10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-36030

Marrone Bio Innovations, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-5137161
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1540 Drew Avenue, Davis, California 95618

(Address of principal executive offices and zip code)

(530) 750-2800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Class	Exchange on which registered
Common Stock, $0.00001 par value	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨   (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of June 30, 2015, the last day of the registrant’s most recently completed second quarter, the aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates was $20,508,703 based upon the closing price of the common stock as reported on the NASDAQ Global Market. This calculation excludes the shares of common stock held by each officer, director and holder of 5% or more of the outstanding common stock as of June 30, 2015. This calculation does not reflect a determination that such persons are affiliates for any other purposes.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Shares Outstanding at March 23, 2016
Common Stock, $0.00001 par value	24,583,831

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K where indicated. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2015.

TABLE OF CONTENTS

		Page
PART I.
Item 1.	Business		2
Item 1A.	Risk Factors		29
Item 1B.	Unresolved Staff Comments		50
Item 2.	Properties		50
Item 3.	Legal Proceedings		51
Item 4.	Mine Safety Disclosures		52
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		53
Item 6.	Selected Financial Data		54
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		57
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		86
Item 8.	Financial Statements and Supplementary Data		87
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		128
Item 9A.	Controls and Procedures		128
Item 9B.	Other Information		130
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance		131
Item 11.	Executive Compensation		131
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		131
Item 13.	Certain Relationships and Related Transactions, and Director Independence		131
Item 14.	Principal Accounting Fees and Services		131
PART IV.
Item 15.	Exhibits, Financial Statement Schedules		132
SIGNATURES			133

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Special Note Regarding Forward-Looking Statements and Trade Names

This Annual Report on Form 10-K includes a number of forward-looking statements that involve many risks and uncertainties. Forward-looking statements may be identified by the use of the words “would”, “could”, “will”, “may”, “expect”, “believe”, “should”, “anticipate”, “outlook”, “if”, “future”, “intend”, “plan”, “estimate”, “predict”, “potential”, “targets”, “seek” or “continue” and similar words and phrases, including the negatives of these terms, or other variations of these terms, that denote future events. These forward-looking statements include: our plans to target our existing products or product variations for new markets and for new uses and applications; our plans and expectations with respect to growth in sales of our product lines and with respect to Bio-Tam 2.0; our ability and plans to develop, register and commercialize additional new product candidates and bring new products to market across multiple categories faster and at a lower cost than other developers of pest management products, including research, development and field trial plans; our expectations regarding registering new products and new formulations and expanded use labels for existing products, including submitting new products to the EPA; our belief that challenges facing the use of conventional chemical pesticides will continue to grow; our beliefs regarding the growth of markets for, and unmet demand for, bio-based products; our beliefs regarding market adoption of our products and our ability to compete in our target markets; our intention to maintain existing, and develop new, supply, sales and distribution channels and extend market access; expectations regarding potential future payments under strategic collaboration and development agreements; our plans and expectations relating to our debt agreements; our plans to grow our business while improving efficiency, including by focusing on a limited number of product candidates, taking measures to reduce expenses and expanding our sales and marketing team; our plans with respect to manufacturing; our plans to seek third-party collaborations to develop and commercialize more early stage product candidates; our intention to continue to devote significant resources toward our proprietary technology and research and development; our expectations that sales will be seasonal and the impact of continued drought and other weather-related conditions; our ability to protect our intellectual property in the United States and abroad; our beliefs regarding the effects of the outcome of certain legal matters; our anticipated impact of certain accounting pronouncements; our ability to use carryforwards; our expectations regarding market risk, including interest rate changes, foreign currency fluctuations and commodity price changes; and our future financial and operating results. These statements reflect our current views with respect to future events and our potential financial performance and are subject to risks and uncertainties that could cause our actual results and financial position to differ materially and adversely from what is projected or implied in any forward-looking statements included in this Annual Report on Form 10-K. These factors include, but are not limited to, the risks described under Part I–Item 1A—“Risk Factors,” Part II–Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” elsewhere in this Annual Report on Form 10-K and those discussed in other documents we file with the U.S. Securities and Exchange Commission (“SEC”). We make these forward-looking statements based upon information available on the date of this Annual Report on Form 10-K, and we have no obligation (and expressly disclaim any such obligation) to update or alter any forward-looking statements, whether as a result of new information or otherwise except as otherwise required by securities regulations.

As used herein, “MBI”, the “Company”, “we”, “our” and similar terms refer to Marrone Bio Innovations, Inc., unless the context indicates otherwise.

Except as context otherwise requires, references in this Annual Report on Form 10-K to our product lines, such as Regalia, refer collectively to all formulations of the respective product line, such as Regalia Maxx, Regalia Rx or Regalia SC, and all trade names under which our distributors sell such product lines internationally, such as Sakalia, Sentry R or Milsana. Our logos, Grandevo^®, Regalia^®, Venerate^®, Zequanox^®, Haven^TM, Majestene^TM and other trade names, trademarks or service marks of Marrone Bio Innovations, Inc. appearing herein are the property of Marrone Bio Innovations, Inc. This Annual Report on Form 10-K contains additional trade names, trademarks and service marks of other companies, such as Bio-Tam^® 2.0. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply relationships with, or endorsement or sponsorship of us by, these other companies.

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PART I

ITEM 1. BUSINESS

We make bio-based pest management and plant health products. Bio-based products are comprised of naturally occurring microorganisms, such as bacteria and fungi, and plant extracts. Our current products target the major markets that use conventional chemical pesticides, including certain agricultural and water markets, where our bio-based products are used as alternatives for, or mixed with, conventional chemical products. We also target new markets for which (i) there are no available conventional chemical pesticides or (ii) the use of conventional chemical pesticides may not be desirable or permissible either because of health and environmental concerns (including for organically certified crops) or because the development of pest resistance has reduced the efficacy of conventional chemical pesticides. All of our current products are approved by the United States Environmental Protection Agency (“EPA”) and registered as “biopesticides.” We expect our future products will include plant health products qualified as “biostimulants,” which may require state registrations, but do not require EPA registration. We believe our current portfolio of products and our pipeline address the growing global demand for effective, efficient and environmentally responsible products to control pests, increase crop yields and reduce crop stress.

We currently primarily sell our products to the crop protection market. Our four commercially available crop protection product lines are Regalia, for plant disease control and plant health, Grandevo and Venerate, for insect and mite control, and Majestene, for nematode control. These products can be used in both conventional and organic crop production, and are sold to growers of specialty crops such as grapes, citrus, tomatoes, vegetables, nuts, leafy greens and ornamental plants. We have had some sales of Regalia for large-acre row crops such as corn and soybeans. In March 2016, we also entered into an agreement with Isagro USA to distribute Bio-Tam 2.0 for soil-borne disease control and grapevine trunk disease control, which complements our existing products, particularly Regalia. In addition, we have developed Zequanox, a commercially available product line that we sell to the water treatment market. Zequanox selectively controls invasive mussels that cause significant infrastructure and ecological damage across a broad range of in-pipe and open-water applications, including hydroelectric and thermoelectric power generation, industrial applications and recreation. We believe that our existing crop protection products, or variations thereof, can also be specifically targeted for industrial and institutional, turf and ornamental, home and garden and animal health uses such as controlling grubs, ants, flies and mosquitoes in and around schools, parks, golf courses and other public-use areas.

We have been implementing a prioritization plan that focuses our resources on continuing to improve and promote our commercially available products, advancing product candidates that are expected to have the greatest impact on near-term growth potential and expanding our international presence and commercialization. Our goal has been to reduce expenses, conserve cash and improve operating efficiencies, to extract greater value from our products and product pipeline and to improve our communication to and connection with the global sustainability movement that is core to our cultural values.

In connection with this strategy, we have significantly reduced overall headcount, while building a new sales and marketing organization with increased training and ability to educate and support customers in specialty crop markets, as well as providing our product development staff with greater responsibility for technical sales support, field-trials and demonstrations to promote sales growth. For markets other than high-value specialty crops, such as row crops and seed treatments, we are seeking to expand our network of distribution partners, focusing on regional and national distributors operating in countries that present a significant opportunity for near-term revenue generation. In addition, our research and development efforts are now focused on supporting existing commercial products with a focus on reducing cost of product revenues, further understanding the modes of action, manufacturing support and improving formulations. Accordingly, while we believe that we have developed a robust pipeline of novel product candidates, we are currently limiting our internal efforts to four product candidates: MBI-010, a bioherbicide that is based on the microorganism in Venerate and Majestene, which we plan to submit to the EPA in late 2016 or early 2017; MBI-110, a biofungicide, which we submitted to the EPA in January 2016; Haven (MBI-505), a plant health product that does not require EPA registration; and

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MBI-601, a biopesticide that produces gaseous natural compounds, or “biofumigant,” which we submitted to the EPA in April 2014. Simultaneously, we are seeking collaborations with third parties to develop and commercialize more early stage candidates on which we have elected not to expend significant internal resources.

We believe that, collectively, these measures will best position us to respond to the business challenges reflected in our financial results for recent periods, but our long-term, global vision for our business and our commitment to that vision remains fundamentally unchanged.

Industry Overview

Pest management is an important global industry. Phillips McDougall, an independent advisory firm, estimates the 2014 agrichemical market (crop protection) at $56.6 billion, with Brazil ranking first at $11.6 billion in sales, followed by the United States at $9.2 billion. Most of the markets we currently target or plan to target primarily rely on conventional chemical pesticides, supplemented in certain agricultural markets by the use of genetically modified crops. Conventional chemical pesticides are generally synthetic materials that directly kill or inactivate pests. However, demand for effective and environmentally responsible bio-based products continues to increase. The global market for biopesticides, which control pests by non-toxic mechanisms such as attracting pests to traps or interfering with their ability to digest food, was valued at $3.6 billion in 2014 and is projected to grow to $6.9 billion in 2019, reflecting a 13.9% compound annual growth rate of over the period, according to BCC Research, an independent market research firm. In comparison, global synthetic pesticides sales were projected at a 5.7% compound annual growth rate for the same period. We believe these trends will continue as the benefits of using bio-based pest management and plant health products become more widely known.

Crop Protection

Conventional Production. Growers are constantly challenged to supply the escalating global demand for food, while reducing the negative impact of crop protection practices on consumers, farm workers and the environment. The dominant technologies for crop protection are conventional chemical pesticides and genetically modified crops. Major agrichemical companies have invested billions of dollars to develop genetically modified crops that resist pests or have high tolerance to conventional chemical pesticides. The market for genetically modified crops was estimated at $21.0 billion in 2014, according to Phillips McDougall. In addition, according to the International Service for the Acquisition of Agri-biotech Applications, a third-party not-for-profit organization, in 2014, 182 million hectares (484 million acres) were planted with genetically modified crops in 28 countries, with the United States, Brazil, Argentina, India and Canada planting the most (in that order). Soybean, corn, cotton and canola plantings have made the greatest inroads, accounting for 50%, 30%, 14% and 9%, respectively, of genetically modified seeds planted globally.

Conventional chemical pesticides and genetically modified crops have historically been effective in controlling pests. However, there are increasing challenges facing the use of conventional chemical pesticides such as pest resistance and environmental, consumer and worker safety concerns. Governmental agencies are further pressuring growers, distributors and manufacturers by restricting or banning certain forms of conventional chemical pesticide usage, particularly in the European Union, as some conventional chemical pesticide products are being phased out, as well as at local levels, where many city and county governments have prohibited the sale of certain conventional chemical pesticide products, magnifying the complexity of agrichemical companies’ distribution and regulatory compliance. At the same time, a number of supermarket chains, food processors and key purchasers of specialty fruits, nuts and vegetables are imposing synthetic chemical residue restrictions, limiting options available to growers close to harvest. Consumers, scientists and environmental groups have also voiced concerns about the unintended effects of genetically modified crops, including pest resistance and contamination of non-genetically modified crops. In response to consumer and environmental group concerns and restrictions by importing countries, several large-scale food purchasers have demanded that their contracted growers supply them only non-genetically modified crops.

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These factors are significant market drivers for conventional producers, and their impact is continuing to grow. An increasing number of growers are implementing integrated pest management (“IPM”) programs that, among other things, combine bio-based pest management products and crop cultivating practices and techniques such as crop rotation, with conventional chemical pesticides and genetically modified crops. Bio-based pest management products are becoming a larger component of IPM programs due in part to the challenges associated with conventional chemical pesticides and genetically modified crops.

Organic Production. Certified organic crops such as food, cotton and ornamental plants, are produced without the use of synthetic chemicals, genetic modification or any other bioengineering or adulteration. As such, organic growers are limited in the number of alternatives for pest management. The U.S. Department of Agriculture, or the USDA, approved national production and labeling standards for organic food marketed in the United States in late 2000. These standards have contributed to the growth of organic food consumption in the United States, and other countries have implemented similar programs. According to the Organic Trade Association, a business association, consumer demand for organic food has outpaced the available acreage in the United States, with $1.4 billion of organic food imported in 2013 and $49.0 billion of domestic organic food sales in 2014, or 5% of all food sales, up 11% over 2013. In addition, U.S. sales of non-GMO-labeled foods were estimated at $8.5 billion across 2,100 brands and 22,000 verified items in 2014, according to SPINS, a third party consulting firm. Globally, organic food sales reached $80.0 billion in 2014, with 43.7 million hectares planted, according to a study by the Research Institute of Organic Agriculture performed on behalf of the International Foundation for Organic Agriculture. We believe this growing demand is primarily driven by concerns about food safety and the adverse environmental effects of conventional chemical pesticides and genetically modified crops.

Water Treatment

Global demand for water treatment products was estimated to be $48.0 billion in 2012, according to The Freedonia Group, an independent market research firm, and the global market for specialty biocide chemicals for water treatment was projected to be $5.2 billion in 2013, according to BCC Research. Invasive and native pest species are increasingly a concern in diverse applications such as hydroelectric and thermoelectric power generation, industrial applications, drinking water, aquaculture, irrigation and recreation. However, discharge of water treatment chemicals to target these pests is highly regulated, and in many cases, such as with management of open waters and sensitive environmental habitats, use of conventional chemicals is prohibited.

One particular area of concern has been the damage caused by invasive zebra and quagga mussels, which clog pipes, disrupt ecosystems, encrust infrastructure and blanket beaches with razor-sharp shells. These species initially infested the Great Lakes region and have spread across the United States. Industry reports estimate that these mussels cause approximately $1.0 billion in damage and associated control costs annually in parts of the United States alone. There are limited treatment options available, many of which are toxic to aquatic flora and fauna. To date, most treatment options have been focused either on manual removal of the mussels, which is time consuming and costly, or conventional chemical treatments, which potentially jeopardize the environment and are thus heavily controlled by regulatory agencies.

The water treatment market also includes products to control algae, aquatic weeds and unwanted microorganisms. For example, one of the most effective and popular methods for controlling algae and unwanted microorganisms is chlorination. One of the major concerns in using chlorination in surface water supplies is that chlorine combines with various organic compounds to form by-products, some of which are considered possible carcinogens.

Other Target Markets

We are also taking steps through strategic collaborations to commercialize our existing crop protection products, or variations thereof, for other markets. Although conventional chemical pesticides have traditionally serviced the industrial and institutional, professional turf and ornamental, home and garden and animal health markets,

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governmental regulations are restricting their use, and reports indicate that end users increasingly value environmentally friendly products, with some households willing to forego pest control treatments entirely if alternatives to conventional chemical pesticides are not available.

