Davis, California
September 19, 2002

The United States Department of Agriculture awarded AgraQuest Inc.a Phase II Small Business Research grant for "Development of a Novel Microbial Biopesticide for the Control of Insect Pests." Over a period of two years the $296,000 grant will assist AgraQuest in the commercialization of their first biological insecticide, Virtuoso(TM). This is a continuation of the $70,000 Phase I research grant given last year.

AgraQuest has successfully completed all the objectives required in the Phase I grant including the isolation and characterization of biologically active components, the development of analytical detection methods, increasing the yield of active ingredients through fermentation improvements, expanded laboratory scale evaluation of pesticidal efficacy, small plot testing to demonstrate efficacy under field conditions and some toxicology.

"We are thrilled that the USDA chose to continue to support us in this venture and we look forward to continuing the commercialization of our first insecticide," said Dr. Pam Marrone, AgraQuest's President and CEO. AgraQuest has already successfully commercialized Serenade(R), a natural fungicide for control of plant diseases. The company is awaiting EPA approval of its second natural fungicide, Sonata(R) for controlling downy and powdery mildews. AgraQuest received Phase I and Phase II SBIR grants from the USDA to support Serenade commercialization.

"Award of this competitive grant helps validate AgraQuest as a world leader in biological pesticide discovery and development. The Phase II funding will allow us to demonstrate the commercial feasibility of this Streptomycete-based insecticide against caterpillar pests in the high value fruit, nut, and vegetable markets," said Desmond R. Jimenez, Ph.D., Staff Scientist.

AgraQuest is a biotechnology company that focuses on discovering, developing, manufacturing and marketing effective, safe and environmentally friendly natural pest management products for the agricultural and institutional and home markets. AgraQuest is developing and commercializing a pipeline of natural pest management products, including Serenade(R) and Sonata(R) Biofungicides, Virtuoso(TM) Bioinsecticide and Muscodor(TM) Biofumigant. Internationally recognized venture capital firms, influential growers and agribusinesses back AgraQuest.

Certain matters contained in the press release concerning AgraQuest, Inc. are forward-looking statements which are subject to known and unknown risks and uncertainties which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Such risks and uncertainties include, among others, the receipt of EPA and other regulatory approval of the Company's products, the success of the Company's products in field trials and the timely development, manufacture and marketing and acceptance of the Company's products in the marketplace.