during the period. Diluted net loss per share is the net loss divided by the sum of the average number of shares outstanding during the period plus the additional shares that would have been issued had all dilutive stock options been exercised, less shares that would be repurchased with the proceeds from such exercise using the treasury stock method. The effect of including outstanding stock options is antidilutive for all periods presented. Therefore, stock options totaling ~~614~~93,~~239~~328 and ~~885~~141,~~953~~776 as of March 31, ~~2007~~2009 and ~~2006~~2008, respectively, have been excluded from the calculation of diluted net loss per share.

2. ~~Sale~~Stock ~~of Harpin Protein Technology to Plant Health Care, Inc. (“PHC”)~~Options

OnAt ~~February~~March 2831, ~~2007~~2009, ~~under~~ the ~~terms of an asset purchase agreement, the~~ Company ~~sold its proprietary harpin-based technology and substantially all of its assets used in the manufacturing~~had ~~and~~reserved ~~distribution of harpin-based products to the agricultural and horticultural markets (“Harpin Protein Technology”) to PHC for $1~~24,~~396,824 in~~442 ~~cash,~~shares ~~net~~ of ~~transaction~~common ~~costs~~stock ~~incurred~~for ~~after~~issuance ~~January~~under ~~1, 2007 totaling $103,176, a promissory note in~~ the ~~principal~~1995 ~~amount of $700~~Plan,~~751~~ ~~payable~~all ~~on December 28, 2007 and the assumption by PHC~~ of ~~certain~~which ofhad ~~the~~been ~~liabilities relating to or arising out of the Company’s Harpin Protein Technology. The promissory note has an interest rate of 5% per annum and is secured by equipment~~granted, ~~certain intellectual property~~ and ~~other assets acquired by PHC and unconditionally guaranteed by PHC’s indirect parent~~412,576 ~~Plant~~shares ~~Health~~for ~~Care~~issuance ~~plc. The Company also sold $261,820 of finished goods to PHC~~ under the ~~Independent~~ ~~Distribution Agreement. Harpin Protein Technology includes substantially all of the Company’s assets used in the creation of plant~~2000 ~~health~~Plan, ~~technology~~including ~~incorporating harpin proteins and the manufacture of biopesticide~~245,909 ~~plant~~shares ~~health~~transferred ~~and~~from ~~nutrient products utilizing~~ the ~~Harpin~~1995 ~~Protein Technology~~Plan. ~~These~~Options ~~assets~~totaling ~~include all intellectual property~~79,996 ~~contracts~~under ~~(including~~ the ~~Company’s~~2000 ~~license~~Plan ~~agreement~~had ~~with~~been ~~the~~granted ~~Cornell~~at ~~Research Foundation~~March ~~(“CRF”)~~31, ~~and~~2009, ~~manufacturing and office facility lease)~~leaving 332,580 ~~equipment~~options ~~and~~available ~~inventory~~for ~~related~~future togrant. ~~the~~The ~~Company’s~~following ~~worldwide~~table ~~agricultural and~~summarizes ~~horticultural~~stock ~~markets.~~option activity:

~~The sale of Harpin Protein Technology to PHC resulted in a gain calculated as follows:~~-7-

Cash portion of purchase price	$	1,500,000
Promissory note portion of purchase price		700,751
Less transaction costs incurred after January 1, 2007		(103,176	)
Assets sold to PHC:
Inventory		(1,895,978	)
Equipment held for sale		(63,750	)
Property and equipment held and used		(647,962	)
Liabilities assumed by PHC:
Accrued liabilities		59,625
Other long-term liabilities		460,988
Recognition of cumulative translation adjustment		103,470
Gain on sale of assets to PHC	$	113,968

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Weighted Average Exercise Price Per Share
Balance at December 31, 2008	93,328	$	29.97
Expired	—		—
Balance at March 31, 2009	93,328		29.97
Exercisable at March 31, 2009	93,328	$	29.97

~~EDEN~~3. ~~BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~Inventory

Under the asset purchase agreement, all liabilities and obligations under the Company’s non-cancelable office and manufacturing facility lease were assigned to PHC as of February 28, 2007, including future minimum lease payments totaling $184,970 in 2007, $229,424 in 2008 and $238,366 in 2009. PHC provided all of the deposits required by the lease to the landlord and the Company’s restricted cash and deposit totaling $287,879 were released by the landlord and returned to the Company in March 2007. In conjunction with the assignment of this lease, PHC also assumed the Company’s liabilities recorded for rent expense in excess of rent payments of $73,131 at February 28, 2007 and the Company’s asset retirement obligation associated with this facility lease of $287,857 at February 28, 2007.

Under the asset purchase agreement, all rights, liabilities and obligations under the Company’s exclusive worldwide licensing agreement with CRF for certain patents, patent applications and biological material relating to harpin proteins and related technology have been assigned to PHC. As consideration for the license, the Company originally issued 133,333 shares of common stock to CRF in May 1995, funded certain research and development activities at Cornell University and agreed to pay a 2% royalty on net sales of current Harp-N-Tek Products that incorporate the licensed technology, subject to a $200,000 minimum annual royalty payment. Effective July 1, 2006, the license agreement was amended to establish a development fund at CRF to advance harpin technology and reduced the minimum obligation required to maintain the rights under the license agreement to contributions to the development fund of $100,000 in each of the 2006, 2007 and 2008 license years. The amendment also required a payment to CRF of $100,000 by May 30, 2008, which was recorded in other long-term liabilities on the balance sheet at December 31, 2006.

As of February 28, 2007, the cumulative translation adjustment related to our European subsidiary totaling $103,470 was reclassified from accumulated other comprehensive income and reported as part of the gain on sale of Harpin Protein Technology as this subsidiary was substantially liquidated as a result of the sale to PHC.

All of the Company’s obligations under the change-in-control agreement with Dr. Zhongmin Wei, the Company’s former Chief Science Officer, were assigned to PHC and Dr. Wei resigned from the Company on February 28, 2007. The agreement provides that, upon a change in control, as defined in the agreement, the Company or the acquiring company would continue to employ Dr. Wei for a period of two years following such change in control. During that time, the agreement provides that the position, authority, duties and responsibilities of Dr. Wei would be substantially the same as they were during the 90-day period prior to the change in control, and that his annual base salary would be at least equal to his annual base salary established by the Company’s Board of Directors prior to the change in control. If, during this two-year period, the employment of Dr. Wei is terminated by the acquiring company other than for cause, as defined in the agreements, or by the executive for good reason, as defined in the agreement, the terminated executive would be entitled to receive (i) his annual base salary, and pro rata annual bonus, through the date of termination, and any deferred compensation; and (ii) a severance payment equal to twice the sum of his annual base salary and the average of his past three annual bonuses.

The Company retained its cash, accounts receivable, tax attributes and assets relating to its Home and Garden Business, consisting primarily of inventory designated for the Home and Garden Market. In conjunction with the sale of its Harpin Protein Technology, the Company entered into a license and supply agreement with PHC, pursuant to which PHC granted the Company an exclusive worldwide right and license to sell harpin protein-based products for the protection of plants and seeds and the promotion of plant health in the Home and Garden Market and a royalty free, exclusive worldwide license to use the Messenger, MightyPlant and Harp-N-Tek trademarks in connection with the sale of its Home and Garden Products. Under the license and supply agreement, PHC will supply the Company harpin proteins and harpin-protein based products for its Home and Garden Business. The license and supply agreement will continue until the expiration of the last U.S. or foreign patent relating to the products held or acquired by PHC in connection with the asset purchase agreement and, thereafter, for automatic additional consecutive five year periods. The Company retained all liabilities associated with the Home and Garden Business and all liabilities associated with its Harpin Protein Technology that occurred or existed prior to February 28, 2007 that were not specifically assumed by PHC.

The Company has indemnified PHC and Plant Health Care plc, and PHC and Plant Health Care plc have indemnified the Company, for any damages incurred in connection with a breach of the Company’s or PHC’s and Plant Health Care plc’s respective representations and warranties, covenants or obligations contained in the asset purchase agreement. The Company has also indemnified PHC in connection with any losses relating to liabilities

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and obligations that the Company retained after the sale of the Harpin Protein Technology, and PHC and Plant Health Care plc have indemnified the Company against any losses relating to liabilities and obligations that PHC assumed in connection with the purchase of the Harpin Protein Technology or that arise in connection with the ownership and operation of the Harpin Protein Technology after February 28, 2007. The indemnification obligation will not apply until the aggregate amount of losses for which any party otherwise is entitled to be indemnified exceeds $50,000, at which time the indemnified party will be entitled to be paid for the full amount of all losses, up to a maximum amount of $700,751, the principal amount of PHC’s promissory note.

3. Stock Options

At March 31, 2007, the Company had reserved 163,330 shares of common stock for issuance under the 1995 Combined Incentive and Nonqualified Stock Option Plan, all of which had been granted, and 1,099,394 shares for issuance under the 2000 Stock Incentive Plan. Options totaling 450,909 under the 2000 Stock Incentive Plan had been granted at March 31, 2007, leaving 648,485 options available for future grant.

The following table summarizes stock option activity:

			Weighted Average Exercise Price Per Share
Balance at December 31, 2006	741,384		$	8.31
Granted	—			—
Forfeited	(127,145	)		6.46
Balance at March 31, 2007	614,239			8.69
Exercisable at March 31, 2007	597,017		$	8.88

4. Inventory

Inventory, at the lower of average cost or market, consists of the following:

	March 31,2007			December 31,2006
	March 31,2009			December 31,2008
Raw materials	$	138,~~982~~331		$	~~418~~8,~~597~~331
Bulk manufactured goods		—			340,313
Finished goods		45,181			60,874
Finished goods		122,636			1,567,148
Total inventory		53,512			69,205
Total inventory		136,618			2,326,058
Less non-current portion of inventory		(19,559	)		(34,478	)
Less non-current portion of inventory		(36,449	)		(41,758	)
Current portion of inventory	$	33,953		$	34,727
Current portion of inventory	$	100,169		$	2,284,300

The non-current portion of inventory consists of raw materials and finished goods that the Company does not expect to utilize in the next ~~twelve~~12 months following the balance sheet date.

As of December 31, 2006, the Company reviewed assets for impairment in connection with the sale of our Harpin Protein Technology to PHC by comparing the carrying value at February 28, 2007 of assets sold to consideration received from PHC and recorded liabilities assumed by PHC4. ~~Based~~Accrued on this review, the carrying value of inventory sold to PHC exceeded the consideration received from PHC and recorded liabilities assumed by PHC. Accordingly, the Company recorded a $452,347 charge for impairment to inventory as of December 31, 2006.Liabilities

5. Property and Equipment

Property and equipment are recorded at estimated fair value using an orderly liquidation method and leasehold improvements were estimated to have zero fair value. At March 31, 2007, property and equipment consist of assets used in our Home and Garden Business. At December 31, 2006, property and equipment consists primarily of assets used to manufacture and sell the Company’s products and assets used in our research and administration.

The Company recorded depreciation and amortization of $176,067 for the three months ended March 31, 2006. No depreciation was recorded after June 30, 2006 for equipment depreciated under the units-of-production method

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

due to no production during the period or for equipment depreciated under the straight-line method as estimated fair value approximated salvage value.

6. Accrued Liabilities

Accrued liabilities consist of the following:

	March 31,2007		December 31,2006
	March 31,2009		December 31,2008
Compensation and benefits	$	56,901	$	136,697
Legal fees and expenses	$	25,000	$	98,000
Legal fees and expenses		45,892		107,809
Accounting and investor services		41,805		2,000
Facility costs		110,538		70,352
Research and development field trial expenses		7,373		59,725
Royalty		—		39,794
Promotions		39,044		38,683
Warranty		25,000		25,000
Other		4256,~~196~~100		5026,~~224~~401
Total accrued liabilities	$	~~326~~147,~~944~~905	$	~~528~~151,~~284~~401

75. ~~Warranty~~Commitments ~~Liability~~and Contingencies

The Company provides a limited warranty to its customers that products, at the time of the first sale, conform to the chemical description on the label and under normal conditions are reasonably fit for the purpose referred to in the directions for use, subject to certain inherent risks. The Company records, at time revenues are recognized, a liability for warranty claims based on a percentage of sales. The warranty accrual percentage is reviewed periodically and adjusted as necessary, based on historical experience, the results of product quality testing and future expectations. There were no changes to the Company’s warranty liability during the three months ended March 31, 2007.Leases

8Beginning May 2008, the Company leases its office under a five-year agreement. ~~Commitments~~Rental expense for office and ~~Contingencies~~facility was not significant for the three months ended March 31, 2009 and 2008. There are no material future minimum lease commitments.

Employment and Change-in-Control Agreements

The Company has a severance agreement with Bradley S. Powell, its President and Chief Financial Officer, that requires the Company to make severance payments equal to six months annual base salary if the Company terminates Mr. Powell’s employment without cause, as defined in the agreement. If the Company were required to make payments under this agreement, severance payments would total approximately $88,000 as of March 31, 2007.