Benefits of Bio-Based Pest Management and Plant Health Products

While conventional chemical pesticides are often effective in controlling pests, some of these chemicals are acutely toxic, some are suspected carcinogens and some can have other harmful effects on the environment and other animals. Health and environmental concerns have prompted stricter legislation around the use of conventional chemical pesticides, particularly in Europe, where the use of some highly toxic or endocrine-disrupting chemical pesticides is banned or severely limited and the importation of produce is subject to strict regulatory standards on pesticide residues. In addition, the European Union has passed the Sustainable Use Directive, which requires EU-member countries to reduce the use of conventional chemical pesticides and to use alternative pest management methods, including bio-based pest management products. Over the past two decades, U.S. regulatory agencies have also developed stricter standards and regulations. Furthermore, a growing shift in consumer preference towards organic and sustainable food production has led many large, global food retailers to require their supply chains to implement these practices, including the use of bio-based pest management and fertilizer solutions, water and energy efficiency practices and localized food product sourcing.

Aside from the health and environmental concerns, conventional chemical pesticide users face additional challenges such as pest resistance and reduced worker productivity as workers may not return to the fields for a certain period of time after treatment. Similar risks and hazards are also prevalent in the water treatment market, as chlorine and other chemicals used to control invasive water pests contaminate and endanger natural waterways. Costs of using conventional chemical pesticides are also increasing due to a number of factors, including raw materials costs, stringent regulatory requirements and pest resistance to conventional chemical pesticides, which requires increasing application rates or the use of more expensive alternative products.

As the cost of conventional chemical pesticides increases, the use of conventional chemical pesticides and genetically modified crops meets increased opposition from government agencies and consumers and the efficacy of bio-based pest management and plant health products becomes more widely recognized among growers, bio-based pest management products are gaining popularity and represent a strong growth sector within the market for pest management technologies. Growers are increasingly incorporating bio-based pest management products into IPM programs, and bio-based pest management products help create the type of sustainable agriculture programs that growers and food companies increasingly emphasize.

Bio-based pest management products include biopesticides, as well as minerals such as copper and sulfur. The EPA registers biopesticides in two major categories: (i) microbial pesticides, which contain a microorganism such as a bacterium or fungus as the active ingredient and (ii) biochemical pesticides, which are naturally occurring substances such as insect sex pheromones, certain plant extracts and fatty acids. Biostimulants, which are not registered by the EPA absent additional pest control usages, are microorganisms or natural substances derived from microorganisms or plants that growers use to reduce plant stress, stimulate plant physiology to increase yield, manage pest resistance and reduce chemical residues.

We believe many bio-based pest management products perform as well as or better than conventional chemical pesticides. When used in rotation or in spray tank mixtures with conventional chemical pesticides, bio-based pest management products can increase crop yields and quality over chemical-only programs. Agricultural industry reports, as well as our own research, indicate that bio-based pest management products can affect plant physiology and morphology in ways that may improve crop yield and can increase the efficacy of conventional chemical pesticides. In addition, pests rarely develop resistance to bio-based pest management products due to their complex modes of action. Likewise, bio-based pest management products have been shown to extend the product life of conventional chemical pesticides and limit the development of pest resistance, a key issue facing users of conventional chemical pesticides, by eliminating pests that survive conventional chemical pesticide treatments. Most bio-based pest management products are listed for use in organic farming, providing those

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growers with compelling pest control options to protect yields and quality. Given their generally lower toxicity compared with many conventional chemical pesticides, bio-based pest management products can add flexibility to harvest timing and worker re-entry times and can improve worker safety. Many bio-based pest management products are also exempt from conventional chemical residue tolerances, which are permissible levels of chemical residue at the time of harvest set by governmental agencies. Bio-based pest management products may not be subject to restrictions by food retailers and governmental agencies limiting chemical residues on produce, which enables growers to export to wider markets.

In addition to performance attributes, bio-based pest management products registered with the EPA as biopesticides can offer other advantages over conventional chemical pesticides. From an environmental perspective, biopesticides have low toxicity, posing low risk to most non-target organisms, including humans, other mammals, birds, fish and beneficial insects. Biopesticides are biodegradable, resulting in less risk to surface water and groundwater and generally have low air-polluting volatile organic compound content. Because biopesticides tend to pose fewer risks than conventional pesticides, the EPA offers a more streamlined registration process for these products, which generally requires significantly less toxicological and environmental data and a lower registration fee. As a result, both the time and money required to bring a new product to market are reduced.

Our Solution

We produce bio-based pest management and plant health products that are effective and generally designed to be compatible with existing pest control equipment and infrastructure. This allows them to be used as alternatives for, or mixed with, conventional chemical pesticides, as well as in markets for which there are no available conventional chemical pesticides or the use of conventional chemical products may not be desirable or permissible because of health and environmental concerns. We believe that compared with conventional chemical pesticides, our products:

• can be competitive in both price and efficacy;

• provide viable alternatives where conventional chemical pesticides and genetically modified crops are subject to regulatory restrictions;

• comply with market-imposed requirements for pest management programs by food processors and retailers;

• are environmentally friendly;

• meet stringent organic farming requirements;

• improve worker productivity by shortening field re-entry times after spraying and allowing spraying up to the time of harvest;

• are exempt from residue restrictions applicable to conventional chemical pesticides in both the agriculture and water markets; and

• are less likely to result in the development of pest resistance.

In addition, our experience has shown that when our products are mixed with conventional chemical pesticides, they can:

• increase the effectiveness of conventional chemical pesticides while reducing their required application levels;

• increase levels of pest control and consistency of control;

• increase crop yields;

• increase crop quality, including producing crops with higher levels of protein, better taste and color and more attractive flowers; and

• delay the development of pest resistance to conventional chemical pesticides.

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We believe that the benefits of our products will encourage sustained adoption by end users. For example, we have seen that growers that have used our products on a trial basis in one year have generally continued to use our products in higher levels in subsequent years.

Our Competitive Strengths

Focus on Bio-Based Products

Our belief in and commitment to our vision is our greatest strength. We believe that the world needs more organic and sustainable products and practices, and our goal is to champion that cause. Our experience has shown that by using bio-based pest management and plant health products, growers can benefit the environment and produce more healthy food while improving yields. However, bio-based products have application methods and modes of action that differ fundamentally from conventional chemical products. While major agrichemical companies sell bio-based products, we do not believe that those companies have sufficiently prioritized bio-based products or invested in the internal and external education that is essential to successfully promote these products, and those companies are often conflicted when marketing both conventional chemical products and bio-based products. In contrast, we believe MBI has long been recognized as a thought leader in the bio-based product industry, and we have consistently sought to educate growers in the use and benefits of these products, both alone and mixed with conventional chemical products. We believe our drive to convert acres to these sustainable practices will make us disruptive.

Commercially Available Products

We have five commercially available product lines: Regalia, Grandevo, Venerate, Majestene and Zequanox. All five of these product lines are EPA approved, and Regalia is also approved in Canada, nine Latin American countries (including Brazil), South Africa and parts of Europe. Zequanox is approved in Canada for hydropower facilities, with a label expansion to other industrial and open water uses pending, and is the only product EPA-approved for open water application other than copper, which is rarely used due to its negative environmental effects and uneven efficacy in open water applications. All five of these commercialized lines are subject to patents and trade secrets related to the work we have done to characterize, formulate, develop and manufacture marketable products. In March 2016, we entered into an agreement with Isagro USA to distribute Bio-Tam 2.0, an EPA-approved biofungicide that complements our existing product lines, particularly Regalia. We believe these product lines, along with our other EPA-approved and EPA-submitted products and other pipeline product candidates, provide us with the foundation for continuing to build the leading portfolio of bio-based pest management products.

Robust Pipeline of Novel Product Candidates

Our pipeline of early-stage discoveries and new product candidates extends across a variety of product types for different end markets, including herbicides, fungicides, nematicides, insecticides, algaecides (for algae control), molluscicides (for mussel and snail control) and plant growth and plant stress regulators. Our product candidates are developed both internally and sourced from third parties. Our research and development process enables us to discover, source and develop multiple products in parallel, which keeps our pipeline robust. We are developing the microorganism in Venerate and Majestene, a Burkholderia rinojensis bacterium that we isolated using our discovery process, as MBI-010, a bioherbicide. We also have additional product candidates at various other stages of development, including MBI-601, a fungus that produces volatile compounds and works as a soil biofumigant, which was submitted to the EPA in April 2014 and MBI-110, a new Bacillus-based fungicide, that has demonstrated activity against downy mildew, Sclerotinia and other crop diseases, which we submitted to the EPA in January 2016. In August 2014, we received EPA approval of MBI-011, a weed-controlling biochemical, sarmentine, discovered and isolated from a pepper plant species, and we are currently pursuing third-party manufacturers to synthesize the natural compound at a cost that allows us to introduce the product to the market.

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Rapid and Efficient Development Process

We believe we can develop and commercialize novel and effective products faster and at a lower cost than many other developers of pest management products. For example, we have moved each of Regalia, Grandevo, Venerate, Majestene and Zequanox through development, EPA approval and first U.S. launch in approximately four years or less at a cost of $3.0 million to $6.0 million. Thereafter, we have continued to develop and refine these products, producing new formulations, applying for expanded use labels and seeking new markets, in each case at a cost of less than $10.0 million per product line. In comparison, a report from Phillips McDougall shows that the average cost for major agrichemical companies to bring a new crop protection product to market has been over $250.0 million, and these products have historically taken an average of nearly ten years to move through development, regulatory approval and market launch.

Proprietary Discovery Process

Our discovery process allows us to efficiently discover microorganisms and plant extracts that produce or contain compounds that display a high level of pesticidal activity against various pests and target specific unmet market needs. After we identify pesticidal activity, we subject the microorganisms and plant extracts to tests to determine effects on plant growth, nutrient uptake and drought and salt stress. We then use various analytical chemistry techniques to identify and characterize the natural product chemistry of the compounds, which we optimize and patent. Four of our product candidates, one of which is EPA-approved, are what we believe to be newly identified microorganism species. We believe that four of our product candidates produce novel compounds that we identified, and four of our product candidates have been found to have, or produce compounds with, a novel mode of action. Our proprietary discovery process is protected by patents on the microorganisms, their natural product compounds and their uses for pest management, as well as a patent application we have filed on a screening process to identify enzyme-inhibiting herbicides. We also maintain trade secrets related to the discovery, formulation, process development and manufacturing capabilities. By conducting our own discovery with a focus on unmet market needs, as well as working with outside collaborators, we are able to access the broadest range of products for commercialization, giving us an advantage over other natural bio-based pest management companies. For example, we identified MBI-110 in our discovery screen by targeting downy mildews, a problem for which there are few biological and chemical solutions.

Management Team with Significant Industry Experience

Our management team has extensive experience in bio-based pest management products and the broader agriculture industry. Our chief executive officer and other key employees average over 25 years of experience and include individuals who have led agrichemical sales and marketing organizations, top scientists and industry experts, some of whom have served in leadership roles at large multinational corporations and governmental agencies, commercialized multiple products, brought multiple products through EPA, state and foreign regulatory processes, filed patent applications and received patents, led groundbreaking research studies and published numerous scientific articles. In addition, our chief financial officer brings over 30 years of financial management experience spanning a variety of industries, including over 13 years of service as several public companies’ chief financial officer. Our general counsel has over 30 years of experience, including over 25 years with public companies, in senior legal, sales and operating roles, including general counsel, vice president of sales and chief operating officer.

Our Growth Strategy

Accelerate Adoption of New Products, Product Applications and Product Lines

Our goal is to provide growers of specialty and row crops with complete and effective solutions to a broad range of pest management and plant health needs. Due to the competitive nature of the industry and the seasonality of crop growing, speed is essential to ensure widespread adoption. Accordingly, we have launched targeted placements of our products with early adopters in the United States relatively early in the product commercialization stage and for a limited number of indications. These growers, many of whom have unmet market needs, help us to troubleshoot and refine our products and to maximize their value proposition, enabling

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us to efficiently develop new formulations and expand uses and market penetration with minimal up-front capital investment per product line. We also believe we will be able to leverage growers’ positive experiences using our Regalia, Grandevo, Venerate and Majestene product lines to accelerate adoption of new products, product applications and product lines, including Bio-Tam 2.0. We believe product diversity allows us to compete with larger companies, to strengthen relationships with growers and distributors and to not be dependent on any one product or product category. Further, by offering and developing multiple products simultaneously, we believe we are perceived as a technology leader and can gain the benefits of increased momentum with distributors and end users. We will continue to target early adopters of new pest management and plant health technologies with controlled product launches and educate growers and water resource managers about the benefits of bio-based pest management products through demonstrations to accelerate commercial adoption of our products.

Deliberately Expand Applications of Our Product Lines

We want growers to know and trust that our products work. Although our initial EPA-approved master labels cover our products’ anticipated crop-pest use combinations, we launch early formulations of our pest management and plant health products to targeted customers under commercial labels that list a limited number of crops and applications that our initial efficacy data can best support. We then gather new data from experiments, field trials and demonstrations, gain product knowledge and get feedback to our research and development team from customers, researchers and agricultural agencies. Based on this information, we enhance our products, refine our recommendations for their use in optimal IPM programs, expand our commercial labels and submit new product formulations to the EPA and other regulatory agencies. For example, we began sales of Regalia SC, an earlier formulation of Regalia, in the Florida fresh tomatoes market in 2008, while a more effective formulation of Regalia with an expanded master label, including listing for use in organic farming, was under review by the EPA. When approved, we launched this new formulation into the Southeast United States in 2009 and nationally in 2010. In 2011, we received EPA approval of a newly expanded Regalia master label covering hundreds of crops and various new uses for applications to soil and through irrigation systems, and we recently expanded Regalia for use in large-acre row crops as a plant health product, in addition to its beneficial uses as a fungicide. Similarly, ongoing field development research on the microbe used in our insecticide product Venerate led to our October 2015 registration of Majestene as a nematicide. In addition, as Grandevo has shown activity against larval and adult mosquitos, we intend to expand testing to determine if the application of Grandevo can be expanded to include this important disease vector. We believe we have opportunities to broaden the commercial applications and expand the use of our existing products lines into several key end markets, including large-acre row crop applications, seed treatment, forestry and public health to help drive significant growth for our company.

Focus on Proven Technology Families

We discover and develop more than one product line based on the same technology. For example, the Burkholderia microbe on which Venerate is based is also active against a broad range of nematodes, enabling development as our bionematicide product, Majestene, and produces several herbicidal compounds, enabling development as our bioherbicide product candidate, MBI-010. In addition, our product candidates MBI-110 and MBI-507 are based on microbial fermentations of a newly identified Bacillus strain we isolated using our proprietary screening platform, and the Chromobacterium species on which Grandevo is based may also yield a promising bionematicide product, which we have begun development as MBI-304. Developing multiple products based on the same microbe allows for a more efficient use of research, development and manufacturing resources and enables us to leverage capital invested in existing technologies.

Continue to Develop and Commercialize New Products in Both Existing and New Markets

Our goal is to rapidly and efficiently develop, register and commercialize new products each year, with the goal of developing a full suite of pest management and plant health products. For example, while our current crop protection products address plant diseases, insects and nematodes, we are developing products that control weeds as well as products for improving fertilizer efficiency and reducing drought and salt stress. Our bioassay

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screening has identified at least four microbes that display activity against blue-green algae associated with toxic algal blooms, which have resulted in seasonal closures of some drinking water supplies in the Great Lakes region, and we are seeking partners to move these early-stage discoveries forward.

Target International Markets

Expanding international sales is an important component of our growth strategy, but the global markets for pest management products are intensely competitive. Our plan is to focus on key countries and regions with the largest and fastest growing biopesticide and plant health product markets for specialty crops and select row crops. We intend to work with regional distributors and distributors in key countries who have brand recognition and established customer bases and who can conduct field trials and grower demonstrations and lead or assist in regulatory processes and market development.