The Company also has a change-in-control agreement with Mr. Powell. The agreement provides that, upon a change in control, as defined in the agreement, the Company or the acquiring company would continue to employ Mr. Powell, for a period of two years following such change in control. During that time, the agreement provides that Mr. Powell’s position, authority, duties and responsibilities would be substantially the same as they were during the 90-day period prior to the change in control, and that his annual base salary would be at least equal to his annual base salary established by the Company’s Board of Directors prior to the change in control. If, during this two-year period, Mr. Powell’s employment is terminated by the Company or the acquiring company, as applicable, other than for cause, as defined in the agreements, or by the executive for good reason, as defined in the agreements, Mr. Powell would be entitled to receive (i) his annual base salary, and pro rata annual bonus, through the date of termination, and any deferred compensation; and (ii) a severance payment equal to twice the sum of his annual base salary and the average of his past three annual bonuses. The sale of the Company’s Harpin Protein Technology is deemed a change in control under the agreement. Based on Mr. Powell’s current annual salary and bonus history, the severance payment to Mr. Powell under his change-in-control agreement would be approximately $350,000 as of March 31, 2007. In addition, Mr. Powell’s unvested stock options would accelerate and become fully vested and exercisable.

EDEN BIOSCIENCE CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Legal Proceedings

The Company is subject to various claims and legal actions that arise in the ordinary course of business and believes that the ultimate liability, if any, with respect to these claims and legal actions will not have a material effect on its condensed consolidated financial statements.

96. Major Customers

Net product sales to the following distributors accounted for more than ten percent of net revenues for the periods indicated:

	Three Months Ended March 31,
	2007		2006
Customer A	$	42,000	$	**
Customer B		28,000		—
Customer C		21,000		—
Customer D		21,000		**
Customer E		—		381,000
Customer F		—		253,000
Customer G		—		181,000

-8-

** LessEDEN ~~than~~BIOSCIENCE ~~ten~~CORPORATION ~~percent.~~AND SUBSIDIARYNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Income Taxes

	Three Months Ended March 31,
	2009		2008
Customer A	$	13,000	$	21,000
Customer B		9,000		**
** Less than ten percent.

~~The Company files a U~~7.S. ~~Federal~~Income and certain foreign and state tax returns and did not record an income tax benefit for any of the periods presented because it has experienced operating losses since inception. The Company’s total U.S. Federal tax net operating loss carryforwards were approximately $115,800,000 at December 31, 2006 and expire between 2009 and 2026. The Company’s total foreign tax net operating loss carryforwards were approximately $8,400,000 at December 31, 2006 of which $5,600,000 expires between 2007 and 2016 and approximately $2,800,000 does not expire. The Company has total net operating loss carryforwards in 19 U.S. States that range from approximately $12,500,000 to approximately $2,000 per state and expire between 2007 and 2026. The Company’s total U.S. general business credit carryforwards were approximately $1,400,000 at December 31, 2006 and expire between 2013 and 2026.Taxes

IfThe ~~the~~ Company ~~were~~files toa ~~undergo an ownership change as defined in Section 382 of the~~ U.S. ~~Internal~~Federal ~~Revenue~~and certain ~~Code~~foreign ~~(the~~and ~~“Code”),~~state ~~its net~~ tax ~~loss~~returns ~~carryforwards~~and ~~generated~~did ~~prior~~not ~~to the~~record ~~ownership~~an ~~change~~income ~~would~~tax bebenefit ~~subject~~for toany ~~annual limitations, which could reduce, eliminate, or defer the utilization~~ of ~~these losses. Based upon a preliminary review of past changes in~~ the ~~Company’s~~periods ~~ownership,~~presented ~~the~~because ~~Company believes that~~ it ~~may~~has ~~have~~ experienced ~~one ownership change (as defined~~operating ~~under~~losses ~~Section~~since ~~382)~~inception. inThe ~~October 2000 that would result in a limitation on the~~ Company’s ~~future~~total ~~ability~~U.S. toFederal ~~use~~ tax ~~loss~~net ~~carryforwards~~operating ~~generated prior to that date. The Company does not believe that the sale of assets to PHC resulted in another ownership change that would further limit its future ability to use tax~~ loss carryforwards ~~generated~~were ~~after~~approximately ~~October 2000~~$118.8 ~~However,~~million ~~the~~at ~~IRS~~December ~~or some other taxing authority may disagree with the~~31, ~~Company’s~~2008 ~~position~~ and ~~contend~~expire ~~that~~between ~~the~~2009 ~~Company~~and ~~has already experienced other such ownership changes or that the sale of assets resulted in an ownership change~~2027. InThe ~~such case, the~~ Company’s ~~ability~~total toforeign ~~use~~tax ~~its~~net ~~tax~~operating loss carryforwards towere ~~offset~~approximately ~~future~~$4.3 ~~taxable~~million ~~income would be severely limited.~~at IfDecember ~~the~~31, ~~sale~~2008, of ~~assets~~which ~~to PHC results in an ownership change as defined in Section 382 of the Code, the Company’s tax loss carryforwards available to offset future taxable income could be limited to approximately~~ $~~323,000~~1.4 ormillion ~~less~~expires ~~per~~between ~~year~~2011 and ~~the~~2018 ~~remainder~~and ~~of the tax loss carryforwards would expire as a result of the limitation~~$2.9 Ifmillion ~~an ownership change~~ does not ~~occur~~expire. asThe aCompany ~~result~~has oftotal ~~the~~net ~~sale to PHC, there is still the potential for an ownership change to occur under Section 382 as a result of future changes in stock ownership. Net~~ operating loss carryforwards ~~may~~in ~~expire~~19 ifstates ~~the Company~~that ~~does~~range ~~not~~between ~~generate sufficient income to utilize the losses before their normal expiration~~$12.6 Inmillion ~~addition~~ to ~~Section 382~~$2,000 ~~certain~~per ~~other~~state ~~statutory provisions~~ and ~~common~~expire ~~law~~between ~~doctrine~~2009 ~~could~~and ~~limit~~2027. ~~the~~The Company’s ~~opportunities~~total togeneral business ~~realize~~credit ~~potential~~carryforwards ~~value~~were ~~from,~~approximately or$1.4 ~~otherwise~~million ~~adversely~~at ~~affect~~December ~~the Company’s~~31, ~~ability~~2008 ~~to preserve~~ and ~~utilize,~~expire ~~the~~between ~~Company’s~~2013 ~~tax~~and ~~loss carryforwards~~2026.

12If the Company were to undergo an “ownership change” as defined in Section 382 of the U.S. Internal Revenue Code (the “Code”), its net tax loss and general business credit carryforwards generated prior to the ownership change would be subject to annual limitations, which could reduce, eliminate, or defer the utilization of these losses. Based upon an analysis of past changes in the Company’s ownership, the Company believes that it has experienced ownership changes (as defined under Section 382) on March 20, 1996 and October 2, 2000 and absent any other ownership changes in the future, there are no significant limitations on the Company’s future ability to use net operating loss carryforwards generated prior to those dates. The Company does not believe it has experienced any other ownership changes that would further limit its future ability to use net operating loss carryforwards generated after October 2000.

Even if an ownership change has not occurred in the past, there is still the potential for an ownership change to occur under Section 382 as a result of future changes in stock ownership. For example, if shareholders do not approve the Plan of Dissolution or if it is not otherwise implemented, the holders of the Company’s common stock, including one or more of the holders of 5% or more of the Company’s common stock, could sell their shares in sufficient quantities to trigger an ownership change. In addition, if shareholders do not approve the Plan of Dissolution or it is not otherwise implemented and the Company continues to explore whether there may be opportunities to utilize its net operating loss carryforwards, the Company will be limited in its ability to issue additional stock in the future to provide capital for its business due to the importance of avoiding a future ownership change. The Company would only be able to issue additional stock in a manner that would not cause an ownership change pursuant to Section 382 of the Code. Accordingly, the Company’s ability to access the equity markets or issue stock in connection with an acquisition could be restricted. Net operating loss carryforwards may expire if the Company does not generate sufficient income to utilize the losses before their normal expiration.

-9-

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

~~This~~The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes thereto included in this ~~report~~Quarterly Report on Form 10-Q and with our ~~2006~~2008 audited financial statements and notes thereto included in our most recent Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 3027, ~~2007~~ 2009.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. ~~that~~These ~~involve~~statements ~~risks~~relate ~~and uncertainties,~~to ~~such~~future asevents ~~statements~~or ~~regarding the impact of the asset sale on~~ our future ~~financial~~business ~~condition~~activity, ~~and results of~~ operations; ~~our~~and ~~ability~~financial toperformance. ~~preserve~~Forward-looking ~~and employ~~statements ~~our~~can ~~tax~~be ~~loss~~identified ~~carryforwards;~~by ~~our~~terminology ~~belief~~such as ~~that~~“may,” ~~our~~“will,” ~~cash~~“should,” ~~balance~~“expect,” at“plan,” ~~March~~“intend,” 31“anticipate,” “believe,” ~~2007~~“estimate,” ~~will~~“predict,” be“potential,“ ~~sufficient~~“continue,” to“assume” ~~meet~~or ~~anticipated~~other ~~cash~~similar expressions, ~~needs~~or ~~for~~the ~~move~~negative ~~than the~~of ~~next~~those 12expressions. ~~months;~~These ~~and~~forward-looking ~~our~~statements ~~belief~~are ~~that~~based weon ~~will~~the ~~significantly~~opinions, ~~reduce~~expectations, ~~operating~~forecasts, ~~expenses~~assumptions ~~during~~and estimates ~~2007.~~of Wemanagement ~~use~~at ~~words~~the ~~such~~time asthe ~~“anticipate,” “believe,”~~statements ~~“expect,”~~are ~~“future”~~made and ~~“intend,”~~are ~~the~~subject ~~negative~~to ofrisks ~~these~~and ~~terms~~uncertainties ~~and~~that ~~similar~~are ~~expressions~~difficult to ~~identify forward-looking~~predict ~~statements.~~and ~~However,~~that ~~these~~could cause ~~words~~actual ~~are~~results ~~not~~or the ~~exclusive~~level ~~means~~ of ~~identifying~~activity, ~~such~~performance ~~statements.~~or Inachievements ~~addition,~~expressed ~~any~~or ~~statements~~implied ~~that~~by ~~refer~~such statements to ~~expectations,~~ ~~projections~~differ ormaterially ~~other~~from ~~characterizations~~our expectations of future ~~events~~results, orlevel ~~circumstances~~of ~~are~~activity, ~~forward-looking~~performance ~~statements.~~or ~~Our~~achievements ~~actual~~expressed ~~results~~or ~~could~~implied ~~differ materially~~by ~~from~~ those ~~anticipated~~statements. inFactors ~~these~~that ~~forward-looking~~could ~~statements~~affect actual ~~for~~results, ~~many~~level ~~reasons~~of activity, ~~including~~performance ~~the~~or ~~following~~achievements ~~factors~~include:

• ~~Our~~our ~~inability~~ability to beobtain ~~successful~~shareholder inapproval ~~our~~of ~~Home~~the ~~and~~proposed ~~Garden~~plan ~~Business,~~of ~~which~~complete ~~has~~dissolution aand ~~limited operating history~~liquidation, ~~has~~or ~~generated~~“Plan ~~only~~of ~~limited revenue to date and in which we do not currently expect to substantially increase our investment.~~Dissolution”;

• ~~The~~our ~~failure~~ability ~~of PHC~~ to ~~perform~~sell ~~its~~our ~~obligations~~non-cash ~~under~~assets, ~~the~~consisting ~~promissory~~primarily ~~note issued in connection with the sale~~ of our ~~Harpin~~Home ~~Protein~~and ~~Technology~~Garden ~~or of Plant Health Care plc to perform its obligations under the guaranty~~Business, in ~~which~~a ~~case~~timely wemanner ~~may not receive some~~ or at all ofpursuant ~~the~~to ~~deferred consideration payable by PHC under~~ the ~~Asset~~proposed ~~Purchase~~Plan ~~Agreement,~~of ~~which could adversely affect our operations.~~Dissolution;

• ~~Our~~the ~~inability~~price toand ~~reduce~~other ~~operating~~terms ~~losses~~ and ~~negative~~conditions ~~cash~~of ~~flow~~sale ~~and~~of ~~achieve~~our ~~profitability~~Home orand ~~sustain~~Garden ~~operations.~~Business;

• ~~The~~our ~~failure~~ability ofto ~~PHC~~prosecute, ondefend, ~~whom~~settle, weor ~~are~~otherwise ~~dependent~~resolve ~~for~~claims ~~the~~and ~~manufacture~~demands and ~~supply~~to ofmake ~~harpin~~reasonable ~~proteins~~provision ~~and~~for ~~harpin~~the ~~protein-based~~satisfaction ~~products~~of ~~for~~liabilities ~~our Home~~ and ~~Garden~~the ~~Business,~~costs ~~to provide timely delivery~~ of ~~high~~taking ~~quality~~such ~~products, which could adversely affect our business and results of operations.~~actions;

• ~~Our~~the ~~inability~~risk tothat bewe ~~successful~~may inhave ~~building~~liabilities ~~greater market awareness~~ and ~~increasing~~expenses ~~sales~~that inarise ~~our Home and Garden Business,~~ which isare ~~relatively~~currently ~~new and has limited market awareness.~~unforeseen;

• ~~Our~~the ~~inability~~risk tothat ~~establish~~the orexpenses ~~maintain~~of ~~successful~~implementing ~~relationships~~the ~~with~~Plan ~~independent~~of ~~distributors~~Dissolution ~~and~~may ~~retailers,~~exceed ~~which could adversely affect~~ our ~~sales and our ability to generate revenue from our Home and Garden Business.~~estimates;

• ~~Our~~the ~~inability~~risk that we may not have sufficient funds to ~~complete~~continue ~~successfully~~to inoperate our business and pursue other strategic alternatives if the ~~market~~Plan ~~for~~of ~~Home~~Dissolution ~~and~~is ~~Garden~~not ~~Products.~~approved or is not otherwise implemented pursuant to our board’s ability to abandon the Plan of Dissolution;

• ~~Our~~the ~~inability~~highly speculative nature of any strategic alternatives that may be available to ~~compete~~us ~~with~~if ~~PHC’s~~the ~~Harpin~~Plan ~~Protein~~of ~~Technology~~Dissolution ~~business~~is ~~until~~not ~~after~~approved ~~February~~by ~~28,~~our ~~2009.~~shareholders or is not otherwise implemented pursuant to our board’s ability to abandon the Plan of Dissolution;

• ~~Our~~our inability to ~~achieve~~realize ~~profitability~~value orfrom our ~~inability~~net tooperating ~~identify~~loss ~~and~~carryforwards ~~acquire~~if ~~other~~the ~~businesses~~Plan onof ~~favorable~~Dissolution ~~terms~~is innot ~~order~~approved toby ~~increase~~our shareholders or is not otherwise implemented pursuant to our ~~revenues~~board’s ~~and~~ability ~~generate~~to ~~new~~abandon ~~income.~~the Plan of Dissolution;

• ~~Our~~the ~~inability~~risks toassociated ~~obtain regulatory approvals, or to comply~~ with ~~ongoing~~our ~~and~~dependence ~~changing~~on ~~regulatory~~Plant ~~requirements~~Health Care, ~~which~~Inc. ~~could~~as ~~delay~~the orsource ~~prevent sales~~ of ~~our~~harpin ~~current~~protein-based orproducts ~~any~~for ~~future~~our Home and Garden ~~Products.~~Business;

• ~~Our~~the ~~inability~~competitive tonature ~~adequately~~of ~~distinguish~~the ~~our~~markets ~~products~~in ~~from genetically modified plants and products,~~ which ~~could~~we ~~negatively impact market acceptance and regulatory approval of our products.~~operate;

• ~~The~~a ~~occurrence~~change ofin ~~product~~economic ~~liability claims which could adversely affect our operations.~~conditions;

• ~~Rapid changes in technology, which could render~~ our ~~current~~ability orto ~~any~~retain ~~future~~existing ~~products~~customers weand ~~may~~to ~~develop~~attract ~~unmarketable~~new ~~or obsolete.~~customers;

• ~~Our inability to retain~~ our ~~existing personnel, which could impair our~~ ability to ~~successfully~~retain ~~manage~~qualified ~~our business or achieve our objectives.~~personnel;

13• our anticipated operating losses;

• ~~Any~~uncertainties ~~severance~~regarding ~~payments~~the weavailability ~~are~~of ~~required~~additional tocapital ~~pay to Mr. Powell under his employment agreement~~ and~~/or~~ ~~change~~continued listing of ~~control~~our ~~agreement,~~common ~~which~~stock ~~could~~on ~~materially~~The ~~impair~~Nasdaq ~~our~~Capital ~~liquidity~~Market; and ~~financial conditions.~~

• ~~Our~~ ~~inability~~the ~~to realize~~other ~~value~~risks ~~from~~and uncertainties described under the heading “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, Item 1A of our ~~tax~~Annual ~~loss~~Report ~~carryforwards.~~on Form 10-K for the year

~~• Our inability to use our tax loss carryforwards because we are unable to generate taxable income.~~-10-

•ended ~~IRS~~December ~~challenge~~31, of2008, our definitive proxy statement on Schedule 14A relating to the ~~amount~~proposed Plan of ~~our~~Dissolution ~~tax~~and ~~loss~~other ~~carryforwards~~reports we may file with the Securities and Exchange Commission.

•Although ~~Changes~~we believe that expectations reflected in ~~legislation~~the ~~that~~forward-looking ~~could~~statements ~~negatively~~are ~~affect~~reasonable, we cannot guarantee future results, level of activity, performance or achievements. You should not place undue reliance on our ~~ability~~forward-looking tostatements, ~~use~~which apply only as of the ~~tax~~date ~~benefits~~of ~~associated~~this ~~with~~Quarterly ~~our~~Report ~~tax~~on ~~loss~~Form 10-Q. ~~carryforwards~~Except as may be required under federal law, we undertake no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur.

More information about factors that potentially could affect our financial results and our business include, but are not limited to, those discussed under Item 1A “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2007. You should not place undue reliance on our forward-looking statements, which apply only as of the date of this report. The cautionary statements made in this report apply to all forward-looking statements wherever they appear in this report. Except as may be required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We ~~have~~sell ~~incurred~~harpin ~~significant~~protein-based ~~operating~~products ~~losses~~for ~~since~~the ~~our~~protection ~~inception in 1994. As~~ of ~~March~~plants ~~31,~~and ~~2007,~~seeds weand ~~had~~the anpromotion ~~accumulated deficit~~ of ~~$126,545,702.~~overall Weplant ~~incurred~~health ~~net~~to ~~losses of $292,765 in~~ the ~~first~~ ~~three~~general ~~months of 2007~~public, ~~$9,445,185~~to inresellers ~~2006,~~or ~~$10,857,865~~businesses inthat ~~2005,~~offer ~~and $8,886,252 in 2004. On February 28, 2007, we sold~~ our ~~proprietary harpin~~ harpin protein-based ~~technology~~products ~~and substantially all of our assets used in our worldwide agricultural and horticultural markets~~ to PHC for $2,097,575 (net of transaction costs incurred after January 1, 2007) and assumption of certain liabilities by PHC, including all of our obligations under our office and manufacturing facility lease, under our license with the ~~Cornell~~general ~~Research~~public ~~Foundation (“CRF”)~~ and ~~under~~to ~~our~~businesses ~~change~~that inincorporate ~~control~~harpin ~~agreement~~protein-based ~~with our~~products ~~former~~into ~~Chief~~existing ~~Science~~or ~~Officer,~~new ~~Dr.~~products ~~Zhongmin Wei. From December 1, 2006 through February 28, 2007, we operated under an Independent Distribution~~to ~~Agreement~~be ~~whereby~~sold ~~PHC~~to ~~served as~~ the ~~exclusive~~general ~~distributor of our products for all channels of trade, other than the Home and Garden Market, in substantially all worldwide territories~~public. We ~~believe~~refer ~~that~~to this ~~sale~~business ~~will~~as ~~enable us to significantly reduce~~ our ~~future operating losses and liabilities, generate cash for our~~ “Home and Garden Business ~~and preserve the potential future value of our remaining business assets~~,” ~~primarily our tax loss carryforwards. As described in more detail below, we retained the right~~ to ~~our~~this ~~cash,~~market ~~accounts~~as ~~receivable and assets relating to~~ our “Home and ~~Garden~~ Business. As part of the closing, we entered into a license and supply agreement with PHC, pursuant to which PHC granted us an exclusive worldwide right and license to sell harpin protein-based products for the protection of plants and seed and the promotion of overall plant health in the Home and Garden Market” and ~~a royalty free, exclusive worldwide license~~ to ~~use~~these ~~the~~products ~~Messenger,~~as ~~MightyPlant and Harp-N-Tek trademarks in connection with the sale of~~ our “Home and Garden Products. Under the license and supply agreement, PHC will supply us harpin proteins and harpin-protein based products for our Home and Garden Business. We retained all liabilities associated with the Home and Garden Business and all liabilities associated with the Harpin Protein Technology that occurred or existed prior to February 28, 2007 that were not specifically assumed by PHC.”

~~Our~~We ~~business~~have ~~strategy~~incurred ~~following~~significant ~~the~~operating ~~sale~~losses issince toour ~~use~~inception ~~any~~in ~~revenue~~1994. ~~generated~~At byMarch ~~our~~31, ~~Home~~2009, ~~and~~we ~~Garden~~had ~~Business~~an toaccumulated ~~support~~deficit ~~our~~of ~~continued~~$128.1 ~~operations~~million. ~~while~~We weincurred ~~explore~~net ~~whether~~losses ~~there~~of ~~may~~$0.2 ~~be opportunities~~million toand ~~realize~~$0.1 million ~~potential~~for ~~value~~the ~~from~~three ~~our~~months ~~remaining~~ended ~~business~~March ~~assets~~31, ~~primarily~~2009 ~~our~~and ~~tax~~2008, ~~loss carryforwards~~respectively. We expect to incur additional net losses asin ~~we proceed with our Home and Garden Business and as we explore whether there may be opportunities to realize potential value from our remaining business assets~~2009.

~~Sale~~On December 4, 2008, our board of directors ~~Harpin~~approved ~~Protein~~the ~~Technology~~proposed Plan of Dissolution, subject to ~~Plant~~shareholder ~~Health~~approval. The proposed Plan of Dissolution provides for the voluntary ~~Care~~liquidation and dissolution of our company and, subject to the requirements of Washington law, distribution of any available cash and other assets to our shareholders. A special meeting of shareholders to vote on the Plan of Dissolution is scheduled to be held on May 20, 2009. If the Plan of Dissolution is approved, we intend to file articles of dissolution with the Secretary of State of the State of Washington as soon as reasonably practicable after receipt of the required revenue clearance certificate from the Department of Revenue of the State of Washington. The dissolution will be effective on the date on which we file the articles of dissolution or a later date specified in the articles of dissolution. Thereafter, we will not carry on any business activities except those appropriate to winding up and liquidating our business and affairs, including the collection of assets and the disposal of properties that will be applied toward the satisfaction of liabilities or will not otherwise be distributed in kind to our shareholders, the satisfaction of liabilities, the distribution of any remaining assets to our shareholders and the taking of all other actions necessary to wind up and liquidate our business and affairs, in accordance with the Plan of Dissolution.

OnFrom ~~February~~and ~~28,~~after ~~2007,~~the ~~under~~closing of the ~~terms~~sale of ~~the~~our ~~Asset~~proprietary ~~Purchase~~harpin ~~Agreement,~~protein wetechnology ~~sold~~and substantially all of the assets related to our worldwide agricultural and horticultural markets, or “Harpin Protein Technology,” to ~~PHC~~Plant ~~for~~Health $1Care,~~396~~ Inc.,~~824~~ inor ~~cash~~“PHC,” ~~net~~in ofFebruary ~~transaction~~2007 ~~costs~~and ~~incurred~~until ~~after~~the ~~January 1,~~approval ~~2007~~by ~~totaling~~our ~~$103,176,~~board of adirectors ~~promissory~~of ~~note in~~ the ~~principal~~proposed ~~amount~~Plan of ~~$700~~Dissolution,~~751~~ ~~payable~~our onbusiness ~~December~~strategy ~~28,~~had ~~2007~~been ~~and~~to ~~the~~use ~~assumption~~any revenue generated by ~~PHC~~our ofHome ~~certain~~and ofGarden Business to ~~the~~support ~~liabilities~~our ~~relating~~continued operations while we explore whether there may be opportunities to orrealize ~~arising~~potential ~~out~~value offrom our ~~Harpin~~remaining ~~Protein~~business ~~Technology~~assets, primarily ~~totaling~~our ~~$520,613~~net operating loss carryforwards discussed under “—Results of Operations—Income Taxes.” We refer to this as our “NOL Strategy.” The ~~promissory~~NOL ~~note~~Strategy ~~has~~is anextremely ~~interest~~speculative ~~rate~~and subject to a large number of 5%risks ~~per~~and ~~annum~~uncertainties, including ~~and~~those isset ~~secured~~forth byunder ~~equipment,~~the ~~certain~~heading ~~intellectual~~“Risk ~~property~~Factors” ~~and~~in ~~other~~our ~~assets~~Annual ~~acquired~~Report byon ~~PHC~~Form ~~and~~10-K ~~unconditionally~~for ~~guaranteed~~the byyear ~~PHC’s~~ended ~~indirect parent~~December 31, ~~Plant~~2008, ~~Health~~and ~~Care~~has ~~plc.~~not been ~~Harpin~~successful ~~Protein~~to ~~Technology~~date. ~~includes~~A ~~substantially~~detailed ~~all~~discussion of the background and reasons for our ~~assets~~board’s ~~used~~decision into abandon the ~~creation~~NOL ofStrategy ~~plant~~and ~~health~~pursue ~~technology~~the ~~incorporating~~proposed ~~harpin~~Plan ~~proteins~~of ~~and~~Dissolution is contained in the ~~manufacture~~definitive ofproxy ~~biopesticide,~~statement ~~plant~~on ~~health~~Schedule ~~and~~14A ~~nutrient~~that ~~products~~we ~~utilizing~~filed with the Securities and Exchange Commission on April 1, 2009.