Leverage Manufacturing Capabilities

We initially used third-party manufacturers to produce all of our products on a commercial scale. In 2014, we completed the repurpose of a manufacturing facility that we purchased in July 2012 by installing three 20,000 liter fermentation tanks and constructing a dedicated building to house them, which has enabled us to manufacture in-house certain of our products. We believe that greater control of our own manufacturing capacity allows us to scale-up processes and institute process changes more quickly and efficiently while ultimately lowering manufacturing costs over time to achieve desired margins and protecting the proprietary position of our products. We continue to use third party manufacturers for Venerate and Majestene and for spray-dried powder formulations of Grandevo and Zequanox.

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Our Products

Commercially Available Products

The table below summarizes our current portfolio of commercially available biopesticide products, which have been able to move through development, EPA approval and first U.S. market launch in four years or less and at a cost of $3.0 million to $6.0 million. We have continued to develop and refine these products after initial launch, producing new formulations, applying for expanded use labels and seeking new markets.

NAME	MARKET	TARGET	USE	STATUS
Regalia	Crop Protection, Home and Garden, Turf	Plant Disease/Plant Health	Protects against fungal and bacterial diseases and enhances yields	Commercially Available Domestically and Internationally
Grandevo	Crop Protection, Home and Garden, Turf and Ornamentals, Public Health, Forestry	Insects and Mites	Controls a broad range of sucking and chewing insects through feeding	Commercially Available Domestically; International Expansion Efforts Underway
Venerate	Crop Protection, Home and Garden, Turf and Ornamentals, Animal Health, Forestry	Insects and Mites	Controls sucking and chewing insects on contact	Commercially Available Domestically; International Expansion Efforts Underway
Majestene	Crop Protection, Turf	Plant Parasitic Nematodes	Controls soil-dwelling nematodes by preventing and reducing root galls, and by reducing adult reproduction and egg hatch	Commercially Available Domestically
Zequanox	Water Treatment	Invasive Mussels (In-Pipe and Open Water Habitat Restoration)	Controls invasive mussels that restrict water flow in industrial and power facilities and harm recreational waters	Commercially Available Domestically and in Canada

Regalia

• Biofungicide

• Crop Protection, Home and Garden, Turf: Targets Plant Disease, Improves Plant Health, Increases Yields

• Commercially Available Domestically and Internationally

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Regalia, a plant extract-based fungicidal biopesticide, or “biofungicide,” is EPA-registered for crop and non-crop uses and approved for use on foliage and roots in all states in the United States, including California and Florida, where the majority of the specialty crops are grown. It is also approved for sale in Brazil (tomatoes, potatoes, dried beans), Ecuador (flowers), Mexico (citrus and tree fruit, berries, tomatoes, peppers, potatoes, cucurbits, flowers, potatoes and grapes), Turkey (covered vegetables), Canada (tomatoes, grapes, strawberries, cucurbits, apples, turf, blueberries, hops (emergency use), ornamental plants and wheat), Peru (grapes and quinoa), South Africa (grapes), Morocco (cucurbits, tomatoes and grapes), Tunisia (tomatoes) and Panama, Dominican Republic, El Salvador, Guatemala and Honduras (potatoes, tomatoes, peppers, tobacco, cucurbits, beans, avocados, citrus, peanuts, papayas and strawberries). Registration efforts are currently underway in China, with Regalia demonstrating efficacy in government-conducted trials on tomatoes, cucurbits, strawberries and grapes. University researchers have extensively tested the product against several important plant diseases, especially against mildews. We, and our commercial partners, have also conducted hundreds of trials in the United States and abroad, including five years of crop trials in Europe. The data show that Regalia is an effective addition to a disease management program against a broad range of diseases and can increase yields in crops such as strawberries, tomatoes, potatoes, soybeans, rice, wheat, alfalfa, sugarcane and corn.

Regalia is made from an extract of the giant knotweed plant and acts by turning on a plant’s “immune system,” a process called induced systemic resistance. Regalia also enhances the efficacy of major conventional chemical fungicides, and we have received issued patents on this synergism. Regalia also is effective for seed treatment of soybean, corn and cotton, for which we have filed a patent application, and we have received an issued patent on the effects on root growth and yield when Regalia is applied to the seed or as a root stimulant. For example, in field tests and in actual grower use, Regalia has shown significant yield increases on strawberries, tomatoes, potatoes, soybeans, rice, wheat, alfalfa, sugarcane and corn, with less irrigation required for strawberries treated with Regalia.

We obtained an exclusive license relating to the technology used in our Regalia product line while Regalia was in the process development and formulation stage of product development. In addition to developing the supply chain to commercially market the product, using our natural product chemistry expertise, we developed an analytical method to measure and characterize the major compounds in the plant extract, and we enhanced these compounds several times in new formulations, providing Regalia with a broader spectrum of activity and better efficacy than the original licensed product. In addition, we improved the physical properties of our Regalia formulations and developed four formulations that meet organic farming standards. We have filed several patent applications with respect to these innovations. In addition, we have received a U.S. patent for modulating plant growth by treating roots of plants with Regalia (or other compounds or extracts of knotweed) and transplanting the plants into soil. We have also received a patent on the synergistic combination of Regalia or knotweed extract and some important chemical fungicides.

We launched Regalia SC, an earlier formulation of Regalia, into the Florida fresh tomatoes market in December 2008. This formulation had a limited label with a few crops and uses on the label and it was not compliant for organic listing. In 2009, we began selling Regalia-based plant health products in the United Kingdom (under the name Sentry R by Plant Health Care) and Ecuador (under the name Milsana), and we later received a revised, broader label with hundreds of crops for a new organic formulation, which we subsequently launched into the Florida vegetables and Arizona leafy greens markets. In January 2010, we received state approval in California and immediately launched Regalia into the leafy greens and walnuts markets. Key markets include vegetables in the southeast, citrus in Florida, leafy greens and vegetables in California and Arizona, walnuts and stone fruit in California and pome fruit and grapes in California and the Pacific Northwest. In December 2011 and August 2012, we received EPA approval and California regulatory approval, respectively, for an expanded Regalia label that includes new soil applications, instructions for yield improvement in corn and soybeans and additional crops and target pathogens. Our product for row crops is sold separately as Regalia Rx and for international markets, where the Regalia trademark is allowed, as Regalia Maxx. We submitted Regalia for registration in the European Union, which is one of the largest fungicide markets in the world. We received regulatory approval for Regalia in South Africa in June 2013, in El Salvador, Guatemala and Honduras in December 2013, in Peru in March 2014,

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in Colombia in June 2014, in Tunisia and Morocco in late 2014 and in Brazil, for tomato, potato and dry beans, in December 2014. We have recently received EPA approval for three new formulations (12%, 16% and 5% that eliminated the solvent, hexanol), which will be used for market segmentation and replacement of existing formulations. In 2016, we launched the new formulation of Regalia 5% that eliminated hexanol, a solvent that is difficult to source and is likely to experience future regulatory restrictions. This new formulation disperses better in water and is easier to mix and rinse from containers and spray equipment.

Regalia, Regalia Maxx and Regalia Rx are USDA National Organic Program compliant and OMRI-USA/OMRI-Canada listed.

Grandevo

• Bioinsecticide

• Crop Protection, Home and Garden, Turf and Ornamentals, Public Health, Forestry: Targets Insects and Mites

• Commercially Available Domestically, International Expansion Efforts Underway

Grandevo is based on a new species of microorganism, Chromobacterium subtsugae, which was discovered by a scientist at the USDA in Beltsville, Maryland, and which we have licensed and commercialized. Grandevo is a powerful feeding inhibitor: insects and mites become agitated when encountering it and will not feed and starve, or, if they do ingest it, die from disruption to their digestive system. Grandevo also has repellent effects on and reduces egg hatching and reproduction of target insects and mites. Grandevo is particularly effective against chewing insects (such as caterpillars and beetles) and sucking insects (such as stinkbugs and mealybugs, as well as thrips and psyllids, which are respectively known as “corn lice” and “plant lice”). Trials to date and reports from grower use have shown instances of commercial levels of efficacy as good as the leading conventional chemical pesticides on a range of chewing and sucking insect and mite pests, including two invasive species of psyllid affecting citrus and potato crops. Grandevo has also shown significant control of other pests such as plant-feeding fly larvae, mosquitoes, white grubs in turf grass, “leafmining” caterpillar larvae and other leaf-eating caterpillars. Grandevo has also shown efficacy against corn rootworm, a major pest of corn, which has reportedly been resistant to corn engineered for rootworm control. Grandevo has shown efficacy against other soil pests, including wireworms, root maggots and nematodes. Field trials are ongoing to further characterize Grandevo’s efficacy.

We obtained a co-exclusive license for the bacterial strain used in our Grandevo product line while Grandevo was undergoing primary screening as a potential product candidate. Since licensing the microorganism, we completed the testing and development necessary to produce and commercialize an EPA-approved product and have filed our own patent applications with respect to the microorganism, including its genome, synergistic combinations with conventional chemical pesticides, product formulations containing the bacterial strain as well as the chemistry produced by the microorganism upon which Grandevo is based. We have issued U.S. patents on one of these novel compounds produced by the bacteria and novel insecticidal and nematicidal uses.

We placed a prototype liquid formulation of Grandevo on a targeted basis under a limited label into the Florida citrus crop market in 2011. Commencing in the summer of 2012, we launched a dry formulation of Grandevo in markets across the United States where state registrations have been approved, targeting key markets, including citrus, tomatoes, peppers, strawberries, potatoes, leafy greens and other fruits and vegetables. This dry formulation was approved by the EPA in May 2012 and has been registered in all 50 states as well as Puerto Rico. In May 2013, we received EPA approval for a revised label reflecting Grandevo’s safety for bees. In addition, we submitted the registration dossier for Grandevo to Mexico and Canada and for emergency use in Brazil in October 2014. Grandevo has received completeness determination from the European Commission and is now cleared to begin the evaluation for Annex 1 listing and commercialization in the European Union with a draft decision expected in 2016. A June 2015 policy decision by the European Commission, the European Food Safety Authority and a Working Group of EU Member States has allowed Grandevo, which contains only non-

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viable Chromobacterium subtsugae cells, to be evaluated as a microbial pesticide. Until this recent EU decision, only pesticides containing live microbes could be evaluated under EU regulation. Grandevo is being assessed under the Netherlands Government’s “Green Deal” Initiative, which has been created with an aim to “speed up the sustainability of PPPs (plant protection products) in agriculture and horticulture by facilitating the authorization of green PPPs with a low risk for humans, animals and the environment.” Efficacy trials recently completed in Europe will be used to support uses of Grandevo for the control of whitefly and thrips in Solanaceae (tomato, pepper and aubergine) and Cucurbitaceae (melon, cucumber and squash) crops.

Grandevo is USDA National Organic Program compliant and OMRI-USA/OMRI-Canada listed.

Venerate

• Bioinsecticide

• Crop Protection, Home and Garden, Turf and Ornamentals, Animal Health, Forestry: Targets Insects and Mites

• Commercially Available Domestically, International Expansion Efforts Underway

Venerate is based on a microbial fermentation of a new bacterial species we isolated using our proprietary discovery process. We have identified compounds produced by the microorganism in Venerate that control a broad range of chewing and sucking insects and mites, as well as flies and plant parasitic nematodes, on contact, which is complementary to the anti-feeding effects of Grandevo. In addition, because we currently sell Venerate in a liquid formulation and Grandevo in a powder formulation, we are seeking to exploit opportunities for market segmentation, including for combinations with liquid fertilizer and for low-volume aerial applications. Venerate was approved by the EPA in February 2014 and we began to sell Venerate in May 2014. We submitted Venerate for the Canadian Pest Management Regulatory Agency registration in April 2014 and submitted the registration dossier for Venerate to Mexico in April 2014. We have conducted field trials on several crops and insects and mites, many of which show efficacy as good as leading conventional chemical pesticides. Venerate has shown positive results in field trials against soil insects of corn, wheat and soybeans applied both in-furrow and as seed treatments, and has shown broad spectrum activity across a wide range of pests, including Asian citrus psyllid, corn rootworm, stinkbugs, caterpillars and weevils. Additional trials are in progress in 2016.

We have filed patent applications on the microorganism and the natural product compounds that demonstrate insecticidal and nematicidal activity, as well as product formulations containing the microorganism. Venerate is USDA National Organic Program compliant and OMRI-USA/OMRI-Canada listed.

Majestene

• Bionematicide

• Crop Protection, Turf: Targets Plant Parasitic Nematodes

• Commercially Available Domestically

Majestene is a bionematicide we have developed based on the microorganism used in Venerate. This nematicide is active against a broad range of nematodes, and in field trials it has been as effective as or better than the leading conventional chemical nematicide against soybean cyst, root knot, lesion, stunt, reniform, lance and burrowing nematodes. Crops tested include soybean, corn, cotton, strawberry, turf, tomato, potato and banana. Usage for Majestene as a nematicide was approved by the EPA in connection with its approval of the labels for Venerate in 2014, and a modified label with refined rates, nematode species and crops was approved in October 2015. We have filed a patent application for use of the bacterial strain in Majestene for use as a nematicide. We conducted a targeted placement of Majestene with key, early adopter growers in 2015, with our first sales in January 2016.

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Zequanox

• Biomolluscicide

• Water Treatment: Targets Invasive Mussels (In-Pipe and Open Water Habitat Restoration)

• Commercially Available in United States and Canada

• USDA “BioPreferred” Program Certified Product

Zequanox addresses the problem of invasive zebra and quagga mussels, which clog pipes, disrupt ecosystems, encrust infrastructure and blanket beaches with razor-sharp shells. These mussels cause approximately $1.0 billion in damage and associated control costs annually in parts of the United States alone. There are limited treatment options available, many of which are time-consuming and costly, or harm aquatic flora and fauna. Zequanox is a biomolluscicide derived from a common microbe found in soil and water bodies, Pseudomonas fluorescens. Zequanox is an environmentally friendly, bio-based pest management product that is designed to kill over 75% of invasive mussels in treated pipe systems without causing collateral ecological damage. In July 2012, we conducted an open water trial in Deep Quarry Lake, Illinois, where the Zequanox treatment killed more than 90% of the tested mussels on the lake bed. This level of control in open water treatments was repeated in 2013. We generated revenues for treating an Oklahoma Gas & Electric facility in 2012 and 2013 and a First Light & Power facility along the Housatonic River in Connecticut in 2014. In addition, Zequanox was used by the Minnesota Department of Natural Resources and the Minnehaha Creek Watershed District’s Aquatic Invasive Species Program in 2014 to treat an infestation of these invasive mussels in Christmas Lake, resulting in 100% control of the mussels in the tested area. Zequanox is approved in Canada and is the only product EPA-approved for open water application in the United States other than copper, which is rarely used due to its negative environmental effects.

At recommended application rates, Zequanox is not toxic to other aquatic life, including ducks, fish, crustaceans and other bivalve species such as native clams or mussels. Zequanox is safe to workers, less labor intensive and requires shorter treatment times as compared to conventional chemical pesticides. Zequanox can be used by power plants and raw water treatment facilities as an alternative to conventional chemical treatments such as chlorine, or as a complement to those products.

We entered into a license agreement with The University of the State of New York pursuant to which we were granted an exclusive license under the University’s rights relating to the bacterial strain used in our Zequanox product line while the product’s natural product chemistry was still under investigation. Since then, we have developed dry powder formulations, significantly improved the fermentation process for higher cell yield, allowing us to increase manufacturing scale, and filed patent applications relating to natural product compounds in the Zequanox cells we have identified and product formulations we have developed. In addition, we have received $1.1 million in grants from the National Science Foundation for work needed to commercialize the bacterial strain in Zequanox, which is currently being marketed and sold directly to U.S. power and industrial companies. In the fourth quarter of 2015, we implemented a new process at our manufacturing plant that reduced the cost of product revenues to be more competitive with other mussel treatment chemicals.