14If our shareholders do not approve the proposed Plan of Dissolution or if the Plan of Dissolution is not otherwise implemented pursuant to our board’s ability to abandon the Plan of Dissolution if our board determines that such action would be in the best interests of our company and our shareholders, our board of directors will explore what, if any, strategic alternatives are available for the future of our company, which may include the continued exploration of the NOL Strategy. Other possible alternatives include seeking to raise capital from the sale of securities, which could result in substantial dilution to our existing shareholders and the granting of superior rights to the new shareholders, selling all of our stock or assets, changing our business focus, expanding the scope of our business through relationships with third parties, seeking voluntary dissolution at a later time and with potentially

Harpin Protein Technology. These assets include all intellectual property, contracts (including our license agreement with the CRF and our office and manufacturing facility lease), equipment and inventory related to our worldwide agricultural and horticultural markets.-11-

Wediminished ~~believe~~assets ~~that~~or ~~the~~seeking ~~sale~~bankruptcy ofprotection. ~~our~~See ~~Harpin~~Part ~~Protein~~II, Item ~~Technology~~1A ~~will have~~“Risk ~~the~~Factors” ~~following~~of ~~effects~~this Quarterly Report for information on ~~our~~risks ~~future~~related ~~financial~~to ~~condition~~the ~~and~~proposed ~~results~~Plan of ~~operations:~~Dissolution.

• Product sales are expected to decrease significantly in 2007 compared to 2006. The Harpin Protein Technology accounted for 91% of gross product sales in 2006.

• Cost of goods sold is expected to decrease significantly in 2007 compared to 2006 as a result of the decrease in product sales and the elimination of idle capacity charges after February 28, 2007.

• Research and development expenses are expected to decrease to less than $150,000 in 2007.

• Selling, general and administrative expenses are expected to decrease significantly in 2007 compared to 2006.

The sale of our Harpin Protein Technology had the following effects on our condensed consolidated financial statements for the first quarter of 2007:

• Cash and cash equivalents increased by $1,500,000 on February 28, 2007. This increase was offset by the payment of transaction costs totaling $103,176 incurred and recorded in the first three months of 2007 (approximately $320,000 was incurred and recorded in selling, general and administrative expense in 2006). Cash and cash equivalents also increased and other long-term assets decreased by $287,879 for the release of restricted cash and return of deposit by the facility lease landlord.

• Current inventory decreased by $1,895,978 for inventory sold to PHC. We also sold $261,820 of finished goods to PHC under our Independent Distribution Agreement with PHC. The remaining inventory consists primarily of raw materials and finished goods used for our Home and Garden Business.

• Other current assets decreased by $63,750 for equipment classified as held for sale and sold to PHC.

• Property and equipment decreased by $647,962 for assets sold to PHC.

• Current accrued liabilities decreased by $59,625 due to PHC’s assumption of these liabilities.

• Other long-term liabilities decreased to zero at March 31, 2007 due to PHC’s assumption of our office and manufacturing facility lease liabilities recorded for rent expense in excess of rent payments totaling $73,131 and asset retirement obligation of $287,857 and our $100,000 liability to CRF.

• As of February 28, 2007, the cumulative translation adjustment related to our European subsidiary totaling $103,470 was reclassified from accumulated other comprehensive income and reported as part of the gain on sale of Harpin Protein Technology as this subsidiary was substantially liquidated as a result of the sale to PHC.

The sale of Harpin Protein Technology to PHC resulted in a gain calculated as follows:

Cash portion of purchase price	$	1,500,000
Promissory note portion of purchase price		700,751
Less transaction costs incurred after January 1, 2007		(103,176	)
Assets sold to PHC:
Inventory		(1,895,978	)
Equipment held for sale		(63,750	)
Property and equipment held and used		(647,962	)
Liabilities assumed by PHC:
Accrued liabilities		59,625
Other long-term liabilities		460,988
Recognition of cumulative translation adjustment		103,470
Gain on sale of assets to PHC	$	113,968

Additionally, future minimum lease payments under the non-cancelable office and manufacturing facility lease totaling $184,970 in 2007, $229,424 in 2008 and $238,366 in 2009 were assumed by PHC as of February 28, 2007.

All of our rights, liabilities and obligations under the exclusive worldwide license agreement with CRF for certain patents, patent applications and biological material relating to harpin proteins and related technology have been assigned to PHC. The license agreement required funding of certain research and development activities at Cornell University and payment of a 2% royalty on net sales of products that incorporate the licensed technology, subject to a $200,000 minimum annual royalty payment. Effective July 1, 2006, the license agreement was amended to establish a development fund at CRF to advance harpin technology and reduced the minimum obligation required to maintain the rights under the license agreement to contributions to the development fund of $100,000 in each of the 2006, 2007 and 2008 license years.

We have agreed to indemnify PHC and Plant Health Care plc, and PHC and Plant Health Care plc each has agreed to indemnify us, for any damages incurred in connection with a breach of our or PHC’s and Plant Health Care plc’s respective representations and warranties, covenants and obligations contained in the Asset Purchase Agreement. We have also agreed to indemnify PHC in connection with any losses relating to liabilities and obligations that we retained after the sale of the Harpin Protein Technology, and PHC and Plant Health Care plc each has agreed to indemnify us against any losses relating to liabilities and obligations that PHC assumed in connection with the purchase of the Harpin Protein Technology or that arise in connection with the ownership and operation of the Harpin Protein Technology after February 28, 2007. The indemnification obligations do not apply until the aggregate amount of losses for which any party otherwise is entitled to be indemnified exceeds $50,000, at which time the indemnified party will be entitled to be paid for the full amount of all losses, up to a maximum amount of $700,751, the principal amount of PHC’s promissory note.

Results of Operations

Three Months Ended March 31, 2007 and 2006

Revenues

~~Product~~We ~~sales~~sell ~~revenue through February 28, 2007, prior to the sale of~~ our ~~Harpin~~Home ~~Protein Technology, has resulted primarily from sales of Messenger STS, N-HibitTM, ProActTM, MightyPlantTM~~ and ~~other~~Garden ~~related~~Products ~~products (hereafter referred~~ to ~~collectively as “Harp-N-TekTM products”) primarily to distributors in the agricultural markets in the United States and Spain. Product sales~~ ~~revenue in March 2007~~distributors, ~~after~~retailers ~~the sale of our Harpin Protein Technology, has resulted primarily from sales of Messenger~~ and ~~Messenger~~directly ~~Seed Treatment primarily~~ to ~~distributors and~~ consumers inover the ~~Home and Garden Market in the United States~~internet. Revenues from product sales are recognized when (a) the product is delivered to independent distributors, (b) we have satisfied all of our significant obligations and (c) any acceptance provisions or other contingencies or arrangements have been satisfied, including whether collection is reasonably assured. As part of the analysis of whether all of our significant obligations have been satisfied or situations where acceptance provisions or other contingencies or arrangements exist, we consider the following elements, among others: sales terms and arrangements, historical experience and current incentive programs. Our distributor arrangements provide no price protection or product-return rights. Net product sales by geographical region were:

	Three Months Ended March 31,
	2007		2006
United States	$	177,664	$	1,624,750
Spain		11,108		—
Other regions		—		23,637
Product sales, net of sales allowances	$	188,772	$	1,648,387

•

the product is delivered to independent distributors;

~~Net~~• ~~product~~we ~~sales~~have ~~revenue~~satisfied ~~for~~all ~~the first quarter~~ of ~~2007 was $188,772, a decrease of $1,459,615 from $1,648,387 in the same quarter of 2006. The decrease is a result of selling~~ our ~~Harpin Protein~~significant ~~Technology~~obligations; ~~to PHC on February 28, 2007, which was offset by the recognition of sales of Messenger STS in Spain, as described below. Net product sales to foreign customers in other regions were zero~~ and $23,637 in the three months ended March 31, 2007 and 2006, respectively. The decrease was due to the sale of our Harpin Technology to PHC and our Independent Distribution Agreement entered into with PHC on December 1, 2006, whereby product orders received from customers in other regions were fulfilled by PHC in the United States. Net sales of Messenger to consumers in the Home and Garden Market in the United States totaled $134,659 and $231,181 in the three months ended March 31, 2007 and 2006, respectively. We believe this decrease in sales volume is due to higher levels of product inventory in

16• any acceptance provisions or other contingencies or arrangements have been satisfied, including whether collection is reasonably assured.

~~the~~If ~~distribution~~acceptance ~~channel~~provisions or contingencies exist, ~~lower~~revenue ~~spending~~is ondeferred ~~personnel~~and recognized after such provisions or contingencies have been satisfied. As part of the analysis of whether all of our significant obligations have been satisfied or situations where acceptance provisions or other contingencies or arrangements exist, ~~marketing~~we consider the following elements, among others: sales terms and ~~advertising~~arrangements, historical experience and ~~poor~~current ~~weather~~incentive ~~conditions~~programs. inOur ~~the~~distributor arrangements ~~first~~do ~~quarter~~not ofhave ~~2007~~price protection or product-return rights.

InThe ~~February~~following ~~2004,~~table wesets ~~received~~forth ~~approval to sell Messenger in~~product ~~Spain. We initiated marketing activities in March 2004, but the approval was not received in time to meet initial~~ sales ~~activity.~~for ~~In order to ensure that an adequate supply of Messenger STS was quickly disbursed in~~ the ~~new~~quarters ~~distribution~~ended channel and to limit the amount of working capital required by our new distributors at this early stage of introduction, we granted flexible and/or extended payment terms to distributors in this new market. Because of this combination of factors, revenues from product deliveries to certain distributors were deferred and are recognized as payment is received. We recognized net revenue of $11,108 in the first quarter of 2007. Gross revenues of approximately $55,000 and cost of goods sold of approximately $28,000 were deferred at March 31, ~~2007~~2009 and ~~will be recognized when payment is received~~2008.

Due to the growing seasons in the United States, we expect usage of our Home and Garden Products to be highly seasonal. Based on the recommended application timing, we expect the second quarter to be the most significant period of use. Our Home and Garden Product sales to distributors are also expected to be seasonal. However, actual timing of orders received from distributors will depend on many factors, including the amounts of our products in distributors’ inventories.

				Three Months Ended March 31,
					2009				2008
Product sales				$	49,923			$	80,890

~~Sales~~We ~~Allowances~~believe the decrease in first quarter 2009 sales volume compared to first quarter 2008 sales volume was due to our lower spending on personnel, marketing and advertising. We operate our Home and Garden Business with one part-time employee and do not intend to significantly increase our investment toward the development of this business. We expect this will continue to negatively impact our product sales revenue in 2009. Moreover, our Home and Garden Business and revenues may be negatively impacted by our announced intent to dissolve our company, which may cause our customers to transition to other products.

~~Product~~Due ~~sales~~to ~~revenue~~the isgrowing ~~reported~~seasons ~~net~~in the United States, we expect usage of ~~applicable~~our products to be highly seasonal. Based on the recommended application timing, we expect the second quarter to be the most significant period of use. Our Home and Garden Product sales ~~allowances~~to distributors are also expected to be seasonal. However, asactual ~~follows:~~timing of orders received from distributors will depend on many factors, including the amounts of our products in distributors’ inventories.

	Three Months Ended March 31,
	2007		2006
Gross product sales	$	188,108	$	1,953,536
Sales allowances		—		(347,178	)
Reduction of previously recorded sales allowance liabilities		664		42,029
Product sales, net of sales allowances	$	188,772	$	1,648,387

Sales allowances represent allowances granted to independent distributors for sales and marketing support and are estimated based on the terms of the distribution arrangements. Sales allowances are estimated and accrued when the related product sales revenue is recognized or when services are provided and are paid in accordance with the terms of the then-current distributor program arrangements. Distributor program arrangements expire annually, generally on December 31.

Sales allowances during the quarter ended March 31, 2007 were zero compared to $347,178 (18% of gross product sales) in the comparable quarter of 2006. The decrease was due to the sale of Harpin Protein Technology to PHC on February 28, 2007. As a result of the sale of the Harpin Protein Technology to PHC, we expect sales allowances to be less than 1% of sales in 2007. Net revenue for the quarters ended March 31, 2007 and 2006 include the reduction by $664 and $42,029, respectively, of sales allowance recognized in prior quarters that were not paid because actual amounts earned by distributors were less than amounts previously estimated.