Due to our prioritization plan, we have not committed sufficient resources to Zequanox in order to market it full-scale and substantially improve margins. However, we are currently in discussions with large water treatment companies to further develop Zequanox and expand it commercially. In addition, we continue to work with state, federal and bi-national partners via the Great Lakes Commission’s Invasive Mussel Collaborative and the EPA’s Great Lakes Restoration Initiative to further develop Zequanox in the Great Lakes/Upper Mississippi River Basin as a habitat restoration tool and potential harmful algal bloom management tool as zebra and quagga mussels selectively feed on beneficial algae while rejecting toxic blue-green algae.

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Product Pipeline

Our pipeline consists of product candidates in various stages of development, including biostimulant and plant health products that do not require EPA registration, products submitted to the EPA for registration and other promising product candidates under development, as well as other early-stage discoveries. We have been implementing a prioritization plan for our pipeline candidates, focusing first on those that are expected to have the greatest near-term growth potential. We are seeking collaborations with third parties to develop and commercialize more early stage candidates.

Haven (MBI-505)

• Anti-transpirant

• Crop Protection, Turf and Ornamentals: Enhances Crop Yields and Plant Health

• Subject to State Registrations; Under Development

Haven (MBI-505), a plant health product candidate that helps prevent plants from drying out, or “anti-transpirant,” is based on a technology of naturally-derived, plant-based compounds that we licensed from Kao Corporation for use in the United States. The licensed patents are directed to methods of promoting plant growth and increasing biomass and crop yield. We developed new formulations and are conducting field trials showing that Haven protects and enhances yields by reflecting heat from leaves, which reduces plant water loss, allowing plants to thrive better in sun-stressed environments. Field trials in 2014 in the United States and Chile demonstrated a reduction in sun-stressed fruit and an increase in quality characteristics on citrus, apples and grapes, increased yields on walnuts, almonds and wheat, often equal to or better than the commercial standard, and increased turf growth. Unlike competing products, Haven does not leave an undesirable white deposit on crops.

MBI-010

• Bioherbicide

• Crop Protection, Home and Garden, Turf: Targets Weeds

• Under Development

MBI-010 is based on the same species of bacteria used to produce Venerate and Majestene, which we isolated using a proprietary discovery process that identifies herbicides that inhibit a certain plant enzyme. MBI-010 produces several herbicidal compounds, some of which are novel, that are rapidly taken up by germinating seeds and by the roots of seedling and mature weeds. MBI-010 has demonstrated effectiveness against a range of weeds, including weeds resistant to leading conventional chemical herbicides, either after or before the weeds’ emergence. MBI-010 has also demonstrated a novel mode of action (inhibiting histone deacetylase enzymes), and some of its active compounds are transmitted systemically through the vascular structure of weeds. We have filed a patent application with respect to the MBI-010 formulation uses and its associated natural product compounds as an herbicide. We also received an issued U.S. patent on the process we used to discover MBI-010 and certain other bioherbicides. We expect to submit MBI-010 to the EPA in late 2016 or early 2017.

MBI-601

• Biofumigant

• Crop Protection, Home, Industrial: Targets Plant Disease, Nematodes and Insects

• Under Development

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MBI-601 is a biofumigant based on a novel and proprietary genus of fungus, Muscodor, which was discovered by a professor at Montana State University. We obtained a co-exclusive license for several strains and species of this fungus, which produces a suite of gaseous natural product compounds that have been shown to control certain species of harmful fungi and bacteria that cause plant diseases and to control nematodes and some insect species. We believe that MBI-601 may be used for agricultural and industrial applications, including post-harvest control of fruit and flower decay and pre-planting control of plant diseases and nematodes as a viable alternative to methyl bromide and other chemical fumigants, which are subject to significant regulatory restrictions and for which few effective, non-toxic alternatives are available. We submitted MBI-601 to the EPA in April 2014. In 2014, we obtained a license to an artificial mixture of the gaseous compounds produced by the Muscodor fungus, which extends the potential uses of this technology by enabling development of products at a potentially lower cost and better shelf stability than versions using the living fungus.

MBI-110

• Biofungicide and Plant Health

• Crop Protection, Home and Garden: Targets Plant Disease, Improves Plant Health

• Under Development

MBI-110 is based on microbial fermentations of a newly identified Bacillus strain we isolated using our proprietary screening platform. MBI-110 is being developed as a biofungicide, targeting difficult to control plant diseases such as Sclerotinia white molds, gray mold and downy mildews. We have identified compounds, some of which are novel, produced by the microorganism in MBI-110 that control a broad range of plant diseases. We have filed a U.S. patent application covering fungicidal uses and have been issued a U.S. patent on related claims. We submitted MBI-110 to the EPA in January 2016. Several field trials were conducted in Europe in 2014 and the United States in 2013 and 2014 that showed good efficacy against white molds and downy mildews.

Other Products and Candidates

In addition to the above, pursuant to an agreement with Isagro USA, we intend to distribute Bio-Tam 2.0, a biofungicide for soil-borne disease control and grapevine disease control that complements our existing products, particularly Regalia. Bio-Tam 2.0 recently gained EPA registration for grapevine trunk diseases caused by Eutypa, Botyrosphaeria (Esca), Phomopsis and other fungi, which are responsible for significant economic losses to the wine and grape industry worldwide, including the Western United States, and for which there are few registered conventional chemical pesticides.

We have also developed patented technology relating to a number of other product candidates, including MBI-304, a bionematicide product candidate based on the microorganism used in Grandevo; MBI-011 and MBI-005, bioherbicides that have received EPA approval; and MBI-302, a bionematicide with an EPA registration package that is nearly complete. We are also developing MBI-507, a plant health product and plant root and growth biostimulant based on the living spores of a new Bacillus amyloliquefaciens strain, for which we have received an issued U.S. patent on these claims. We are seeking collaborations with third parties to develop and commercialize certain of these and other promising early-stage candidates, but as resources permit, we may choose to move some of these product candidates forward internally.

We have also discovered several microorganisms with algaecidal activity and over 25 additional fungicide, herbicide, insecticide and nematicide candidates using our proprietary screening platform. In addition, we have produced a collection of microorganisms from taxonomic groups that research suggests may enhance nutrient uptake in plants, reduce stress and otherwise increase plant growth.

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Our Discovery and Product Development Process

Our proprietary technology comprises a sourcing process for microorganisms and plant extracts, an extensive proprietary microorganism collection, microbial fermentation technology, screening technology and a process to identify and characterize natural compounds with pesticidal activity. Our technology enables us to isolate and screen naturally occurring microorganisms and plant extracts in an efficient manner and to identify those that may have novel, effective and safe pest management or plant health promoting characteristics. We then analyze and characterize the structures of compounds either produced by selected microorganisms or found in plant extracts to identify product candidates for further development and commercialization. We have screened more than 18,000 microorganisms and 350 plant extracts, and we have identified multiple product candidates that display significant levels of activity against insects, nematodes, weeds, plant diseases and invasive species such as zebra and quagga mussels, aquatic weeds and algae. We also have produced a collection of microorganisms from taxonomic groups that may enhance nutrient uptake in plants, reduce stress and otherwise increase plant growth. Our product candidates come primarily from our own discovery and development, as well as in-licensed technology from universities, corporations and governmental entities.

Our proprietary product development process includes several important components. For all of our product candidates, we develop an analytical method to detect the quantity of the active natural product compounds that are produced by the microorganism or that are extracted from plants. For microbial products, we develop unique proprietary fermentation processes that increase the active natural compounds produced by the microorganisms. We also scale-up fermentation volumes to maximize yields consistently in each batch. Similarly, for our plant extract-based products, we develop a manufacturing process that increases the amount of active natural compounds extracted from plant materials.

Our deep understanding of natural product chemistry allows us to develop fermentation and formulations that optimize the concentrations, efficacy and stability of compounds produced by microorganisms or plants. These methods allow us to produce products that are highly effective and of a consistent quality on a commercial scale. With the successful commissioning of our manufacturing facility, we have added a wealth of know-how and have demonstrated an ability to manufacture products that are effective and of a consistent quality on a commercial scale.

Our commercial products are sold in various formulations and are tailored to meet customers’ needs and display performance characteristics such as effectiveness, shelf life, compatibility with other pesticides and ease of use. Our senior management’s numerous years of experience in the development of commercial products and formulations have resulted in a highly efficient product development process.

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Our discovery and development process is illustrated in the following diagram:

Discovery

We have found over 25 candidates for commercial development from our proprietary discovery process, including Venerate, a new bacterial species and bioinsecticide, MBI-011, a burndown bioherbicide, MBI-010, a systemic bioherbicide, MBI-302 and MBI-303, bionematicides, MBI-110, a biofungicide, and MBI-507, for plant health, as well as several bioalgaecides, additional biofungicides, bioherbicides, bionematicides and plant growth enhancers. Key aspects of our discovery process include:

Collection and isolation. Using our years of experience, we target selected habitats and niches of high biodiversity to collect soil, compost, insects, flowers or other biological matter from which we isolate our

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proprietary microorganisms on proprietary media. We capture information in a microorganism database such as taxonomic groups, geographical locations, types of samples, niches and habitats where collected and biological activity. We also isolate microorganisms that improve the efficiency of plants to uptake nitrogen and phosphorous. In addition to isolating our own microorganisms, which make up approximately 90% of our collection, we have had collaborations with three companies plus the Scripps Institution of Oceanography to diversify our sourcing of microorganisms.

Fermentation. For our microbial products, before testing the selected microorganisms for activity against pests, we ferment them to produce sufficient quantities for testing. We grow the selected microorganisms in proprietary media, which maximizes their pesticidal properties. In addition, we use proprietary fermentation processes that are designed to replicate those that would be required for large-scale fermentation and commercial production, avoiding the time and expense of an unsuccessful scale-up.

Primary screening. We use automated, miniaturized biological assays to test the selected microorganism’s or plant extract’s effectiveness against several weed, insect and nematode pests and plant pathogens and algae. We compare those results to conventional chemical pesticide standards. When a microorganism shows a high level of pesticidal activity, we conduct further tests to determine the spectrum of activity, mode of action, stability and activity on plants. We also test for the microorganisms’ ability to reduce plant stress and promote growth.

Novel and proprietary screening methods for weeds and nematodes. We have used proprietary assays based on specific enzymes that find systemic herbicidal compounds from microorganisms, one of which is the subject of an issued patent covering identification of compounds that act systemically through plants’ vascular systems. We have developed a rapid, efficient method to find microorganisms that produce compounds with a high level of activity against plant parasitic nematodes.

Natural product chemistry. Using high-performance liquid chromatography (“HPLC”) with diode array detection technology, liquid chromatography-mass spectroscopy (“LCMS”), gas chromatography-mass spectroscopy (“GC-MS”) and nuclear magnetic resonance (“NMR”), we compare the natural product compounds produced by each of the selected microorganisms with known compounds. This allows us to eliminate those microorganisms that produce known toxins and to select those that we believe are novel and safe. From the selected microorganisms, we identify and characterize the natural product compounds responsible for their pesticidal activity by using HPLC, LCMS, GC-MS and NMR equipment. We then develop analytical methods to measure the quantity of these compounds in individual fermentation batches, determine the quantities needed to maximize efficacy and to ensure consistent levels of these compounds from batch to batch.

Genetic identification. After confirming pesticidal activity during our primary screen, we perform the initial genetic identification of the microorganisms. Further characterization of the genome of our early stage candidates is contracted with one of several genome sequencing service companies. This characterization allows us to determine novelty compared to discoveries from others, the relatedness to human or animal pathogens, genes for compounds that are not expressed in fermentation or detected by our chemists, and information about the possible mode of action on the target pest. We also file additional patent applications based on the results of these genetic identification processes.

Product Development

We believe that by maintaining a strong reputation in the industry, many opportunities come to us for development in addition to our own discoveries from our in-house efforts. Once we discover or are brought an opportunity, we make a preliminary assessment of the commercial potential of a natural product determined through laboratory, greenhouse and initial field tests. We then select product candidates we have discovered in-house or in-licensed for further development. Key aspects of our product development process include:

Development of the manufacturing process that maximizes the active natural product compounds. For our microbial biopesticide products, we develop proprietary processes that increase the yield of both the

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microorganism and the active natural product compounds produced by the microorganism during fermentation. Similarly, for our plant extract-based products, we develop proprietary processes that increase the amount of active natural compounds extracted from plant materials. This process development allows us to produce products that have superior performance. For our microbial products, we then scale-up these proprietary processes in progressively larger fermentation tanks. We develop quality control methods based on the active natural product compounds rather than just the microorganisms or plant extracts. This approach results in a more consistent and effective product.

Formulation. We are able to develop proprietary wettable powder, liquid and granule formulations that allow us to tailor our products to customers’ needs. This allows us to develop product formulations with enhanced performance characteristics such as effectiveness, value, shelf life, suitability for organic agriculture, water solubility, rain resistance, compatibility with other pesticides and ease of use. Formulation is critical to ensuring a bio-based pest management and plant health product’s performance. Our understanding of the natural product chemistry allows us to develop formulations that maximize the effectiveness and stability of the compounds produced by the microorganisms or plants.

Field testing. We conduct numerous field trials for each product candidate that we develop. These field trials are conducted in small plots on commercial farms or research stations by our own field development specialists as well as private and public researchers to determine large-scale effectiveness, use rates, spray timing and crop safety. We conduct crop protection product field trials globally in both hemispheres to accelerate the results of our field trials and provide alternate season learning opportunities. As the crop protection product candidate nears commercialization, we conduct demonstration trials on the farm. These trials are conducted with distributors, influential growers and food processors on larger acreages. For Zequanox, we have been working with large power and industrial customers both in the United States and Canada to obtain field trial data to help with product commercialization efforts and to obtain efficacy data.

Sales, Marketing and Distribution

In the United States, we sell our products through our own internal sales force, which consists of 8 employees focused on managing distributor relationships and creating grower demand for our products. In addition, a dedicated team of 4 employees provide technical service support to both our customers and sales representatives on the use of our products in IPM programs, both for conventional growers as well as for an expanding number of organic growers. Our sales force covers all major regions in the United States, including California and the Pacific Northwest, the Southeast, the Northeast, the Mid-Atlantic and the Midwest regions, with an emphasis on high-value specialty crops (fruits, nuts and vegetables). We currently sell our crop protection product lines, Regalia, Grandevo, Venerate and Majestene, through leading agricultural distributors, including members of the Integrated Agribusiness Professionals group. These are the same distribution partners that most major agrichemical companies use for delivering solutions to growers across the country. For our water treatment product line, Zequanox, we are seeking sales and distribution partners for in-pipe and open water uses. Zequanox is currently being marketed and sold directly to a selected group of U.S. power and industrial companies.

With respect to sales outside of the United States, we have signed exclusive international distribution agreements for Regalia with major international distributors such as FMC (for certain markets in Latin America), Syngenta (for specialty crop markets in Africa, Europe and the Middle East) and Engage Agro (for markets in Canada and professional turf and ornamental plant markets in the United States). We also intend to work with regional distributors and distributors in key countries who have brand recognition and established customer bases and who can conduct field trials and grower demonstrations and lead or assist in regulatory processes and market development. For example, we are in discussions and have testing agreements with distributors in Brazil, Australia, New Zealand and Europe, and for certain other foreign markets for Grandevo and Venerate.

We have also recently entered into an agreement with Isagro USA with respect to distribution of their Bio-Tam 2.0 product line in California, Oregon, Washington and Arizona. We believe we can leverage our existing sales, marketing and distribution network to bring in additional revenues from sales of this product, while enhancing our overall product portfolio.

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We derived approximately 89%, 91% and 95% of our total revenues from Regalia and Grandevo for the years ended December 31, 2015, 2014 and 2013, respectively. In addition, we currently rely, and expect to continue to rely, on a limited number of distributors for a significant portion of our revenues since we sell through highly concentrated, traditional distribution channels. For the year ended December 31, 2015, our top two distributors accounted for 38% of our total revenues.