Cost of Goods Sold

Cost of goods sold includes the cost of products sold toand ~~distributors,~~used ~~idle~~for ~~capacity~~promotional ~~charges~~purposes, ~~royalty expense,~~ shipping and handling and other costs necessary to ~~deliver~~store ~~product to distributors,~~ and ~~the~~deliver ~~cost of~~ products ~~used~~to ~~for promotional purposes~~customers. Cost of goods sold was $~~123~~19,~~242~~292 in the first quarter of ~~2007~~2009, compared to $129,~~015,480~~022 in the first quarter of ~~2006~~2008. The decrease ~~in cost of goods sold~~ was primarily due to lower sales volumes in our Home and Garden Business and lower sales volumes, ~~idle~~and ~~capacity~~lower ~~charges, royalty expense,~~ shipping and handling costs. For the first quarter of 2009, we did not purchase any harpin protein-based product pursuant to our license and ~~products~~supply ~~used~~agreement ~~for~~with ~~promotional~~PHC. ~~purposes~~Depending ason ainventory ~~result~~levels of and whether the ~~sale~~Plan of Dissolution ~~Harpin~~is ~~Protein~~approved ~~Technology~~or toimplemented, we may purchase product from PHC in 2009.

As a result of the sale of the Harpin Technology to PHC, cost of goods sold is expected to be significantly less in 2007 compared to 2006. Royalty expenses and idle capacity charges ceased as of February 28, 2007 and we currently expect that the cost of products used for promotional purposes will be less than $5,000 in 2007.

Research and Development Expenses

Research and development expenses consist primarily of personnel, field trial, laboratory, regulatory, patent and facility expenses. Research and development expenses decreased $180,096 from $316,538 in the first quarter of 2006 to $136,442 in the same quarter of this year. This decrease was primarily a result of the sale of Harpin Protein

Technology to PHC and lower personnel, facility, depreciation and field trial costs. Stock compensation expense included in research and development was zero in 2007 and $6,708 in the first quarter of 2006. As a result of the sale of our Harpin Protein Technology to PHC, we do not expect to incur any additional research and development expenses for the remainder of 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of ~~payroll~~personnel and related expenses for sales and marketing, executive and administrative personnel;, advertising, marketing and professional fees;, and other corporate expenses. Selling, general and administrative expenses ~~decreased~~increased $133,~~159~~442,~~004~~ or 14%, from $1237,~~558,786~~565 in the first ~~quarter~~ quarter of ~~2006~~2008 to $~~399~~271,~~782~~007 in the same quarter of ~~2007~~2009. The ~~decrease~~increase resulted primarily from ~~reductions~~increased inprofessional ~~personnel,~~fees ~~advertising~~ and marketing expenses, facility costs and the sale of Harpin Protein Technology to PHC. Stock compensation expense included in selling, general and administrative expenses was $5,503 in the first quarter of 2007 compared to $118,421 in 2006.

Our business strategy moving forward is to use any revenues generated by our Home and Garden Business to support our operations while we explore whether there may be opportunities to realize potential value from our remaining business assets, primarily our tax loss carryforwards. As described below, we plan to engage legal and accounting professionals during 2007 to validate the underlying assumptions related to our tax loss carryforwards and analyze and provide advice on the options that may be available to preserve and maximize the potential use of our deferred tax assets, as well as on potential limitations and risks of such utilization strategy. We expect this to be an expensive and time consuming process, and we may not generate revenue from our Home and Garden Business or otherwise attract capital to support the process for its duration.-12-

~~Gain~~expenses onrelated ~~sale~~to ofour ~~investment~~proposed dissolution. The increase was partially offset by reductions in personnel, marketing and advertising expenses.

In the first quarter of 2006, we sold a minority stock investment for $100,000 that resulted in a gain of $99,884.

Interest Income

Interest income consists of earnings on our cash and cash equivalents ~~and note receivable~~. Interest income ~~increased~~decreased $241,~~847~~766, or 75%, from $6155,~~114~~421 in the first quarter of ~~2006~~2008 to $6313,~~961~~655 in the same quarter of ~~2007~~ 2009. The ~~increase~~decrease was primarily due to ~~higher~~lower interest rates ~~in 2007~~ and ana ~~increase~~lower in cash ~~balances~~balance ~~available for investment~~ in the first quarter ~~ended March~~of ~~31,~~2009 ~~2007~~ compared to the same quarter in ~~2006, resulting from proceeds from the sale of our Harpin Protein Technology~~ 2008.

Income Taxes

We have generated a net loss from operations for each period since we began doing business. As of December 31, ~~2006~~2008, we had accumulated approximately $115,800,000 of net operating loss carryforwards for U.S. Federal income tax purposes, which expire between 2009 and 2026, and net operating loss carryforwards in 19 U.S. States that range from approximately $12,500,000 to approximately $2,000 per state and expire between 2007 and 2026. Our total U.S. general business credit carryforwards were approximately $1,400,000 and expire between 2013 and 2026. We have also accumulated approximately $1,400,000 of net operating loss carryforwards in Mexico that expire between 2011 and 2016 and approximately $7,000,000 million in France, of which approximately $4,200,000 expires in 2007 and 2008 and approximately $2,800,000 does not expire. We have provided a valuation allowance against our net deferred tax assets because of the significant uncertainty surrounding our ability to realize value on such assets.:

~~Our~~• ~~business~~United ~~strategy~~States isFederal tonet ~~use~~operating any revenue generated by our Home and Garden Business to support our continued operations while we explore whether there may be opportunities to realize potential value from our remaining business assets, primarily our tax loss carryforwards. ~~The strategy is extremely speculative and subject to a large number~~ of ~~risks~~approximately ~~and uncertainties including those set forth under the heading “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2007~~$118.8 Wemillion ~~have~~that ~~conducted~~expire ~~only~~between ~~limited~~2009 ~~preliminary analysis of our ability to utilize of our tax loss carryforwards~~ and have drawn no final conclusions about the viability of this strategy. We have not developed any specific plan as to whether, how or within what time frame we might pursue or implement this strategy. In order to confirm whether there are opportunities to realize potential value from our tax loss carryforwards, we plan to engage legal and accounting professionals during 2007 to validate the underlying assumptions related to our tax loss carryforwards2027;

18• aggregate net foreign operating loss carryforwards of $4.3 million, of which $1.4 million expires between 2011 and 2018 and $2.9 million which do not expire;

~~and~~• ~~analyze~~aggregate ~~and~~net ~~provide~~operating ~~advice on the options that may be available to preserve and maximize the potential use of our tax~~ loss carryforwards, asin ~~well~~19 asstates onthat ~~potential~~range ~~limitations~~between ~~and~~$2,000 ~~risks~~to ~~of such utilization strategy~~$12.6 ~~This~~million ~~will~~per bestate ~~an expensive~~ and ~~time~~expire ~~consuming~~between ~~process,~~2009 and we2027; ~~may not generate revenue from our Home~~ and ~~Garden Business or otherwise attract capital to support the process for its duration.~~

In• ~~the~~aggregate ~~event~~United weStates ~~were~~general tobusiness ~~undergo~~credit ~~an ownership change as defined in Section 382 of the Code, our net tax loss~~ carryforwards ~~generated prior to the ownership change would be subject to annual limitations, which could reduce, eliminate, or defer the utilization~~ of these losses. Based upon a preliminary review of past changes in our ownership, we believe that we may have experienced one ownership change (as defined under Section 382) in October 2000 that would result in a limitation on our future ability to use tax loss carryforwards generated prior to that date. We do not believe that the sale of assets to PHC resulted in another ownership change that would further limit our future ability to use tax loss carryforwards generated after October 2000. However, we cannot assure you that the IRS or some other taxing authority may not disagree with our position and contend that we have already experienced other such ownership changes. In such case, our ability to use our tax loss carryforwards to offset future taxable income would be severely limited. If the sale of assets to PHC were deemed to result in an ownership change as defined in Section 382 of the Code, our tax loss carryforwards available to offset future taxable income could be limited to approximately $~~323,000 or less per year and the remainder of the tax loss carryforwards would expire as a result of the limitation~~1.4 Ifmillion anthat ownership change is not deemed to occur as a result of the sale to PHC, there is still the potential for an ownership change to occur under Section 382 as a result of future changes in stock ownership. Net operating loss carryforwards may expire ifbetween we2013 doand ~~not generate sufficient income to utilize the losses before their normal expiration~~2026.

We have provided a valuation allowance against our net deferred tax assets because of the significant uncertainty surrounding our ability to realize value on such assets.

From and after the sale of the Harpin Protein Technology to PHC until the date our board of directors approved the proposed Plan of Dissolution, our business strategy had been to use any revenue generated by our Home and Garden Business to support our continued operations while we explore the NOL Strategy. The NOL Strategy is extremely speculative and subject to a large number of risks and uncertainties including those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008. We have conducted limited analysis of our ability to utilize our net operating loss carryforwards and have drawn no final conclusions about the viability of this strategy. In order to confirm whether there are opportunities to realize potential value from our net operating loss carryforwards, we engaged legal advisors to validate the underlying assumptions related to our net operating loss carryforwards and analyze and provide advice on the options that may be available to preserve and maximize the potential use of our net operating loss carryforwards, as well as on potential limitations and risks of such utilization strategy.

If we were to undergo an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, or the “Code,” our net operating loss carryforwards and general business credit carryforwards generated prior to the ownership change would be subject to annual limitations, which could reduce, eliminate, or defer the utilization of these losses. Based upon an analysis completed during the third quarter of 2007 of past ownership changes, we believe we have experienced ownership changes on March 20, 1996 and October 2, 2000. Absent any other ownership changes in the future, we believe there are no significant limitations on our future ability to use net operating loss carryforwards generated prior to those dates. We do not believe that the sale of assets to PHC in February 2007 resulted in another ownership change that would further limit our future ability to use net operating loss carryforwards generated after October 2000 because it was a sale of assets. However, the IRS or some other taxing authority may disagree with our position and contend that we have already experienced other such ownership changes or that the sale of assets resulted in an ownership change. In such case, our ability to use our net operating loss carryforwards to offset future taxable income would be severely limited. If the sale of assets to Plant Health Care results in an ownership change as defined in Section 382 of the Code, our net operating loss carryforwards available to offset future taxable income could be severely limited and the net operating loss carryforwards may expire as a result of the limitation.

-13-

Even if an ownership change has not occurred in the past, there is still the potential for an ownership change to occur under Section 382 of the Code as a result of future changes in stock ownership. For example, if shareholders do not approve the Plan of Dissolution or if it is not otherwise implemented, the holders of our common stock, including one or more of the holders of 5% or more of our common stock, could sell their shares in sufficient quantities to trigger an ownership change. In addition, if shareholders do not approve the Plan of Dissolution or it is not otherwise implemented and we continue to explore whether there may be opportunities to utilize our net operating loss carryforwards, we will be limited in our ability to issue additional stock in the future to provide capital for our business due to the importance of avoiding a future ownership change. We would only be able to issue additional stock in a manner that would not cause an ownership change pursuant to Section 382 of the Code. Accordingly, our ability to access the equity markets or issue stock in connection with an acquisition could be restricted. Net operating loss carryforwards may expire if we do not generate sufficient income to utilize the losses before their normal expiration.

Generally, an ownership change occurs if one or more shareholders, each of whom owns 5% or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50% over the lowest percentage of stock owned by such shareholders at any time during the preceding three-year period. For example, if a single shareholder owning 10% of our stock acquired an additional 50.1% of our stock in a three-year period, a change of ownership would occur. Similarly, if ten persons, none of whom owned our stock, each acquired slightly over 5% of our stock within a three-year period (so that such persons own, in the aggregate, more than 50%) an ownership change would occur. Ownership of stock is determined by certain constructive ownership rules which can attribute ownership of stock owned by entities (such as estates, trusts, corporations, and partnerships) to the ultimate indirect owner.

For purposes of this rule, all holders who each own less than 5% of a corporation’s stock are generally treated together as one (or, in certain cases, more than one) 5% shareholder. Transactions in the public markets among shareholders owning less than 5% of the equity securities generally are not included in the calculation. Special rules can result in the treatment of options (including warrants) or other similar interests as having been exercised if such treatment would result in an ownership change.

AsThe weuse ~~explore~~of ~~whether~~our ~~there~~net ~~may~~operating beloss carryforwards ~~opportunities~~is subject to ~~utilize~~uncertainty ~~our tax~~because ~~loss~~it ~~carryforwards,~~is ~~due~~dependent toupon the ~~importance~~amount of ~~avoiding~~taxable aincome ~~future~~we ~~ownership~~generate. ~~change~~If ~~under~~ the ~~tax~~proposed ~~laws~~Plan of Dissolution is not approved or is not otherwise implemented, we have no assurance that we will behave ~~limited~~sufficient taxable income in future years to use the net operating loss carryforwards before they expire. We believe that our ability to ~~issue additional~~achieve ~~stock~~profitability may depend in ~~the~~substantial ~~future~~part on our ability to ~~provide~~identify and ~~capital~~acquire ~~for~~suitable acquisitions on favorable terms, so that we can increase our ~~business~~revenues and generate new income. We ~~would~~may ~~only~~seek beadditional ~~able~~capital from time to ~~issue~~time, ~~such~~including ~~additional~~through the sale of stock or other securities, which may result in adilution ~~manner~~to ~~that~~existing ~~would~~shareholders ~~not~~and the granting of ~~cause~~superior anrights ~~ownership~~to ~~change~~the new shareholders. In addition, ~~for~~as ~~purposes~~noted above, the provisions of ~~these~~the ~~rules,~~Code and ~~thus~~certain applicable IRS regulations will limit the number of shares of stock we can sell from time to time without causing a limitation on our ability to ~~access~~use ~~the~~our ~~equity~~net ~~markets~~operating ~~could~~loss becarryforwards ~~restricted~~to reduce our future tax obligations.

Finally, in addition to Section 382, certain other statutory provisions and common law doctrine could limit our opportunities to realize potential value from, or otherwise adversely affect our ability to preserve and utilize, our tax loss carryforwards.

The use of our tax loss carryforwards is subject to uncertainty because it is dependent upon the amount of taxable income we generate. We have no assurance that we will have sufficient taxable income in future years to use the tax loss carryforwards before they expire. We believe that our ability to achieve profitability may depend in substantial part on our ability to identify and acquire suitable acquisitions on favorable terms, so that we can increase our revenues and generate new income. We may seek additional capital from time to time, including through the sale of stock or other securities, which may result in dilution to existing shareholders. In addition, as noted above, the provisions of the Code and certain applicable IRS regulations will limit the number of shares of stock we can sell from time to time without causing a limitation on our ability to use our tax loss carryforwards to reduce our future tax obligations.

Liquidity and Capital Resources

Our operating expenditures have been significant since our inception. We currently anticipate that our operating expenses in 2007, although substantially less than our operating expenses in 2006, will significantly exceed net Home and Garden Product sales and that net losses and working capital requirements will consume a material amount of our cash resources in 2007. Our future capital requirements will depend on the success of our Home and Garden Business and our ability to successfully implement our strategy of realizing potential value from our remaining business assets, primarily our tax loss carryforwards. We have no current intention to make substantial investments to grow our Home and Garden Business. We believe that the balance of our cash and cash equivalents at March 31, 2007 will be sufficient to meet our anticipated cash needs for net losses, working capital and capital expenditures for more than the next 12 months, although there can be no assurance in this regard.Liquidity

AtOur ~~March~~operating ~~31,~~expenditures ~~2007,~~have ~~our cash and cash~~been ~~equivalents~~significant ~~totaled~~since ~~$5,399,370,~~our ~~an increase of $1,214,145 from the balance of $4,185,225 at December 31, 2006~~inception. InWe ~~the~~currently ~~first~~anticipate ~~quarter~~that ofour ~~2007,~~operating ~~we received~~expenses ~~$1,396,824~~ in ~~net proceeds (after transaction costs incurred after January 1~~2009, ~~2007)~~if ~~from the sale of the Harpin Protein Technology to PHC and~~ we ~~expect~~continue tocurrent ~~collect an additional $700~~operations,~~751~~ ~~upon~~will ~~payment~~be ofgreater ~~the~~than our ~~promissory~~operating ~~note~~expenses in ~~December~~2008 ~~2007.~~and ~~Prior~~will tosignificantly ~~October~~exceed ~~2000, we financed our operations primarily through the private sale of our equity securities, resulting in~~ net ~~proceeds~~Home ofand ~~approximately~~Garden ~~$36,500,000~~Product ~~through September 30, 2000~~sales. ~~In October~~The ~~2000,~~reason wefor ~~received~~the ~~approximately~~estimated ~~$91,500,000~~greater inoperating ~~net~~expenses is ~~proceeds from~~ the ~~initial~~expenses ~~public~~incurred ~~offering of 2,223,333 shares of our common stock. We plan~~ year-to-date ~~finance our operations in 2007 using existing cash~~ and ~~cash~~to ~~equivalents. Our business strategy of exploring whether there may~~ be ~~opportunities~~incurred ~~to utilize~~in ~~our remaining business assets, including our tax loss carryforwards, will, due to~~ the ~~importance of avoiding a~~ future ~~ownership~~in ~~change~~connection ~~under the~~with ~~tax laws, limit us in~~ our ~~ability~~attempt to ~~issue~~secure ~~additional~~shareholder ~~stock~~approval toof ~~provide~~the ~~capital~~proposed Plan ~~for~~of ~~our business~~Dissolution.

~~The~~Our ~~sale~~future capital requirements are expected to be insignificant if shareholders approve, and we implement, the proposed Plan of ~~our~~Dissolution. ~~Harpin~~If ~~Protein~~the proposed Plan of Dissolution is not ~~Technology~~approved ~~had~~or ~~the~~implemented, ~~following~~our ~~effects~~future capital requirements will depend on the success of our ~~cash~~Home ~~used~~and inGarden ~~operations~~Business. We anticipate that net losses and working ~~cash~~capital ~~resources~~requirements inwill ~~the~~consume ~~first~~a ~~quarter~~significant amount of ~~2007:~~our cash resources in 2009.

• Cash and cash equivalents increased by $1,500,000 on February 28, 2007. This increase was offset by the payment of transaction costs totaling $103,176 incurred and recorded in the first three months of 2007 (approximately $320,000 was incurred and recorded in selling, general and administrative expense in 2006). Cash and cash equivalents also increased and other long-~~term assets decreased by $287,879 for the release of restricted cash and return of deposit by the facility lease landlord.~~14-

•As ~~Current~~described ~~inventory~~above, ~~decreased~~our byfuture ~~$1,895,978~~capital requirements ~~for~~will ~~inventory~~depend ~~sold~~on tothe ~~PHC.~~success Weof ~~also~~our ~~sold~~Home ~~$261,820~~and Garden Business and whether or not the Plan of ~~finished~~Dissolution ~~goods~~is approved by our shareholders and implemented. We have no current intention to ~~PHC~~make ~~under~~substantial ~~our~~investments ~~Independent~~to ~~Distribution~~grow ~~Agreement~~our ~~with~~Home ~~PHC~~and Garden Business. ~~The~~We ~~remaining~~believe ~~inventory~~that ~~consists~~the ~~primarily~~balance of ~~raw~~our ~~materials~~ cash and ~~finished~~cash ~~goods~~equivalents ~~used~~at ~~for~~March 31, 2009 will be sufficient to meet our ~~Home~~anticipated cash needs for net losses, working capital and ~~Garden~~capital ~~Business~~expenditures for more than the next 12 months, although there can be no assurance in this regard.

•Capital ~~Other current assets decreased by $63,750 for equipment classified as held for sale and sold to PHC.~~Resources

•At ~~Property~~March 31, 2009, our cash and ~~equipment~~cash equivalents ~~decreased~~totaled by$4.8 million, a decrease of $~~647~~0.3 million from the balance of $5.1 million at December 31,~~962~~ ~~for~~2008. ~~assets~~We ~~sold~~plan to ~~PHC~~finance our operations in 2009 using cash from operations and existing cash and cash equivalents. As discussed in detail above and in the section entitled “Results of Operations — Income Taxes,“ due to the importance of avoiding a future ownership change under the tax laws, we are limited in our ability to issue additional stock to provide capital for our business. As of March 31, 2009, there were no material commitments for capital expenditures.

•Net ~~Current~~Cash ~~accrued~~Used ~~liabilities~~in ~~decreased by $59,625 due to PHC’s assumption of these liabilities.~~Operations

•Net ~~Other~~cash ~~long-term~~used ~~liabilities~~in ~~decreased~~operations toincreased by ~~zero~~$41,814, ator ~~February 28~~19%, ~~2007~~to ~~due~~$263,773 toin ~~PHC’s~~the ~~assumption~~first quarter of ~~our~~2009 ~~office~~from ~~and~~$221,959 ~~manufacturing~~in ~~facility~~the ~~lease~~same ~~liabilities~~period ~~recorded~~of ~~for~~2008. ~~rent~~Net ~~expense~~cash used in ~~excess~~operations during the first quarter of ~~rent~~2009 ~~payments~~resulted ~~totaling~~primarily from a net loss of $73226,~~131~~721 and net fluctuations in various asset ~~retirement~~and ~~obligation~~liability balances totaling $37,052. Net cash used in operations during the first quarter of 2008 resulted primarily from a net loss of $~~287~~130,~~857~~276 offset by net fluctuations in various asset and liability ~~our~~balances totaling $~~100~~93,~~000~~358. ~~liability~~We expect that net cash used in operations will continue to ~~CRF~~be significant.

•Exchange ~~Product~~Rate ~~sales, cost of goods sold, research and development and selling, general and administrative expense are expected to decrease significantly in 2007 compared to 2006.~~Risk

~~Additionally~~Historically, ~~future~~we ~~minimum~~conducted ~~lease~~our ~~payments~~operations ~~under~~in ~~the~~three ~~non-cancelable~~primary ~~office~~functional ~~and~~currencies: ~~manufacturing~~the ~~facility~~U.S. ~~lease~~dollar, ~~totaling~~the ~~$184~~euro and,~~970~~ inuntil ~~2007~~December 31, ~~$229~~2004,~~424~~ inthe ~~2008~~Mexican peso. We closed and ~~$238,366~~dissolved our European operation in ~~2009~~December ~~were~~2008. ~~assumed by~~Historically, ~~PHC~~neither asfluctuations ofin ~~February~~foreign ~~28,~~exchange ~~2007.~~rates Wenor ~~currently~~changes in foreign economic conditions have had noa ~~contractual~~significant ~~obligations~~impact ~~associated~~on ~~with~~our ~~capital~~financial ~~and~~condition ~~operating~~or ~~lease~~results ~~obligations~~of operations.

Net cash used in operations decreased by $1,584,773 from $1,749,014 in the first three months of 2006 to $164,241 in the same period of 2007. Net cash used in operations in the first three months of 2007 resulted primarily from a net loss of $292,765 offset by net fluctuations in various asset and liability balances totaling $129,253. We expect that net cash used in operations will continue to be significant.

We conduct our operations in two primary functional currencies: the U.S. dollar and the euro. Historically, neither fluctuations in foreign exchange rates nor changes in foreign economic conditions have had a significant impact on our financial condition or results of operations. We currently do not hedge our foreign currency exposures and are, therefore, subject to the risk of exchange rate fluctuations. We may invoice our international customers in U.S. dollars and euros, as the case may be. We are exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into U.S. dollars in consolidation. As of February 28, 2007, the cumulative translation adjustment related to our European subsidiary totaling $103,470 was reclassified from accumulated other comprehensive income and reported as part of the gain on sale of Harpin Protein Technology as this subsidiary was substantially liquidated as a result of the sale to PHC. Foreign exchange rate fluctuations did not have a material impact on our financial statements in the three months ended March 31, 2006.

Employment and Change-in-Control Agreements

We have a severance agreement with Bradley S. Powell, our President and Chief Financial Officer, that requires us to make severance payments equal to six months’ annual base salary if we terminate Mr. Powell’s employment without cause, as defined in the agreement. If we were required to make payments on this agreement, severance payments would total approximately $88,000 as of March 31, 2007.

We also have a change-in-control agreement with Mr. Powell. The agreement provides that, upon a change in control, as defined in the agreement, we or the acquiring company would continue to employ Mr. Powell, for a period of two years following such change in control. During that time, the agreement provides that Mr. Powell’s position, authority, duties and responsibilities would be substantially the same as they were during the 90-day period prior to the change in control, and that his annual base salary would be at least equal to his annual base salary established by our Board of Directors prior to the change in control. If, during this two-year period, Mr. Powell’s employment is terminated by us or the acquiring company, as applicable, other than for cause, as defined in the agreement, or by the executive for good reason, as defined in the agreement, Mr. Powell would be entitled to receive (i) his annual base salary, and pro rata annual bonus, through the date of termination, and any deferred compensation; and (ii) a severance payment equal to twice the sum of his annual base salary and the average of his past three annual bonuses. The sale of our Harpin Protein Technology is deemed a change in control under the agreement. Based on Mr. Powell’s current annual salary and bonus history, the severance payment to Mr. Powell under his change-in-control agreement would be approximately $350,000 as of March 31, 2007. In addition, Mr. Powell’s unvested stock options would accelerate and become fully vested and exercisable.