While the biopesticide industry has been growing, customers in the crop production and water treatment sectors are generally cautious in their adoption of new products and technologies and may perceive bio-based pest management products as less attractive than conventional chemical pesticides. Growers often require on-farm demonstrations of a given pest management or plant health product, and given the relative novelty of our water treatment products, consumers of those products will continue to require education on their use. We are implementing the following strategies to accelerate adoption rates and promote sales of our bio-based pest management and plant health products:

Rebuilding a focused and effective sales and marketing team that shares our values. We were significantly negatively impacted by the departures of our former chief operating officer, who led our sales and marketing teams, and significant members of our sales staff in the third quarter of 2014. Over the last year, we have been rebuilding our sales and marketing teams, including hiring highly experienced personnel to train our sales force and a new head of marketing to guide an expanded marketing department. In addition, we are more effectively organizing the data and educational material that we have amassed over nine years of operations on our bio-based products as well as organic and sustainable agricultural practices in order to train and equip our sales staff to communicate with and educate distributors and growers. We believe that hiring and training a sales and marketing staff with a high level of technical expertise and knowledge regarding the capabilities of our bio-based products is essential to expanding adoption of our products by growers and sales to distributors. In addition, we are expanding our field development team to include more technical service activities to support sales.

Develop an extensive demonstration program. We believe that for growers to be convinced that a bio-based pesticide or plant health product works, they often must see it for themselves. Growers risk their crop each time they try a new product, and often produce only one crop per year on any given plot of land. Further, bio-based pesticide and plant health products are often applied differently and at different times than conventional chemical pesticides and so may be used incorrectly by an inexperienced grower or advisor, decreasing efficacy. We typically conduct on-farm demonstrations with growers in the first year they try one of our products on smaller plots of land to ensure successful application, promoting the continued use of our products in future years across more acres. In addition, we work with distributors to determine which crops to emphasize in a given year and which area to maximize the effectiveness of our demonstration program.

Target early adopters of new pest management technologies. For crop protection products, we target large commercial growers in the United States, who generally set industry standards through more widespread adoption of new pest management technologies they initially test on portions of their crops. We also target organic growers, who are more willing to take risks on new products as they have had few alternatives and great demand for increased yields. We plan to continue to recruit these growers and their consultants to participate in demonstrations and field trials, enabling them to become familiar with our bio-based pest management and plant health products, to experience their benefits firsthand and to promote the use of our products with other growers in their regions. For Zequanox, we have developed strategic relationships with early adopters in the power generation business to do efficacy demonstrations while perfecting the formulations and application of the product.

Educate growers and water resource managers about the benefits of our bio-based pest management products. We will continue to perform on-farm and in-facility demonstrations and provide field data packages to support and validate our product claims. We will also continue to participate in trade shows and conferences to educate growers, their licensed pest control advisors and water resource managers about the benefits of our bio-based pest management products. When in the field, our sales and technical service team members have access to a wealth of information regarding our products and on pre-loaded tablet computers to assist in solving growers’

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and distributors’ problems real-time. We have provided a free application for mobile phone users to assist in calculating tank mix quantities, as well as webinars and an online course on bio-based pest management products, which can be taken by growers for continuing education credit to maintain crop protection product applicator licenses. We intend to continue to expand our efforts to work with utilities, especially through potential distribution partners, which we believe will create increased demand for Zequanox in adjacent market spaces beyond the power and industrial treatment opportunities we are currently targeting.

Develop and leverage relationships with key industry influencers. We will continue to develop relationships early in the product development process with influential members within our target markets, including large innovative growers, technical experts at leading agricultural universities, licensed pest control advisors, wineries, food processors, produce packers, retailers and power facilities. We believe that educating industry influencers about the benefits of Regalia, Grandevo, Venerate, Majestene, Zequanox and our future products increases the likelihood that they will recommend our products to our distributors and end users.

Focus our own sales and marketing on the United States, while signing strategic agreements for international markets, turf, ornamental plants and consumer retail. Because of the concentration of large growers in the United States, we can access these customers through our own sales force. For international markets for Zequanox, we intend to develop strategic partnerships with large suppliers and distributors of water products. For Regalia, Grandevo, Venerate and Majestene, we have distribution agreements with leading agrichemical companies and national and regional distributors. For future products, distribution agreements will be developed with regional and national distributors or large multinationals on a case-by-case basis, depending on their expertise in the regions. We have engaged distributors that are selling Regalia in Canada for specialty crops, in the United States for turf and ornamental plants, and in parts of the Midwestern United States for row crops. We have also engaged a distributor, Engage Agro, who is selling Grandevo and Regalia in the United States for turf and ornamental plants as Grandevo PTO and Regalia PTO, respectively. We have an exclusive relationship with Scotts Miracle-Gro for the consumer retail market, and have recently submitted dossiers to Canadian regulators for consumer retail uses of Regalia and Grandevo as part of our relationship with Scotts Miracle-Gro.

Manufacturing

We have substantially transitioned our manufacturing processes in-house to our Bangor, Michigan facility, which was formerly used as a biodiesel plant prior to our acquisition in July 2012. Biopesticide formulation, microbial fermentation and product packaging are among the facility’s core competencies. We believe in-house manufacturing enhances control and flexibility in production while lowering manufacturing costs over time to achieve desired margins, in addition to strengthening intellectual property security. The facility has significant room for expansion to install drying capacity and larger fermenters to accommodate production of multiple products at higher volumes.

We now ferment our Grandevo and Zequanox products in our manufacturing facility, but use a third-party contractor for formulating them into spray-dried powders. The facility also accommodates full-scale production of Regalia. While we have the ability to produce the majority of our products using our own manufacturing capacity, we currently exclusively use third parties to manufacture Venerate and Majestene as a result of regulatory requirements that would require additional capital investment to produce these products in-house, and we expect to continue to utilize third-party manufactures for supplemental production capacity to meet excess seasonal demand. Once manufactured, we may use our own facility or third parties to package and label products.

The active ingredient in our Regalia product line is derived from the giant knotweed plant, which we obtain from China. We have scaled production of Regalia using a single supplier to acquire raw knotweed from numerous regional sources and perform an extraction process on this plant and create a dried extract that is shipped to our manufacturing plant for production and packaging. We do not maintain a long-term supply contract with this supplier. While there can be no assurance that we will continue to be able to obtain dried giant knotweed plant extract from our supplier in China at a competitive price point, we estimate that our current supply of the

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ingredient will be sufficient to manufacture product to meet the next 12 months’ demand. Should we elect or be required to do so, we do not believe that we would have substantial difficulty in finding an alternative supplier as we have identified and received quality knotweed from a number of new possible suppliers, although there can be no assurance that we will continue to be able to obtain dried extract from China at a competitive price point.

Research and Development

As of December 31, 2015, we had 35 full-time equivalent employees dedicated to research and development and patent related activities, 7 of whom hold Ph.D. degrees, plus 4 sales and field development personnel who focus on technical support and demonstration and research field trials. Our research and development team has technical expertise in microbiology, natural product and analytical chemistry, biochemistry, fermentation, entomology, nematology, weed science, plant physiology, plant pathology and aquatic sciences. Our research and development activities include discovery, product development, product support, regulatory, patent and field trial activities, which are principally conducted at our Davis, California facility as well as by our field development specialists on crops and mussel-infested facilities in their respective regions. We have reduced the size of our research and development staff compared to prior periods as part of our measures to streamline business operations, but we have made, and will continue to make, substantial investments in research and development. Our research and development expenses, including patent expenses, were $13.5 million, $19.3 million and $17.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Intellectual Property Rights

We rely on patents and other proprietary right protections, including trade secrets and proprietary know-how, to preserve our competitive position. As of December 31, 2015, we had 25 issued U.S. patents and 87 issued foreign patents (of which 5 U.S. patents and 37 foreign patents were in-licensed), 29 pending U.S. provisional and non-provisional patent applications (of which 1 was in-licensed), and 179 pending foreign patent applications (of which 5 were in-licensed) relating to microorganisms and natural product compounds, uses and related technologies. As of December 31, 2015, we had received 16 U.S. trademark registrations and had 7 trademark applications pending in the United States. As of December 31, 2015, we also had received 61 trademark registrations and had 19 trademark applications pending in various other countries.

When we find a microbial product in our screen that kills or inhibits one or more pests or pathogens in at least three replicated tests and identify the microorganism and its associated chemistry, we file a patent application claiming any one or more of the following:

• the microorganism, its DNA products, as well as mutations and other derivatives;

• the use of the microorganism for pest management;

• novel natural product compounds, their analogs and unique mixtures of compounds produced by the microorganism;

• the new use of known natural product compounds for pest management;

• formulations of the microorganism or compounds; and

• synergistic mixtures of the microorganism or compounds with conventional chemical or other pesticides.

One of our commercially available products and certain of our lead product candidates are based on microbes we have identified using our proprietary discovery process, including Venerate, Majestene and MBI-010, which are based on a Burkholderia bacterium, with respect to which we have 10 issued patents and 36 pending patent applications (both U.S. and foreign), and MBI-110 and MBI-507, which are based on a Bacillus strain, with respect to which we have 3 issued patents and 13 pending patent applications (both U.S. and foreign).

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We have also entered into in-license and research and development agreements with respect to the use and commercialization of Regalia, Grandevo and Zequanox, as well as certain products under development, including Haven (MBI-505) and MBI-601. Under the licensing arrangements for our commercially available products, we are obligated to pay royalty fees between 2% and 5% of net sales of these products, subject in certain cases to aggregate dollar caps. The exclusivity and royalty provisions of these agreements are generally tied to the expiration of underlying patents. For Regalia, the licensed patent is related to a method of extraction of knotweed. These patents acquired for Regalia and in-licensed for Zequanox will expire in or around 2017, although we have filed separate patent applications with respect to both product lines and have been issued two U.S. patents with respect to Regalia and two for Zequanox. In addition, the in-licensed U.S. patent for Grandevo is expected to expire in or around 2024, but there is a pending patent application relating to Grandevo that could expire later than 2024, if issued, and we have also filed separate patent applications for Grandevo of which four have been issued on a novel compound and uses for nematodes, corn rootworm and a variety of insects. While third parties thereafter may develop products using the technology under the expired patents, we do not believe that they can produce competitive products without infringing other aspects of our proprietary technology, and we therefore do not expect the expiration of the patents or the related exclusivity obligations to have a significant adverse financial or operational impact on our business. Certain additional information regarding the intellectual property associated with commercially available products based in part on in-licensed technology follows:

• Regalia. We entered into an exclusive license agreement with a company co-founded by Dr. Hans von Amsberg, a former employee of German chemical producer BASF, in May 2007 for U.S. and limited international use of a U.S. patent and technology used in our Regalia product line. We have also filed patent applications with respect to new formulations of Regalia. Two U.S. patents have been issued on the synergistic combinations with biopesticides and conventional chemical pesticides and one patent has been issued on the new uses for soil and roots.

• Grandevo. We entered into a co-exclusive license agreement with the USDA in November 2007 for the use in the United States of a U.S.-issued patent and a U.S. patent application relating to the Chromobacterium subtsugae bacteria used in our Grandevo product line. We have filed patent applications on the compounds produced in the bacterial cells, gene sequences and new uses for the Chromobacterium subtsugae bacteria, and for new uses and new formulations of our Grandevo product line. Four U.S. patents have been issued on a novel compound produced by the bacteria for uses on a variety of insects, use for corn rootworm populations and for nematode control. While a second company has licensed the USDA’s patent with respect to the Chromobacterium subtsugae bacteria and could develop products based on the same underlying intellectual property, we have not provided this company access to the proprietary technology we have developed relating to Grandevo.

• Zequanox. We entered into a license agreement with The University of the State of New York in December 2009 pursuant to which we were granted an exclusive license under the University’s rights for the worldwide use of a U.S.-issued patent and a Canadian-issued patent relating to the Pseudomonas fluorescens bacteria used in our Zequanox product line. Two U.S. patents have been issued on the natural, mussel-killing compounds in the bacteria, and we have filed patent applications relating to various Zequanox active ingredients.

Regulatory Considerations

Our activities are subject to extensive federal, state, local and foreign governmental regulations. These regulations may prevent us or our collaborators from developing or commercializing products in a timely manner or under technically or commercially feasible conditions and may impose expenses, delays and other impediments to our product development and registration efforts. In the United States, the EPA regulates our bio-based pest management products under the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), the Federal Food, Drug and Cosmetics Act (“FFDCA”) and the Food Quality Protection Act (“FQPA”). In addition, some of our plant health products are regulated as fertilizers or biostimulants in each of the fifty states.

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In 2004, the United States Congress passed the Pesticide Registration Improvement Renewal Act, which was reauthorized in 2007 and 2012, a result of efforts from an industry coalition of pesticide companies and environmental groups, to codify pesticide approval times in return for user fees. This law facilitates faster approval times for biopesticides, with EPA approvals typically received within 16 to 24 months, compared with 36 months or longer for conventional chemical pesticides. Registration processes for state and foreign governments vary between jurisdictions and can take up to 12 months for state governments, such as California and New York, and up to 36 months or more for foreign governments. In some instances, California and Canada will conduct joint reviews with the EPA, which allows some pesticides to receive concurrent approvals in California, Canada and the United States. However, in most instances, most foreign government submissions will not occur until after a U.S. registration has been secured. To register a crop protection product with the EPA, companies must demonstrate the product is safe to mammals, non-target organisms, endangered species and the environment. To demonstrate the bio-based pest management product’s safety, required studies must be conducted that evaluate mammalian toxicology, toxicological effects to non-target organisms in the environment (ecotoxicological exposures) and physical and chemical properties of the product. The registration dossier is subject to both scientific and administrative reviews by EPA scientists and management before registration approval. The scientific review involves thorough evaluation of submitted data and completion of risk assessments for human dietary and ecotoxicological exposures. Upon completion of this process, the registration package, including the proposed label, is sent to the Office of General Council for legal review. The final step in the registration process is administrative sign-off by the EPA director of the Biopesticides and Pollution Prevention Division.

In addition to EPA approval, we are required to obtain regulatory approval from the appropriate state regulatory authority in individual states and foreign regulatory authorities before we can market or sell any pest management product in those jurisdictions. Foreign governments typically require up to two seasons of locally generated field efficacy data on crop-pest combinations before a product dossier can be submitted for review. California and foreign jurisdictions also require us to submit product efficacy data, which the EPA historically has not required, but may request.

While these regulations substantially increase the time and cost associated with bringing our products to market, we believe that our management team’s significant experience in bringing our and other companies’ technologies through EPA, state and foreign regulatory approval, efficient development process and ability to leverage our strategic collaborations to assist with registrations, particularly in Europe and Latin America, will enable us to overcome these challenges.

Since our plant health products (which are classified by the EPA as biostimulants) are not used to control pests, they currently fall outside the legal scope of FIFRA, FFDCA and FQPA and, therefore, we do not need to submit applications for EPA registrations for such products. However, we must still submit state registrations for our plant health products, and those containing microbes of foreign origin may also need to be “deregulated” (or determined not to be a plant pest) under the Plant Protection Act by the USDA Animal and Plant Health Inspection Service prior to use in field trials or for large scale release. Nevertheless, the regulatory process is significantly accelerated compared to that for biopesticides.

Regalia. The EPA granted approval for the Regalia SC formulation in August 2008, for the Regalia 5% (“Regalia”) formulation in May 2009, for the Regalia 20% (“Regalia Maxx”) formulation in January 2010 and for a “ready to use” consumer formulation in January 2010. Regalia is currently registered in all U.S. states and Puerto Rico. We have also registered Regalia Maxx in Brazil, Mexico, Canada, South Africa, Ecuador, Turkey, Panama, El Salvador, Guatemala, Honduras, Peru, the Dominican Republic, Morocco and Tunisia. We submitted an Annex 1 registration dossier to the European Union. Our Regalia registration package has completed initial review by regulatory authorities in the United Kingdom, which is serving as lead for completing the Annex 1 (active substance) listing of Regalia for the European Union. The UK-generated risk assessment has completed its technical review by the European Food Safety Authority, and it is currently being reviewed by the European Commission for Annex 1 listing consideration. In addition to obtaining the Annex 1 listing, we must obtain

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Annex 3 authorization approval from each country in which we plan to market and sell products. Regalia Maxx will be marketed as “Sakalia” by Syngenta in Europe and much of the Middle East and Africa. In January 2016, we launched a new formulation of Regalia that no longer contains hexanol, which is difficult to source and is likely to experience future regulatory restrictions. This new formulation of Regalia disperses better in water and is easier to mix and rinse from containers and spray equipment.

Grandevo. In August 2011 and May 2012, the EPA granted approval for the Grandevo insecticide “technical grade active ingredient” and a wettable powder formulation, respectively. The wettable powder formulation is registered in all 50 states as well as Puerto Rico and the District of Columbia. In May 2013, we received EPA approval for a revised label reflecting Grandevo’s safety for bees. In addition, we submitted the registration dossier for Grandevo to Mexico and we also received permission to field test Grandevo in Brazil, Australia, New Zealand and South Africa, allowing us to prepare the dossiers for submission in those countries. We submitted dossiers for Grandevo registration in Europe and Canada in 2015, with the Netherlands recently finding the Grandevo dossier meeting “completeness check” requirements in July 2015 and officially starting the dossier review for the EU. Grandevo is also currently being field evaluated in a Brazilian government sponsored emergency use program to control an outbreak of Heliocoverpa armigera infestations in cotton and soya. Grandevo was submitted to the emergency use program in October 2014 and is under active review and field evaluation by Brazilian regulatory agencies. Concurrently, we have other field trials either underway or planned in Brazil for 2016 on a variety of insect pests in order to have additional crop-pest uses added to the regulatory dossier and label.

Venerate. In February 2014, the EPA granted approval for Venerate. Venerate is currently registered in 48 states and Puerto Rico, with registration pending in New York and Hawaii. In 2014, we submitted Venerate registration dossiers in Canada and Mexico. Several key regulatory efficacy trials to support Venerate Annex 1 listing in Europe have been completed and ongoing work will enable us to submit a dossier for Venerate in 2016. As with Grandevo, Venerate is also currently being field evaluated in a Brazilian government sponsored emergency use program to control an outbreak of Heliocoverpa armigera infestations in cotton and soya. Venerate also was submitted to the emergency use program in October 2014 and is under active review by Brazilian regulatory agencies. Concurrently, we have other field trials either underway or planned in Brazil for 2016 on a variety of insect pests in order have broader uses available.

Majestene. In October 2015, the EPA granted product registration for Majestene. Majestene is currently registered in more than 25 states, including key states of Florida, Georgia, South Carolina, North Carolina, Wisconsin, Idaho, Washington and Oregon. We are currently preparing 2015 efficacy trial data to support product registration in California, with a regulatory submission to support tomato, strawberry, potato and corn uses in California made in the first quarter of 2016. With additional efficacy trial data expected in 2016, we expect to submit an expanded crop label to states in late 2016 or early 2017.

Zequanox. In July 2011, the EPA granted a conditional approval of the “technical grade active ingredient” in an early formulation of Zequanox. A spray-dried powder formulation, which is an improvement over the “end product” approved in July 2011, was approved with an unconditional registration in March 2012, and this formulation is now commercially available. We also received approval for Zequanox for use in hydroelectric plants in Canada in November of 2012. We received EPA approval for open water uses in June 2014. Currently, Zequanox is being evaluated by several U.S. and Canadian federal, state and provincial entities as an invasive mussel eradication, native mussel habitat restoration and harmful algal bloom prevention tool in the Great Lakes region under the auspices of government programs. In-pipe and open water labels have been approved in all targeted states, with the exception of California where in-pipe uses are currently registered and the open water use label is under evaluation.

As with any pesticide, our pest management products will continue to be subject to review by the EPA and state regulatory agencies. The EPA has the authority to revoke the registration or impose limitations on the use of any of our pest management products if we do not comply with the regulatory requirements, if unexpected problems occur with a product or if the EPA receives other newly discovered adverse information. See Part I-Item 1A-

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“Risk Factors—Risks Relating to Our Business and Strategy—Our inability to obtain regulatory approvals, or to comply with ongoing and changing regulatory requirements, could delay or prevent sales of the products we are developing and commercializing.” Our research and development activities are also subject to federal, state and local worker safety, air pollution, water pollution and solid and hazardous waste regulatory programs and periodic inspection. We believe that our facilities are in substantial compliance with all applicable environmental regulatory requirements.

Competition

For pest management products, performance and value are critical competitive factors. To compete against manufacturers of conventional chemical pesticides and genetically modified crops, we need to demonstrate the advantages of our products over these more established pest management products. Many large agrichemical companies are developing, and have introduced, new conventional chemical pesticides and genetically modified products that they believe are safer and more environmentally friendly than older conventional chemical products.

The pest management market is very competitive and is dominated by multinational chemical and life sciences companies such as Arysta, BASF, Bayer, Dow Agrosciences, DuPont, FMC, Monsanto, Sumitomo Chemical and Syngenta. Universities, research institutes and government agencies may also conduct research, seek patent protection and, through collaborations, develop competitive pest management products. Other companies, including bio-specialized biopesticide businesses such as AgraQuest (now a part of Bayer), Certis USA (now a part of Mitsui), Novozymes (in a joint venture with Monsanto) and Valent Biosciences (now a part of Sumitomo) may prove to be significant competitors in the bio-based pest management and plant health market. In addition, we could face competition in the future from new, well-financed start-up companies such as AgBiome and Indigo.

In many instances, agrichemical companies have substantially greater financial, technical, development, distribution and sales and marketing resources than we do. Moreover, these companies may have greater name recognition than we do and may offer discounts as a competitive tactic. There can be no assurance that our competitors will not succeed in developing pest management products that are more effective or less expensive than ours or that would render our products obsolete or less competitive. Our success will depend in large part on our ability to maintain a competitive position with our technologies and products.

Employees

In connection with our recent changes in business strategy, we have significantly reduced overall headcount, while building a new sales and marketing organization which provides for increased training and a better ability to educate and support customers in specialty crop markets as well as transitioning our product development staff to undertake greater responsibility for technical sales support, field trials and demonstrations to promote sales growth. As of December 31, 2015, we had 86 full-time equivalent employees, of whom 9 hold Ph.D. degrees. Approximately 35 employees are engaged in research and development and patent related activities, 17 in sales and marketing (including 4 sales and field development personnel who focus on technical support and demonstration and research field trials), 21 in operations, including manufacturing, supply chain and quality assurance, and 13 in management, accounting/finance and administration. None of our employees are represented by a labor union.

Corporate Information

We were originally incorporated in the State of Delaware in June 2006 as Marrone Organic Innovations, Inc. Our principal executive offices are located at 1540 Drew Avenue, Davis, CA 95618. Our telephone number is (530) 750-2800. Our website address is www.marronebioinnovations.com.

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ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, growth prospects and the trading price of our common stock.

Risks Relating to Our Business and Strategy

We have a limited number of commercialized products, have incurred significant losses to date and anticipate continuing to incur losses in the future, and we may not achieve or maintain profitability.

We are an early stage company with a limited number of commercialized products. We have incurred operating losses since our inception in June 2006, and we expect to continue to incur operating losses for the foreseeable future. As of December 31, 2015 and 2014, we had an accumulated deficit of $203.6 million and $159.8 million, respectively. For the years ended December 31, 2015, 2014 and 2013, we had a net loss attributable to common stockholders of $43.7 million, $51.7 million and $32.6 million, respectively. As a result, we will need to generate significant revenues to achieve and maintain profitability, and we may not be able to achieve profitability in the near future or at all, which may depress our stock price.

Through December 31, 2015, we have derived substantially all of our revenues from sales of Regalia and Grandevo. In addition, we have derived revenues from strategic collaboration and development agreements for the achievement of testing validation, regulatory progress and commercialization events, and from sales of other products. Accordingly, there is only a limited basis upon which to evaluate our business and prospects. Our future success depends, in part, on our ability to market and sell other products, such as Zequanox, Venerate and Majestene, as well as our ability to increase sales of Regalia and Grandevo and to introduce new products. An investor in our stock should consider the challenges, expenses and difficulties we will face as a company seeking to develop and manufacture new types of products in a relatively established market. We expect to derive future revenues primarily from sales of Regalia, Grandevo, Zequanox, Venerate, Majestene and other products, but we cannot guarantee the magnitude of such sales, if any. We expect to continue to devote substantial resources to expand our research and development activities, further increase manufacturing capabilities and expand our sales and marketing activities for the further commercialization of Regalia, Grandevo, Zequanox, Venerate and Majestene, and other product candidates. We expect to incur additional losses for the foreseeable future, including at least the next several years, and may never become profitable.

There is uncertainty about our ability to continue as a going concern.

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We currently estimate that by the fourth quarter of 2016, without entering into strategic agreements that include significant cash payments upfront, significantly increasing revenues from sales or raising additional capital through the issuance of equity or debt, we will be below the minimum cash balance requirement in our promissory notes with affiliates of Waddell & Reed. Further, although under a promissory note with Five Star Bank our lender has waived a requirement to remain below a maximum debt-to-worth ratio under this agreement through December 31, 2016, we expect that immediately after this waiver has expired, we will be in violation of this covenant as well. Breach of covenants included in our debt agreements, which could result in the lenders demanding payment of the unpaid principal and interest balances, would have a material adverse effect upon our business and would likely require us to seek to renegotiate these debt arrangements with the lenders. If such negotiations are unsuccessful, we may be required to seek protection from creditors through bankruptcy proceedings. These circumstances raise substantial doubt about our ability to continue as a going concern, which depends on our ability to obtain further waivers of our covenants, or raise additional capital and increase revenues. Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

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We expect to require additional financing in the future to meet our business requirements and to service our debt. Such capital raising may be costly, difficult or not possible to obtain and, if obtained, could significantly dilute current stockholders’ equity interests, and we may be unable to repay our secured indebtedness.

In our August 2015 private placement transaction, we issued senior secured promissory notes in the initial aggregate principal amount of $40.0 million, which accrue interest at a rate of 8% per annum, with $10.0 million payable three years from the closing, $10.0 million payable four years from the closing and $20.0 million payable five years from the closing. In June 2014, we borrowed $10.0 million pursuant to a promissory note with a bank, which accrues interest at a variable interest rate, 5.25% per annum as of December 31, 2015, and which is repayable in monthly payments through June 2036. We also completed private placements in October 2012 and April 2013 of promissory notes in the aggregate principal amount of $12.5 million, which accrue interest at 18% through maturity in October 2017. The debt agreements with respect to these transactions contain various financial and other covenants, as discussed below, and our obligations under the loan agreements are secured by all of our real and personal property assets and general intangibles.

As we expect to continue to incur significant losses until we are able to significantly increase our revenue, we expect to need significant additional financing to meet the financial covenants or pay the principal and interest under our debt agreements, as well as to maintain and expand our business. We may seek additional funds from public and private stock offerings, corporate collaborations and licenses, borrowings under lease lines of credit or other sources. Additional capital may not be available on terms acceptable to us, or at all. Any additional equity financing may be significantly dilutive to stockholders, and debt financing, if available, may include restrictive covenants and bear high rates of interest. In addition, our existing loan agreements contain certain restrictive covenants that either limit our ability to, or require a mandatory prepayment if we incur additional indebtedness and liens and enter into various specified transactions. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of our lenders or prepay the outstanding amounts under the debt agreements, which could require us to pay additional prepayment penalties. In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We also may be required to recognize non-cash expenses in connection with certain securities we issue, such as warrants, which may adversely impact our financial results.

Certain of our debt agreements also contain financial covenants, including maintaining minimum current, debt-to-worth and loan-to-value ratios and certain cash balance requirements, in addition to provisions providing for an event of default if there is a material adverse change in our financial condition and if we are in default under certain of our other agreements. While we are not currently in default under any of these agreements, and none of our lenders have previously declared an event of default on our indebtedness, prior to our recent receipt of waivers from our lenders, we had not been in compliance with certain of these covenants. In addition, if we fail to pay any principal or interest under our indebtedness when due, or are otherwise in violation of certain covenants under our debt agreements, this may result in the acceleration of our indebtedness, and we may not have sufficient funds to repay that indebtedness.

If we cannot raise more money when needed, or are unable to use our future working capital, borrowings or equity financing to repay or refinance the amounts outstanding under our debt agreements or to renegotiate our debt arrangements with lenders, we may have to reduce our capital expenditures, scale-back our development of new products, reduce our workforce or license to others products that we otherwise would seek to commercialize ourselves. Any of these eventualities would likely have a material adverse impact on our value and the value of our equity. Further, we may not be able to continue operating if we do not generate sufficient revenue from operations needed to stay in business, and we may be required to seek protection from creditors through bankruptcy proceedings. See Part II-Item 7-“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” below.

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Our business may fail if we are not able to increase sales.

Our future success will depend on our ability to significantly increase sales from the bio-based pest management products we have commercialized, both domestically and abroad. Our initial sales of our primary formulation of Regalia and our initial formulation of Grandevo occurred in the fourth quarter of 2009 and the fourth quarter of 2011, respectively. We began selling Zequanox in the second half of 2012, Venerate in May 2014 and Majestene in December 2015. However, while we have invested considerable resources in the launch of our products, various factors have impeded growth in sales of these products.

For example, we believe adverse conditions in the U.S. agricultural industry, including low commodity prices, may have reduced demand for our products. Further delays in regulatory approvals of certain of our products in Europe and other jurisdictions may slow international growth, and any delay in a product launch that causes us to miss a growing season may require us to wait a year to enter that market. The extended drought in California and other markets has reduced demand for our products as fewer acres are planted, changes in weather patterns in Florida resulted in a shortened bloom cycle for the citrus market and few pesticide and plant health products being used, and certain of our strategic collaborations have not resulted in significant increases in sales of Regalia outside of the Unites States. Due to our prioritization plan, we have not committed sufficient resources to Zequanox in order to market it full-scale, and our collaboration efforts with regard to this product may not result in increased sales. In addition, the departures of our former chief operating officer and significant members of our sales staff in the third quarter of 2014 and subsequent turnover in our sales and marketing department disrupted the 2014 launch of Venerate as well as growth in sales of our other commercialized products, including Regalia and Grandevo. Further, we believe that following the announcement of the matters relating to our recent restatement, some customers and potential customers were concerned about our reported investigation efforts, and therefore, were reluctant to do business with us until after we had reached a settlement with the SEC.

Lower than expected sales growth may result in an increase in write-offs and inventory obsolescence if we are not be able to use raw materials or sell finished goods before they expire, and may result in higher proportional operating expense levels, increases in our cost of product revenues and decreases in product margins as we are unable to manufacture products as efficiently at low volumes and underutilization of our Bangor, Michigan manufacturing facility results in increased relative overhead and operating costs in addition to decreased allocation of depreciation and other costs to production and inventory. If we are unable to establish a successful sales and marketing infrastructure internally and increase sales of our commercialized products, our financial results will be adversely affected, our available cash and ability to raise additional capital will decrease and our business may fail.

We have limited experience in marketing and selling our products and will need to expand our sales and marketing infrastructure.