Critical Accounting Policies, Estimates and Judgments

Our critical accounting policies are more fully described in Note 1 to our condensed consolidated financial statements included in this Quarterly Report and in Note 1 to our audited consolidated financial statements included in our most recent Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 3027, ~~2007~~2009. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, terms of existing contracts, commonly accepted industry practices, information provided by our customers and other assumptions that we believe are reasonable under the circumstances. Our estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the ~~condensed~~ consolidated financial statements in the period in which they are determined to be necessary. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies and estimates include:

Revenue Recognition

Prior to the sale of our Harpin Protein Technology assets on February 28, 2007, we sold the majority of our products to independent, third-party distributors in the agricultural and horticultural markets. We sell the majority of our Home and Garden Products to independent, third-party distributors and directly to consumers over the internet in the Home and Garden Markets. Our arrangements with those distributors provide no price protection or product-return rights. We recognize revenue from product sales, ~~net of sales allowances,~~ when product is delivered to our distributors and all of our significant obligations have been satisfied, unless acceptance provisions or other contingencies or arrangements exist, including whether collection is reasonably assured. If acceptance provisions or contingencies exist, revenue is recognized after such provisions or contingencies have been satisfied. As part of the analysis of whether all of our significant obligations have been satisfied or situations where acceptance provisions or other contingencies or arrangements exist, we consider the following elements~~, among others~~: sales terms and arrangements, including customer payment terms, historical experience and current incentive programs.

21-15-

Sales allowances represent allowances granted to independent distributors for sales and marketing support and are based on the terms of the distribution agreements or other arrangements. Sales allowances are estimated and accrued when the related product sales are recognized or when services are provided and are paid in accordance with the terms of the then-current distributor program agreements or other arrangements.

We also record, at the time revenue is recognized, a liability for warranty claims based on a percentage of sales. The warranty accrual percentage and warranty liability are reviewed periodically and adjusted as necessary, based on historical experience, the results of product quality testing and future expectations. Changes in our estimate of the warranty liability are recorded in cost of goods sold.

Accounts and Note Receivable and Allowance for Doubtful Accounts

Accounts receivable balances are reported net of customer-specific related sales allowances. In determining the adequacy of the allowance for doubtful accounts, we consider a number of factors, including the age of outstanding invoices, customer payment trends, the financial condition of our customers, historical bad debts and current economic trends. Based upon our analysis of outstanding accounts and note receivable at March 31, 2007, no allowance for doubtful accounts was recorded. Changes in the factors above or other factors could result in a significant charge.

Inventory Valuation and Classification

Our inventory is valued at the lower of cost or market on an average cost basis. We regularly review inventory balances to determine whether a write-down is necessary. We consider various factors in making this determination, including recent sales history, ~~including bulk sales,~~ and predicted trends, industry market conditions, general economic conditions, the age of our inventory and recent quality control data. Changes in the factors above or other factors could result in significant inventory cost reductions and write-offs.

AsWe ofalso ~~December~~review ~~31,~~our ~~2006,~~inventory ~~we reviewed~~to ~~assets~~determine ~~for~~inventory ~~impairment~~classification. inInventory ~~connection~~expected ~~with the sale of our Harpin Protein Technology~~ to ~~PHC~~be byutilized ~~comparing~~in the ~~carrying~~next ~~value~~12-month atperiod ~~February~~is ~~28,~~classified ~~2007~~as ~~of assets~~current ~~sold~~and toinventory ~~consideration~~expected ~~received~~to ~~from~~be utilized ~~PHC~~beyond ~~and~~that ~~recorded~~period ~~liabilities~~is ~~assumed~~classified byas ~~PHC~~non-current. ~~Based~~In ondetermining ~~this review,~~ the ~~carrying~~classification ~~value~~ of inventory, ~~sold~~we ~~to PHC~~consider ~~exceeded~~a ~~the~~number ~~consideration~~of ~~received~~factors, ~~from~~including historical ~~PHC~~sales experience and ~~recorded~~trends, ~~liabilities~~existing ~~assumed~~distributor ~~by PHC. Accordingly~~inventory, weexpansion ~~recorded~~into anew ~~$452~~markets,~~347~~ ~~charge~~introduction ~~for~~of ~~impairment~~new ~~to inventory~~products asand estimates of future ~~December~~sales ~~31, 2006~~growth.

We also review our inventory to determine inventory classification. Inventory expected to be utilized in the next twelve-month period is classified as current and inventory expected to be utilized beyond that period is classified as non-current. In determining the classification of inventory, we consider a number of factors, including historical sales experience and trends, existing distributor inventory, expansion into new markets, introduction of new products and estimates of future sales growth.

Valuation of Property and Equipment

We periodically review the carrying values of our property and equipment to determine whether such assets have been impaired. An impairment loss must be recorded pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, when the undiscounted net cash flows expected to be realized from the use of such assets are less than their carrying value. The determination of undiscounted net cash flows expected requires us to make many estimates, projections and assumptions, including the lives of the assets, future sales and expense levels, additional capital investments or expenditures necessary to maintain the assets, industry market trends and general and industry economic conditions. Prior to the sale of our Harpin Protein Technology assets on February 28, 2007, our property and equipment consisted primarily of assets used to manufacture and sell our products and assets used in our research and administration. For the purpose of assessing asset impairment, we grouped all of these assets together in one asset group because our administration and research support our manufacturing and sales activities and do not have a separate identifiable cash flow. Equipment and leasehold improvements are stated at estimated fair value as a result of asset impairment charges recorded at June 30, 2006.

Stock-Based Compensation

We account for stock-based compensation in accordance with the fair value recognition provisions of ~~SFAS~~Financial ~~123R~~Accounting Standards Board, or “FASB,” Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. We use the Black-Scholes-Merton option-pricing model which requires the input of of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of our common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related amount recognized on the consolidated statements of operations.

22Recent Accounting Pronouncements

~~expected~~In ~~term~~December ~~and~~2007, the ~~number~~FASB issued Statement of ~~options~~Financial ~~that~~Accounting ~~will~~Standards ~~ultimately~~141(R), ~~not complete~~Business ~~their~~Combinations, ~~vesting~~or ~~requirements~~“SFAS No. 141(~~“forfeitures”~~R).” ~~Changes~~SFAS inNo. 141(R) improves the relevance, ~~subjective~~representational ~~assumptions~~faithfulness, ~~can~~and ~~materially~~comparability ~~affect~~of the ~~estimate~~information ofthat ~~fair~~a ~~value of~~reporting ~~stock-based~~entity ~~compensation~~provides in is financial reports about a business combination and ~~consequently,~~its ~~the~~effects. ~~related~~SFAS ~~amount~~No. ~~recognized~~141(R) inis ~~the~~effective ~~condensed~~for ~~consolidated~~us ~~statements~~beginning with fiscal year 2009. The impact of ~~operations~~adopting SFAS No. 141(R) was not significant to the consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Standards 160, Noncontrolling Interests in Consolidated Financial Statements, or “SFAS No. 160.” SFAS No. 160 improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. SFAS No. 160 is effective for us beginning with fiscal year 2009. The impact of adopting SFAS No. 160 was not significant to the consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not currently hold any derivative instruments, and we do not engage in hedging activities. Also, we do not have any outstanding variable- interest rate debt and currently do not enter into any material transactions denominated in foreign currency. Because of the relatively short-term average maturity of our investment funds, such investments are sensitive to interest rate movements. Our direct exposure to interest rate and foreign exchange rate fluctuation is currently not material to our results of operations. We believe that the market risk arising from the financial instruments we hold is not material.

~~Item~~Because 4of the relatively short-term average maturity of our investment funds, such investments are sensitive to interest rate movements. ~~Controls~~ Therefore, our future interest income may be adversely impacted by changes in interest rates. Further, cash deposits with banks may exceed the amount of insurance provided on such deposits. However, these deposits may be redeemed upon demand. Our credit risk is managed by investing our excess cash in high-quality money market instruments and securities of the U.S. government. However, our direct exposure to interest rate fluctuations is currently not material to our results of ~~Procedures~~operations.

~~Our~~Historically, ~~President~~we ~~and~~have ~~Chief~~conducted ~~Financial~~our ~~Officer~~operations ~~has~~in ~~carried~~three ~~out~~primary anfunctional ~~evaluation~~currencies: of the ~~effectiveness~~U.S. ofdollar, ~~our~~the ~~disclosure~~euro ~~controls~~ and, ~~procedures~~until ~~(as~~December ~~defined~~31, in2004, ~~Rule 13a-15(e) under~~ the ~~Securities Exchange~~Mexican ~~Act of 1934) as of the end of the fiscal quarter covered by this report~~peso. ~~Based~~We onclosed ~~that evaluation, our President~~ and ~~Chief Financial Officer~~dissolved ~~concluded that~~ our ~~disclosure~~European ~~controls~~operations ~~and~~in ~~procedures~~December ~~are~~2008. ~~effective~~Historically, asneither offluctuations ~~the~~in ~~end~~foreign ofexchange ~~such~~rates ~~quarter.~~nor ~~There have been no~~ changes in ~~our~~foreign ~~internal~~economic ~~control~~conditions have ~~over~~had ~~financial~~a ~~reporting~~significant ~~during~~impact ~~the~~on ~~quarter~~our ~~covered~~financial bycondition ~~this report that have materially affected,~~ or ~~are~~results ~~reasonably~~of ~~likely to materially affect, our internal control over financial reporting~~operations.

~~PART II—OTHER INFORMATION~~-16-

Item 4T. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness and design of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

There were no changes to our internal control over financial reporting that occurred during the quarter ended March 31, 2009, which were identified in connection with our management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1A. Risk Factors

~~Except~~Our asresults of operations and financial condition are subject to numerous risks and uncertainties described ~~below,~~in ~~there~~Item ~~have not~~1A ~~been~~of ~~any~~our ~~material~~Annual ~~changes~~Report ~~during~~on Form 10-K for the ~~quarter~~fiscal year ended December ~~March~~ 31, ~~2007~~2008, tofiled with the Securities and Exchange Commission on March 27, 2009. You should carefully consider those risk factors, ~~set~~together ~~forth~~with all inof ~~Part~~the I,other ~~Item~~information 1Aincluded in ~~our~~this ~~Annual~~Quarterly Report on Form 10-KQ. ~~for~~Additional ~~the~~considerations ~~year~~not ~~ended~~presently ~~December~~known 31to us or that we currently believe are immaterial may also impair our business operations. If any of such risks actually occur, ~~2006~~our ~~filed~~business, ~~with~~financial ~~the~~condition ~~SEC~~or onoperating results ~~March~~could 30be materially and adversely affected, ~~2007~~the value of our common stock could decline and you may lose all or part of your investment.

~~Item~~Except ~~4. Submission~~as ofset ~~Matters~~forth below, there have been no material changes to athe ~~Vote~~risk offactors ~~Security~~set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~Holders~~2008.

ARisks ~~special~~Related ~~meeting of shareholders of Eden Bioscience Corporation was held on February 26, 2007. At the special meeting, our shareholders were asked (1)~~ to ~~consider and vote upon a proposal to approve~~ the ~~sale~~Plan of our Harpin Protein Technology pursuant to an asset purchase agreement, and (2) to consider and vote upon a proposal to adjourn the special meeting to another time or place, if necessary in the judgment of the proxy holders, for the purpose of soliciting additional proxies to vote in favor of the first proposal. The sale of our Harpin Protein Technology to PHC was approved by our shareholders as follows:Dissolution

				Votes For				Votes Against				Votes Abstain
1. To consider and vote upon a proposal to approve the sale of our Harpin Protein Technology, pursuant to the asset purchase agreement dated as of December 1, 2006, between us and Plant Health Care, Inc. and Plant Health Care plc					5,475,691				210,143				14,511
2. To consider and vote upon a proposal to adjourn the special meeting to another time or place, if necessary in the judgment of the proxy holders, for the purpose of soliciting additional proxies to vote in favor of the first proposal					5,392,068				271,644				36,633

If the amount of our liabilities and expenses is higher than we currently anticipate, the amount we distribute to our shareholders pursuant to the Plan of Dissolution may be less than the amount we have estimated, or may be depleted entirely.

23The amount of cash ultimately distributed to shareholders pursuant to the Plan of Dissolution depends on the amount of our liabilities and expenses during the liquidation process, and the amount we generate from the sale of our remaining non-cash assets, consisting primarily of our Home and Garden Business. We have attempted to estimate such liabilities and expenses in our definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission, or “SEC,” on April 1, 2009. However, those estimates may be inaccurate. Factors that could impact our estimates include the following:

•

If any of the estimates regarding the Plan of Dissolution and the expense of satisfying our outstanding obligations and liabilities during the liquidation process are inaccurate, the amount we distribute to our shareholders may be reduced or may be entirely depleted. For instance, if claims are asserted against us and are successful, we will have to defend or settle these claims before making distributions to our shareholders;

•

We have made certain estimates regarding the expense of personnel required and other operating expenses (including legal, accounting and other professional fees) necessary to liquidate and dissolve our company. Our actual expenses could vary significantly and are dependent on the timing of the effective date of dissolution, or the “Effective Date,” and the timing and manner of the sale of our non-cash assets. If the timing for either event differs from our plans, we may incur additional expenses above our current estimates, which could reduce or deplete entirely funds available for distribution to our shareholders; and

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•

We have assumed that all material contract rights can be effectively transferred. If we are unable to obtain any required consents with the counterparties to those contracts, our ability to transfer such rights may be impaired.

After the Effective Date, we have an obligation to continue to comply with the applicable reporting requirements of the Exchange Act even though compliance with these reporting requirements may be economically burdensome. In order to curtail expenses, we intend, after the Effective Date, to seek relief from the SEC from the reporting requirements under the Exchange Act. We anticipate that, if such relief were granted, we would continue to file current reports on Form 8-K to disclose material events relating to our dissolution and liquidation along with any other reports that the SEC might require. However, the SEC may not grant any such relief, in which case we will be required to continue to incur the expenses associated with these reporting requirements, which will reduce the cash available for distribution to our shareholders.

If the amount of our contingency reserve is insufficient to satisfy the aggregate amount of our liabilities, each shareholder may be liable to our creditors for the amount of liquidating distributions received by such shareholder under the Plan of Dissolution.

After the Effective Date, our corporate existence will continue, but we will not be able to carry on any business except that appropriate to wind up and liquidate our business and affairs. Following the Effective Date, we will pay all expenses and known liabilities and our board will establish a contingency reserve consisting of cash or other assets that we believe to be adequate for the satisfaction of all current, contingent or conditional liabilities. We also may seek to acquire insurance coverage or take other steps our board determines are advisable to provide reasonable provision for the satisfaction of the estimated amount of such liabilities.

In the event the amount of our contingency reserve and other measures reasonably calculated to provide for satisfaction of liabilities are insufficient, each of our shareholders could be held liable for amounts due to our creditors to the extent of the amount of liquidating distributions received by such shareholder. In such event, a shareholder could be required to return all amounts received as distributions pursuant to the Plan of Dissolution and ultimately could receive nothing under the Plan of Dissolution. Moreover, for U.S. federal income tax purposes, payments made by a shareholder in satisfaction of our liabilities not covered by the assets in our contingency reserve or otherwise satisfied through insurance or other reasonable means generally would produce a capital loss for such shareholder in the year the liabilities are paid. The deductibility of any such capital loss generally would be subject to certain limitations under the Internal Revenue Code of 1986, as amended. We cannot assure you that the contingency reserve or any insurance or other arrangements that we establish will be adequate to satisfy the amount of all of our expenses and liabilities.

Distributions to our shareholders could be delayed.

All or a portion of any distributions to our shareholders could be delayed, depending on many factors, including:

•

if a creditor seeks an injunction against the making of distributions to our shareholders on the ground that the amounts to be distributed are needed to provide for the satisfaction of our liabilities;

•

if we became a party to unanticipated lawsuits or other claims asserted by or against us;

•

if we were unable to sell our remaining non-cash assets or if such sales took longer than expected;

•

if we were unable to settle claims with creditors or if such settlements took longer than expected; or

•

if the Department of Revenue of the State of Washington audits us and thereby delays the issuance of the revenue clearance certificate required to file our articles of dissolution with the Secretary of State of the State of Washington.

Any of the foregoing could delay or substantially diminish, or reduce to zero, the amount available for distribution to our shareholders. In addition, pursuant to the Washington Business Corporation Act, or ”WBCA,“ claims and demands may be asserted against us at any time during the three years following the Effective Date. Accordingly, our board of directors plans to establish a contingency reserve and may seek insurance coverage reasonably calculated to provide for satisfaction of the reasonably estimated amount of any claims, suits or liabilities reasonably

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likely to arise during the three-year period following the Effective Date. As a result of these factors, we may retain for distribution at a later date some or all of the amounts, if any, that we expect to distribute to shareholders.

Shareholders will lose the opportunity to capitalize on potential growth opportunities from the continuation of our business.

Our board of directors believes that the Plan of Dissolution is more likely to result in greater returns to shareholders than if we continued the status quo or pursued other alternatives. However, if the Plan of Dissolution is approved, shareholders will lose the opportunity to capitalize on potential business and possible future growth opportunities that may have arisen if we had continued the NOL Strategy or pursued other alternatives. It is possible that these opportunities could prove to be more valuable than the liquidating distributions our shareholders would receive pursuant to the Plan of Dissolution.

Shareholders may not be able to recognize a loss for U.S. federal income tax purposes until they receive a final distribution from us.

As a result of our dissolution and liquidation, for U.S. federal income tax purposes, our shareholders generally will recognize gain or loss equal to the difference between (i) the sum of the amount of cash and the fair market value (at the time of distribution) of property, if any, distributed to them, and (ii) their tax basis for their shares of our common stock. Liquidating distributions pursuant to the Plan of Dissolution may occur at various times and in more than one tax year. A shareholder generally will recognize any loss only when the shareholder receives our final liquidating distribution to shareholders, and then only if the aggregate value of all liquidating distributions with respect to a share is less than the shareholder’s tax basis for that share. Shareholders are urged to consult their own tax advisors as to the specific tax consequences to them of our dissolution and liquidation pursuant to the Plan of Dissolution.

Recordation of transfers of our common stock on our stock transfer books will be restricted after the Effective Date, and thereafter it generally will not be possible for shareholders to change record ownership of our stock.

We intend to close our stock transfer books at the close of business on the Effective Date. Thereafter, certificates representing our common stock will not be assignable or transferable on the books of our transfer agent except by will, intestate succession or operation of law, and will no longer be traded on The Nasdaq Capital Market. From and after the Effective Date, and subject to applicable law, our common stock will be deemed cancelled and each shareholder will cease to have any rights in respect thereof, except the right to receive distributions in accordance with the Plan of Dissolution. The proportionate interests of all of our shareholders will be fixed in our books on the basis of their respective stock holdings at the close of business on the Effective Date. Further, after the Effective Date, any distributions that we make will be made solely to the shareholders of record at the close of business on the Effective Date (except as may be necessary to reflect subsequent transfers recorded on our books as a result of any assignments by will, intestate succession or operation of law).

Further shareholder approval will not be required in connection with the implementation of the Plan of Dissolution.

Approval of the Plan of Dissolution by our shareholders at the special meeting will constitute full and complete authority for our board of directors and officers, without further shareholder approval, to proceed with the dissolution and liquidation of our company in accordance with the applicable provisions of the WBCA. Accordingly, we will be authorized to dispose of our Home and Garden Business and other non-cash assets without further shareholder approval. As a result, our board of directors may authorize actions in implementing the Plan of Dissolution, including the sale of our Home and Garden Business, with which our shareholders may not agree.

Our board of directors may revoke or delay implementation of the Plan of Dissolution even if our shareholders approve it.

Even if our shareholders approve the Plan of Dissolution at the special meeting, our board of directors has reserved the right, if such action would be in the best interest of our company and our shareholders and without further shareholder approval, to revoke the Plan of Dissolution to the extent and in the manner permitted by the WBCA at any time (i) prior to the Effective Date or (ii) at any time within 120 days after the Effective Date. In addition, our board of directors may delay the implementation of the Plan of Dissolution if it determines such delay is in the best interests of our company and our shareholders.

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If prior to the Effective Date, we were to become an acquisition target or receive a proposal for implementing our NOL Strategy or other alternative transaction, our board may elect to delay or revoke the Plan of Dissolution if it believes that such acquisition or alternative transaction could or would be more favorable to and better serve the interests of our company and our shareholders. A revocation of the Plan of Dissolution would result in our shareholders not receiving any liquidating distributions. Any delay in the implementation of the Plan of Dissolution could result in increased expenses, which would reduce the amount available for distribution to our shareholders.

If our shareholders do not approve the Plan of Dissolution, our resources may diminish completely.

If our shareholders do not approve the Plan of Dissolution or if the Plan of Dissolution is not otherwise implemented pursuant to our board’s ability to abandon the Plan of Dissolution as discussed above, our board of directors will explore what, if any, strategic alternatives are available for the future of our company, which may include the continued exploration of our NOL Strategy. Other possible alternatives include seeking to raise capital from the sale of securities, which could result in substantial dilution to our existing shareholders and the granting of superior rights to the new shareholders, selling all of our stock or assets, changing our business focus, expanding the scope of our business through relationships with third parties, seeking voluntary dissolution at a later time and with potentially diminished assets or seeking bankruptcy protection. There can be no assurance that any of these alternatives would result in greater shareholder value than the proposed Plan of Dissolution. Moreover, any alternative we select may have unanticipated negative consequences, and we will face a number of risks, including:

•

We are likely to continue to incur net losses from the operation of our Home and Garden Business. Moreover, our Home and Garden Business may be negatively impacted by our announced intent to dissolve our company, which may cause our customers to transition to other products. Our net losses may increase in the future as we continue to operate our Home and Garden Business and could consume a material amount of our limited cash resources. We discuss the risks of the continued operation of our Home and Garden Business in further detail under the heading ”Risk Factors— Risks Related to Our Continuing Business Operations“ in our Annual Report on Form 10-K for the year ended December 31, 2008;

•

If we were to continue to explore our NOL Strategy, we cannot assure you that we would ever realize the value of our deferred tax assets. For example, if shareholders do not approve the Plan of Dissolution, there can be no assurance that the holders of our common stock, including one or more of the holders of 5% or more of our common stock, will not sell their shares and thereby potentially impair our ability to utilize our net operating loss carryforwards by causing an ”ownership change“ (as defined in Section 382 of the Code). In such case, pursuit of the NOL Strategy may not be among the alternatives available to us. The NOL Strategy is extremely speculative and subject to a number of risks that we describe in further detail under the heading ”Risk Factors— Risks Related to Our Business Plan to Utilize Net Operating Loss Carryforwards“ in our Annual Report on Form 10-K for the year ended December 31, 2008, and the continued pursuit of the NOL Strategy may consume substantially all of our remaining cash resources;

•

Any financing we may require to continue our operations or to acquire another business as part of the NOL Strategy may not be available on acceptable terms, if at all, particularly in light of the current economic crisis, which we believe will significantly impair our ability to attract capital through the sale of securities or otherwise obtain financing. Any financing we are able to obtain may substantially dilute the interests of our current shareholders;

•

We would continue to incur expenses associated with being a public reporting company, including ongoing SEC reporting obligations. These expenses would accelerate the depletion of our existing cash resources; and

•

Prior to the public announcement of our board’s approval of the Plan of Dissolution, our common stock had generally been trading below $1.00 per share for the prior two months. If our shareholders do not approve the Plan of Dissolution, we believe it is likely that the price of our common stock will fall below The Nasdaq Capital Market’s $1.00 minimum bid price requirement and that our common stock will eventually be delisted from The Nasdaq Capital Market, which could significantly impair our ability to fund operations through the sale of our securities.

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If our shareholders do not approve the Plan of Dissolution, our stock price may be adversely affected.

On December 4, 2008, the day immediately prior to our announcement that our board of directors had approved the Plan of Dissolution, the closing sales price of our common stock on The Nasdaq Capital Market was $0.79. From December 5, 2008 to May 4, 2009, the sales price of our common stock on The Nasdaq Capital Market has ranged from a high of $1.70 and a low of $0.85. If our shareholders do not approve the Plan of Dissolution, our stock price may be adversely affected due to the market’s doubt as to our ability to successfully operate our Home and Garden Business or to successfully pursue other strategic alternatives, and we may not be able to retain our listing on The Nasdaq Capital Market.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 26, 2000, the SEC declared effective our Registration Statement on Form S-1, as amended (Registration No. 333-41028), as filed with the SEC in connection with our initial public offering. Our net proceeds, after accounting for $7.0 million in underwriting discounts and commissions and approximately $1.6 million in other expenses of the offering, were $91.5 million. At March 31, 2009, we had used approximately $18.6 million of the net offering proceeds to expand and enhance our former manufacturing and research and development and administration facilities, and approximately $68.1 million for working capital and general corporate purposes. The remaining portion of the net offering proceeds has been invested in cash equivalent instruments. Our use of the proceeds from the offering does not represent a material change in the use of proceeds described in the prospectus included as part of the Registration Statement.

Item 6. Exhibits

Exhibit 31.1 is being filed as part of this quarterly report on Form 10-Q. Exhibit 32.1 is being furnished with this quarterly report on Form 10-Q.

Exhibit Number				Description
31.1				Rule 13a-14(a)/15d-14(a) Certification (~~President~~Chief Executive Officer and Chief Financial Officer).
32.1				Section 1350 Certification (~~President~~Chief Executive Officer and Chief Financial Officer).

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SIGNATURES

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

EDEN BIOSCIENCE CORPORATION

Date: May 105, ~~2007~~2009

By: /s/ ~~Bradley~~Nathaniel ST. ~~PowellBradley~~BrownNathaniel ST. ~~PowellPresident~~Brown Chief Executive Officer, Chief Financial Officer and Secretary (~~Principal~~Signing ~~Executive,~~on behalf of the registrant and as Principal Financial and Accounting Officer)

24-22-

Washington

91-1649604

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

14522 NE North Woodinville Way, Suite 202B
Woodinville, Washington
(Address of principal executive offices)

98072
(Zip Code)

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