We currently have limited sales and marketing experience and capabilities. As of December 31, 2015, we employed 17 full-time equivalent sales and marketing personnel, 4 of which focus on technical support and demonstration and conducting field trials and 3 of which focus on marketing. Many of these sales personnel are recent hires following the departures in the third quarter of 2014 of our former chief operating officer, who led our sales and marketing teams, and significant members of our sales staff. These new personnel have required significant training to attain a high level of technical expertise and knowledge regarding the capabilities of our bio-based products compared with conventional chemical pest management products and techniques in order to educate growers and independent distributors on the uses and benefits of our products. We will need to further develop our sales and marketing capabilities and find partners in order to successfully increase sales of our commercially available products and to commercialize other products we are developing, which may involve substantial costs. We will also need to further expand our field development team to include more technical service activities to support sales. There can be no assurance that our specialists and other members of our sales and marketing team will successfully compete against the sales and marketing teams of our current and future competitors, many of which may have more established relationships with distributors and growers. Our inability to recruit, train and retain sales and marketing personnel, or their inability to effectively market and sell the products we are developing, could impair our ability to gain market acceptance of our products and cause our sales to suffer.

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If we are unable to maintain and further establish successful relations with the third-party distributors that are our principal customers, or they do not focus adequate resources on selling our products or are unsuccessful in selling them to end users, sales of our products will be adversely affected.

In the United States, we rely on independent distributors of agrichemicals to distribute and assist us with the marketing and sale of Regalia, Grandevo, Venerate, Majestene and other products we are developing. We also intend to leverage these relationships to sell Bio-Tam 2.0 in California, Oregon, Washington and Arizona. These distributors are our principal customers, and revenue growth will depend in large part on our success in establishing and maintaining this sales and distribution channel. However, there can be no assurance that our distributors will be successful in selling our products to end users, or will focus adequate resources on selling them, and they may not continue to purchase or market our products for a number of reasons.

For example, many distributors lack experience in marketing bio-based pest management and plant health products, which generally must be used differently than conventional chemical pesticides. Distributors may not continue to market our products if they receive negative feedback from end users, even if we believe our products are being blamed for damage to treated plants caused by other pesticides with which our products have been combined (whether properly or improperly). In addition, many of our distributors are in the business of distributing and manufacturing other, possibly competing, pest management and plant health products, including internally developed and commercialized bio-based products as well as bio-based products developed by larger agrichemical companies that negotiate to “bundle” such specialty products with other high demand products. As a result, our distributors may earn higher margins by selling competing products or combinations of competing products. Our recent Audit Committee investigation, financial restatement and SEC investigation imposed additional work on our distributors, which has been perceived negatively in some cases, and distributors may also react negatively to additional “sell-through” reporting requirements we may require of them to apply our own revenue recognition policies. If we are unable to establish or maintain successful relationships with independent distributors, we will need to further develop our own sales and distribution capabilities, which would be expensive and time-consuming, and the success of which would be uncertain.

The product candidates we select for development and commercialization may fail to generate significant revenues, and we may not be able to successfully enter into strategic collaborations with respect to our other product candidates.

We have been implementing a prioritization plan that focuses our research and development on products that are expected to have the greatest near-term growth potential. Accordingly, we are currently limiting our internal efforts to four product candidates: MBI-010, a bioherbicide that is based on the microorganism in Venerate and Majestene, which we plan to submit to the EPA in late 2016 or early 2017; MBI-110, a biofungicide, which we submitted to the EPA in January 2016; Haven (MBI-505), a plant health product that does not require EPA registration; and MBI-601, a biopesticide that produces gaseous natural compounds, or “biofumigant,” which we submitted to the EPA in April 2014. Simultaneously, we are seeking collaborations with third parties to develop and commercialize more early stage candidates on which we have elected not to expend significant internal resources.

Successful development of product candidates will require significant additional investment, including costs associated with research and development, completing field trials and obtaining regulatory approval, as well as the ability to manufacture our products in large quantities at acceptable costs while also preserving high product quality. Difficulties often encountered in scaling up production include problems involving production yields, quality control and assurance, shortage of qualified personnel, production costs and process controls. In addition, we are subject to inherent risks associated with new products and technologies. These risks include the possibility that any product candidate may:

• be found unsafe;

• be ineffective or less effective than anticipated;

• fail to receive or take longer to receive necessary regulatory approvals;

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• be difficult to competitively price relative to alternative pest management solutions;

• be harmful to consumers, growers, farm workers or the environment;

• be harmful to crops when used in connection with conventional chemical pesticides;

• be difficult or impossible to manufacture on an economically viable scale;

• be subject to supply chain constraints for raw materials;

• fail to be developed and accepted by the market prior to the successful marketing of similar products by competitors;

• be impossible to market because it infringes on the proprietary rights of third parties; or

• be too expensive for commercial use.

Our decisions regarding which product candidates to pursue may cause us to fail to capitalize on product candidates that could have given rise to viable commercial products and profitable market opportunities. In addition, we may not be successful in entering into new arrangements with third parties, on favorable terms or at all, with respect to product candidates we do not pursue internally.

Adverse weather conditions and other natural conditions can reduce acreage planted or incidence of crop disease or pest infestations, which can adversely affect our results of operations.

Production of the crops on which our products are typically applied is vulnerable to extreme weather conditions such as heavy rains, hurricanes, hail, tornadoes, freezing conditions, drought, fires and floods. Weather conditions can be impacted by climate change resulting from global warming, including changes in precipitation patterns and the increased frequency of extreme weather events, or other factors. Unfavorable weather conditions can reduce both acreage planted and incidence (or timing) of certain crop diseases or pest infestations, each of which may reduce demand for our products. For example, in 2013 and 2012, the United States experienced nationwide abnormally low rainfall or drought, reducing the incidence of fungal diseases such as mildews and the demand for fungicides such as Regalia. These conditions have been present in some of our key markets throughout both 2015 and 2014 as well, and have also resulted in further reductions in acreage planted throughout California and the Pacific Northwest. Shortened bloom cycles relating to changes in weather patterns also could reduce the amount of pesticides and plant health products used during a growing season. For example, in 2014, the Florida citrus market experienced a shortened bloom cycle as a result of changes in weather patterns, which negatively affected our sales of Grandevo in the Florida market. In addition, ideal weather conditions can reduce the incidence of diseases and pest infestations and increase yields without the use of additional pesticide and plant health applications. Increased yields can also reduce commodity prices causing growers to make a decision not to increase costs by reducing the amount of pesticides and plant health products used during a growing season. Since all of our products have different margins, changes in product mix as a result of these conditions could affect our overall margins.

If our ongoing or future field trials are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our products on a timely basis.

The successful completion of multiple field trials in domestic and foreign locations on various crops and water infrastructures is critical to the success of our product development and marketing efforts. If our ongoing or future field trials are unsuccessful or produce inconsistent results or unanticipated adverse side effects on crops or on non-target organisms, or if we are unable to collect reliable data, regulatory approval of our products could be delayed or we may be unable to commercialize our products. In addition, more than one growing or treatment season may be required to collect sufficient data and we may need to collect data from different geographies to prove performance for customer adoption. Although we have conducted successful field trials on a broad range of crops, we cannot be certain that additional field trials conducted on a greater number of acres, or on crops for which we have not yet conducted field trials, will be successful. Moreover, the results of our ongoing and future

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field trials are subject to a number of conditions beyond our control, including weather-related events such as drought or floods, severe heat or frost, hail, tornadoes and hurricanes, or low or no natural occurrence of the pests intended for testing. Generally, we pay third parties, such as growers, consultants and universities, to conduct field tests on our behalf. Incompatible crop treatment practices or misapplication of our products by these third parties or lack of sufficient occurrence of the identified pests in nature for a particular trial could impair the success of our field trials.

Our inability to obtain regulatory approvals, or to comply with ongoing and changing regulatory requirements, could delay or prevent sales of the products we are developing and commercializing.

The field testing, manufacture, sale and use of pest management products, including Regalia, Grandevo, Zequanox, Venerate, Majestene and other products we are developing, are extensively regulated by the EPA and state, local and foreign governmental authorities. These regulations substantially increase the time and cost associated with bringing our products to market. If we do not receive the necessary governmental approvals to test, manufacture and market our products, or if regulatory authorities revoke our approvals, do not grant approvals in a timely manner or grant approvals subject to restrictions on their use, we may be unable to sell our products in the United States or other jurisdictions, which could result in a reduction in our future revenues.

We have received approval from the EPA for the active ingredients and certain end product formulations for Regalia, Grandevo, Zequanox, Venerate, Majestene and MBI-011. As we introduce new formulations of and applications for our products, we will need to seek EPA approval prior to commercial sale. For any such approval, the EPA may require us to fulfill certain conditions within a specified period of time following initial approval. We are also required to obtain regulatory approval from other state and foreign regulatory authorities before we market our products in their jurisdictions, some of which have taken, and may take, longer than anticipated.

Some of these states and foreign countries may apply different criteria than the EPA in their approval processes. Although federal pesticide law preempts separate state and local pesticide registration requirements to some extent, state and local governments retain authority to control pesticide use within their borders.

There can be no assurance that we will be able to obtain regulatory approval for marketing our additional products or new product formulations and applications we are developing. Although the EPA has in place a registration procedure for biopesticides like Regalia and Grandevo that is streamlined in comparison to the registration procedure for conventional chemical pesticides, there can be no assurance that all of our products or product extensions will be eligible for this streamlined procedure or that additional requirements will not be mandated by the EPA that could make the procedure more time consuming and costly for our future products.

Additionally, for California state registration and registration in jurisdictions outside of the United States, all products need to be proven efficacious for each proposed crop-pest combination, which can require costly field trial testing, and a favorable result is not assured. Because many of the products that may be sold by us must be registered with one or more government agencies, the registration process can be time consuming and expensive, and there is no guarantee that the product will obtain all required registrations. We have intentionally obtained registration in some jurisdictions and not in others. California is one of the largest and most important producers of agricultural products in the world. Because of its stringent regulation of pesticides and environmental focus, we also view California as one of the most natural and attractive markets for our products. However, California is also very stringent, is generally more time consuming and lacks legally mandated deadlines for its reviews of reduced-risk biopesticides. Therefore, gaining concurrent approvals with the EPA, other states and sometimes even other countries may not always be achievable. Even if we obtain all necessary regulatory approvals to market and sell our products, they will be subject to continuing review and extensive regulatory requirements, including periodic re-registrations. The EPA, as well as state and foreign regulatory authorities, could withdraw a previously approved product from the market upon receipt of newly discovered information, including an inability to comply with their regulatory requirements or the occurrence of unanticipated problems with our products, or for other reasons.

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Bio-based pest management and plant health products are not well understood, which necessitates investment in customer education and makes effectively marketing and selling our products difficult.

The market for bio-based pest management and plant health products is underdeveloped when compared to conventional pesticides. Customers in the crop production sector and the water treatment sector are generally cautious in their adoption of new products and technologies. Growers often require on-farm demonstrations of a given pest management or plant health product. Initial purchases of the product tend to be conservative, with the grower testing on a small portion of their overall crop. As the product is proven, growers incorporate the product into their rotational programs and deploy it on a greater percentage of their operations. As a result, large scale adoption generally takes several growing seasons. Water treatment products must also pass efficacy and ecological toxicity tests. In addition, given the relative novelty of our water treatment products, consumers of those products will continue to require education on their use, which may delay their adoption.

In addition, customers have historically perceived bio-based pest management products as more expensive and less effective than conventional chemical pesticides. To succeed, we will need to continue to change that perception. To the extent that the market for bio-based pest management products does not further develop or customers elect to continue to purchase and rely on conventional chemical pesticides, our market opportunity will be limited.

The high level of competition in the market for pest management and plant health products may result in pricing pressure, reduced margins or the inability of our products to achieve market acceptance.

The markets for pest management and plant health products are intensely competitive, rapidly changing and undergoing consolidation. We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for our products.

Many entities are engaged in developing pest management and plant health products. Our competitors include major multinational agrichemical companies such as Arysta, BASF, Bayer, Dow Agrosciences, DuPont, FMC, Monsanto, Sumitomo Chemical and Syngenta, some of which have developed bio-based products for our target markets, as well as specialized bio-based pesticide and plant health businesses such as AgraQuest (now a part of Bayer), Certis USA (now a part of Mitsui), Novozymes (in a joint venture with Monsanto) and Valent Biosciences (now a part of Sumitomo). Many of these organizations have longer operating histories, significantly greater resources, greater brand recognition and a larger base of customers than we do. As a result, they may be able to devote greater resources to the manufacture, promotion or sale of their products, receive greater resources and support from independent distributors, initiate or withstand substantial price competition or more readily take advantage of acquisition or other opportunities. Further, many of the large agrichemical companies have a more diversified product offering than we do, which may give these companies an advantage in meeting customers’ needs by enabling them to offer a broader range of pest management and plant health solutions. In addition, we could face competition in the future from new, well-financed start-up companies such as AgBiome and Indigo.

Our product sales are subject to weather conditions and other factors beyond our control, which may cause our operating results to fluctuate significantly quarterly and annually.

The level of seasonality in our business overall is difficult to evaluate as a result of our relatively early stage of development, our relatively limited number of commercialized products, our expansion into new geographical territories, the introduction of new products, the timing of introductions of new formulations and products and our recognition of revenue on both a “sell-in” and “sell-through” basis, depending on the transaction. It is possible that our business may become more seasonal, or experience seasonality in different periods, than anticipated, particularly if we expand into new geographical territories, add or change distributors or distributor programs or introduce new products with different applicable growing seasons, or if a more significant component of our revenue becomes comprised of sales of Zequanox, which has a separate seasonal sales cycle compared to our crop protection products.

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Notwithstanding any such seasonality, we expect substantial fluctuation in sales year over year and quarter over quarter as a result of a number of variables on which sales of our products are dependent. Weather conditions, natural disasters and other factors affect planting and growing seasons and incidence of pests and plant disease, and accordingly affect decisions by our distributors, direct customers and end users about the types and amounts of pest management and plant health products to purchase and the timing of use of such products. In addition, disruptions that cause delays by growers in harvesting or planting can result in the movement of orders to a future quarter, which would negatively affect the quarter and cause fluctuations in our operating results. For example, late snows and cold temperatures in the Midwestern and Eastern United States in the first and second quarters of 2014 delayed planting and pesticide and plant health applications. Customers also may purchase large quantities of our products in a particular quarter to store and use over long periods of time or time their purchases to manage their inventories, which may cause significant fluctuations in our operating results for a particular quarter or year, and low commodity prices may discourage growers from purchasing our products in an effort to reduce their costs and increase their margins for a growing season.

Our expense levels are based in part on our expectations regarding future sales. As a result, any shortfall in sales relative to our expectations could cause significant fluctuations in our operating results from quarter to quarter, which could result in uncertainty surrounding our level of earnings and possibly a decrease in our stock price.

We rely on the experience and expertise of our senior management team and other key personnel, and if we are unable to recruit or retain qualified personnel, our development and commercialization efforts may be significantly delayed.

We depend heavily on the principal members of our management, particularly Pamela G. Marrone, Ph.D., our founder, President and Chief Executive Officer, the loss of whose services might significantly delay or prevent the achievement of our scientific or business objectives. Although we maintain and are the beneficiary of $10.0 million in key person life insurance policies for the life of Dr. Marrone, we do not believe the proceeds would be adequate to compensate us for her loss.

We have a lean staff, and rely on qualified sales and marketing, research and development and management personnel to succeed. For example, the departures of our former chief operating officer and significant members of our sales staff in the third quarter of 2014 and subsequent turnover in our sales and marketing department adversely impacted our business by disrupting the 2014 launch of Venerate as well as the growth in sales of our other commercialized products, including Regalia and Grandevo. The process of hiring, training and successfully integrating qualified personnel into our operation is lengthy and expensive. The market for qualified personnel, such as experienced fermentation engineers and formulation chemists, is very competitive because of the limited number of people available with the necessary technical skills and understanding of our technology and anticipated products, and few sales and marketing personnel have prior experience with bio-based products. Perceived instability and risk in our business has made it difficult to retain qualified personnel and could impair our ability to meet our business objectives and adversely affect our results of operations and financial condition.

If we or our third-party manufacturers are unable to produce our products at a satisfactory quality, in a timely manner, in sufficient quantities or at an acceptable cost, our business could be negatively impacted.

We have transitioned the majority of our manufacturing processes in-house to our facility in Bangor, Michigan. If severe weather, a fire or natural disaster occurs, a contaminant grows in our fermentations, or a mechanical or labor problem leads to a reduced capacity or shutdown of our fermenters or other equipment, we may not be successful in producing the amount and quality of product we anticipate in the facility and our results of operations may suffer as a result.

We also continue to rely on third parties to formulate Grandevo and Zequanox into spray-dried powders and for all of our production of Venerate and Majestene, and from time to time, we expect to use third-party manufacturers for supplemental production capacity to meet excess seasonal demand and for packaging. Our reliance on third parties to manufacture our products presents significant risks to us, including the following:

• reduced control over delivery schedules, yields and product reliability;

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• price increases;

• manufacturing deviations from internal and regulatory specifications;

• the failure of a key manufacturer to perform its obligations to us for technical, market or other reasons;

• challenges presented by introducing our fermentation processes to new manufacturers or deploying them in new facilities;

• difficulties in establishing additional manufacturers if we are presented with the need to transfer our manufacturing process technologies to them;

• misappropriation of our intellectual property; and

• other risks in potentially meeting our product commercialization schedule or satisfying the requirements of our distributors, direct customers and end users.

We have not entered into any long-term manufacturing or supply agreements for any of our products, and we may need to enter into additional agreements for the commercial development, manufacturing and sale of our products. There can be no assurance that we can do so on favorable terms, if at all.

Our products have been produced in quantities sufficient to meet commercial demand. However, our dependence upon others for the production of a portion of our products, or for a portion of the manufacturing process, particularly for drying, may adversely affect our ability to develop and commercialize our products on a timely and competitive basis. If manufacturing capacity is reduced or eliminated at one or more of our third-party manufacturers’ facilities, we could have difficulties fulfilling our customer orders, and our net revenues and results of operations could decline.

We must accurately forecast demand for our products to obtain adequate and cost-effective capacity from our third-party manufacturers and to purchase certain of the raw materials used in our products at cost-effective rates. Our third-party manufacturers are not required to supply us products until we place and they accept our purchase orders, which generally occurs approximately one month prior to the anticipated product delivery date based on our own rolling forecasts. Our purchase orders may not be accepted and our third-party manufacturers may not be willing to provide us with additional products on a timely basis if they prioritize orders placed by other companies, many of whom are more established than us and order larger volumes of products. In addition, while raw material orders are generally placed one month in advance, because certain of the raw materials used in our products are in short supply or are subject to capacity demands, we place some raw material orders approximately six months in advance to avoid paying higher prices. Accordingly, if we inaccurately forecast demand for our products, we may be unable to meet our customers’ delivery requirements, or we may accumulate excess inventories of products and raw materials.

Failure to achieve expected manufacturing yields for our products could negatively impact our operating results.

Low yields may result from product design, development stage or process technology failures. We do not know whether a yield problem exists until our products are manufactured based on our design. When a yield issue is identified, the product is analyzed and tested to determine the cause. As a result, yield deficiencies may not be identified until well into the production process. We may experience inability to ramp up yields in our own manufacturing facility. In the event that we continue to rely on third-party manufacturers, resolution of yield problems requires cooperation among, and communication between, us and our manufacturers. We have limited experience producing a number of our products at commercial scale, and we will not succeed if we cannot maintain or decrease our production costs and effectively scale our technology and manufacturing processes.

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We rely on a single supplier based in China for a key ingredient of Regalia.

The active ingredient in our Regalia product line is derived from the giant knotweed plant, which we obtain from China. Our single supplier acquires raw knotweed from numerous regional sources and performs an extraction process on this plant, creating a dried extract that is shipped to our third-party manufacturer in the United States. Although we have identified additional sources of knotweed that appear to be reliable and of appropriate quality, there can be no assurance that we will continue to be able to obtain dried extract from China at a competitive price point.

Other ingredients used in the manufacturing of our products are also sourced from a limited number of suppliers. There can be no assurance that we will continue to be able to obtain such ingredients reliably and of appropriate quality at a competitive price point.

Our Zequanox product line requires additional development to become profitable, and our collaborative efforts on this product may not result in increased sales or gross margins.

Our Zequanox product line is principally designed to control invasive mussels that restrict critical water flow in industrial and power facilities and impinge on access to recreational waters. Although Zequanox requires additional development to become profitable, due to our prioritization plan, we have not committed sufficient resources to this product in order to market it full-scale and substantially improve gross margins. Our ability to generate significant revenues from Zequanox has been dependent on our ability to persuade customers to evaluate the costs of our Zequanox products compared to the overall cost of the chlorine treatment process, the primary current alternative to using Zequanox, rather than the cost of purchasing chemicals alone. Sales of Zequanox have also remained lower than our other products due to the length of the treatment cycle, the longer sales cycle (the bidding process with utility companies and government agencies occurs on a yearly or multi-year basis) and the unique nature of the treatment approach for each customer based on the extent of the infestation and the design of the facility. We expect our near-term sales of Zequanox will continue to be to governmental agencies and regulated industries, which typically take longer to negotiate and approve contracts than the private sector. Further, we currently expect that our governmental sales may be subject to bidding procedures as well as uncertainties surrounding these agencies’ budget approval processes. We are pursuing partnerships to assist us in further developing Zequanox and expanding it commercially, but we may be unsuccessful in securing and maintaining collaboration efforts with regard to this product, and any such efforts may not result in increased sales or gross margins.

We depend on a limited number of distributors.

Our current revenues are derived from a limited number of key customers, each of which serves as a third-party distributor to our products’ end users. For the years ended December 31, 2015 and 2014, our top two distributors accounted for 38% and 43% of our total revenues, respectively. For the year ended December 31, 2013, our top distributor accounted for 20% of our total revenues. We expect a limited number of distributors to continue to account for a significant portion of our total revenues for the foreseeable future. This customer concentration increases the risk of quarterly fluctuations in our revenues and operating results. The loss or reduction of business from one or a combination of our significant distributors could materially adversely affect our revenues, financial condition and results of operations.

Any decline in U.S. agricultural production could have a material adverse effect on the market for pesticides and on our results of operations and financial position.

Conditions in the U.S. agricultural industry significantly impact our operating results. The U.S. agricultural industry has contracted in recent periods, and can be affected by a number of factors, including weather patterns and field conditions, current and projected grain inventories and prices, domestic and international demand for U.S. agricultural products and U.S. and foreign policies regarding trade in agricultural products. State and federal governmental policies, including farm subsidies and commodity support programs, as well as the prices of

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fertilizer products and the prices at which produce may be sold, may also directly or indirectly influence the number of acres planted, the mix of crops planted and the use of pesticides for particular agricultural applications. There are various proposals pending before the U.S. Congress to cut or eliminate various agricultural subsidies. If such proposals are implemented, they may adversely impact the U.S. agricultural industry and suppliers to that industry such as us.

Our intellectual property is integral to our business. If we are unable to protect our patents and proprietary rights in the United States and foreign countries, our business could be adversely affected.

Our success depends in part on our ability to obtain and maintain patent and other proprietary rights protection for our technologies and products in the United States and other countries. If we are unable to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary rights. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. As of December 31, 2015, we had 25 issued U.S. patents and 87 issued foreign patents (of which 5 U.S. patents and 37 foreign patents were in-licensed), 29 pending provisional and non-provisional U.S. patent applications (of which one was in-licensed) and 179 pending foreign patent applications (of which 5 were in-licensed).

The patent position of biotechnology and biochemical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition, recent changes to the patent laws of the United States provide additional procedures for third parties to challenge the validity of issued patents, some of which allow a lower evidentiary standard to hold a patent claim invalid. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems and costs in protecting our proprietary rights in these foreign countries.

Our patents, and those patents for which we have license rights, may be challenged, narrowed, invalidated or circumvented. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or provide us with any competitive advantage. We are not certain that our pending patent applications will be issued. Moreover, our competitors could challenge or circumvent our patents or pending patent applications. It is also not possible to patent and protect all knowledge and know-how associated with our products, so there may be areas that are not protected such as certain formulations and manufacturing processes. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

For certain of our products, we hold co-exclusive licenses to certain of the intellectual property related to these products. Although our products that are derived from intellectual property licensed to us on a co-exclusive basis also include our own proprietary technology, the third parties with whom we share co-exclusive rights may develop products based on the same underlying intellectual property. This could adversely affect the sale of our products.

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Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

We have taken measures to protect our trade secrets and know-how, including the use of confidentiality agreements with our employees, consultants, advisors and third-party manufacturers. It is possible that these agreements may be breached and that any remedies for a breach will not make us whole. In addition, some courts inside and outside of the United States are less willing or unwilling to protect trade secrets. We generally control and limit access to, and the distribution of, our product documentation and other proprietary information. Despite our efforts to protect these proprietary rights, our trade secret-protected know-how could fall into the public domain, and unauthorized parties may copy aspects of our products and obtain and use information that we regard as proprietary. We also cannot guarantee that other parties will not independently develop our knowhow or otherwise obtain access to our technologies.

Third parties may misappropriate our microbial strains.

Third parties, including contract manufacturers, often have custody or control of our microbial strains. If our microbial strains were stolen, misappropriated or reverse engineered, they could be used by other parties who may be able to reproduce the microbial strains for their own commercial gain. If this were to occur, it would be difficult for us to challenge and prevent this type of use, especially in countries with limited intellectual property protection.

Other companies may claim that we infringe their intellectual property or proprietary rights, which could cause us to incur significant expenses or prevent us from selling our products.

Our success depends in part on our ability to operate without infringing the patents and proprietary rights of third parties. Product development is inherently uncertain in a rapidly evolving technological environment such as ours in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. Patents issued to third parties may contain claims that conflict with our patents and that may place restrictions on the commercial viability of our products and technologies. Third parties could assert infringement claims against us in the future. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products, product candidates and technology. We may not be aware of all such third-party intellectual property rights potentially relevant to our products and product candidates.

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Any litigation, adversarial proceeding or proceeding before governmental authorities regarding intellectual property rights, regardless of its outcome, would probably be costly and require significant time and attention of our key management and technical personnel. Litigation, adversarial proceedings or proceedings before governmental authorities could also force us to:

• stop or delay using our proprietary screening technology;

• stop or delay selling, manufacturing or using products that incorporate the challenged intellectual property;

• pay damages; and/or

• enter into licensing or royalty agreements which, if available at all, may only be available on unfavorable terms.

Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

We use hazardous materials in our business and are subject to potential liability under environmental laws. Any claims relating to improper handling, storage or disposal of hazardous materials could be time consuming and costly to resolve.

We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling, disposal and release of hazardous materials and certain waste products. Our research and development and manufacturing activities involve the controlled use of hazardous materials and biological waste. Some of these materials may be novel, including bacteria with novel properties and bacteria that produce biologically active compounds. We cannot eliminate the risk of accidental contamination or discharge and any injury resulting from these materials. In addition, although we have not currently identified any environmental liabilities, the manufacturing facility we purchased in July 2012 may have existing environmental liabilities associated with it that may also result in successor liabilities for us, and we will be subject to increased exposure to potential environmental liabilities as we manufacture our products on a larger scale. We may also be held liable for hazardous materials brought onto the premises of our manufacturing facility before we acquired title, without regard for fault for, or knowledge of, the presence of such substances, as well as for hazardous materials that may be discovered after we no longer own the property if we sell it in the future. In the event of an accident, or if any hazardous materials are found within our operations or on the premises of our manufacturing facility in violation of the law at any time, we may be liable for all cleanup costs, fines, penalties and other costs. This liability could exceed our resources, and, if significant losses arise from hazardous substance contamination, our financial viability may be substantially and adversely affected.

In addition, we may have to incur significant costs to comply with future environmental laws and regulations. We cannot predict the impact of new governmental regulations that might have an adverse effect on the research, development, production and marketing of our products. We may be required to incur significant costs to comply with current or future laws or regulations. Our business may be harmed by the cost of compliance.

Our collaborators may use hazardous materials in connection with our collaborative efforts. To our knowledge, their work is performed in accordance with applicable biosafety regulations. In the event of a lawsuit or investigation, however, we could be held responsible for any injury caused to persons or property by exposure to, or release of, hazardous materials used by these parties. Further, we may be required to indemnify our collaborators against all damages and other liabilities arising out of our development activities or products produced in connection with these collaborations.

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Our headquarters and other facilities and certain manufacturers and suppliers are located in regions that are subject to natural disasters, as well as in some cases geopolitical risks and social upheaval.

Our Davis, California headquarters is located near a known earthquake fault. The impact of a major earthquake, fire or other natural disaster, including floods, on our Davis facilities, Bangor, Michigan manufacturing plant, infrastructure and overall operations is difficult to predict and any natural disaster could seriously disrupt our entire business process. In addition, Regalia is produced by a third-party manufacturer in Florida in a location that could be impacted by hurricane activity, and certain of our raw materials are sourced in China, which is subject to risks associated with uncertain political, economic and other conditions such as the outbreak of contagious diseases, such as avian flu, swine flu and SARS, and natural disasters. The insurance we maintain may not be adequate to cover our losses resulting from natural disasters or other business interruptions. Although these risks have not materially adversely affected our business, financial condition or results of operations to date, there can be no assurance that such risks will not do so in the future.

Inability to comply with regulations applicable to our facilities and procedures could delay, limit or prevent our research and development or manufacturing activities.

Our research and development and manufacturing facilities and procedures are subject to continual review and periodic inspection. We must spend funds, time and effort in the areas of production, safety and quality control and assurance to ensure full technical compliance with the regulations applicable to these facilities and procedures. If the EPA or another regulatory body determines that we are not in compliance with these regulations, regulatory approval of our products could be delayed or we may be required to limit or cease our research and development or manufacturing activities or pay a monetary fine. If we are required to limit or cease our research and development activities, our ability to develop new products would be impaired. In addition, if we are required to limit or cease our manufacturing activities, our ability to produce our products in commercial quantities would be impaired or prohibited, which would harm our business.

We may be exposed to product liability and remediation claims, which could harm our business.

The use of certain bio-based pest management and plant health products is regulated by various local, state, federal and foreign environmental and public health agencies. These regulations may include requirements that only certified or professional users apply the product or that certain products be used only on certain types of locations, may require users to post notices on properties to which products have been or will be applied, may require notification to individuals in the vicinity that products will be applied in the future or may ban the use of certain ingredients. Even if we are able to comply with all such regulations and obtain all necessary registrations, we cannot provide assurance that our products will not cause injury to crops, the environment or people under all circumstances. For example, our products may be improperly combined with other pesticides or, even when properly combined, our products may be blamed for damage caused by these other pesticides. The costs of remediation or products liability could materially adversely affect our future quarterly or annual operating results.

We may be held liable for, or incur costs to settle, liability and remediation claims if any products we develop, or any products that use or incorporate any of our technologies, cause injury or are found unsuitable during product testing, manufacturing, marketing, sale or use. These risks exist even with respect to products that have received, or may in the future receive, regulatory approval, registration or clearance for commercial use. We cannot guarantee that we will be able to avoid product liability exposure.

We currently maintain product liability insurance at levels we believe are sufficient and consistent with industry standards for companies at our stage of development. We cannot guarantee that our product liability insurance is adequate and, at any time, it is possible that this insurance coverage may not be available on commercially reasonable terms or at all. A product liability claim could result in liability to us greater than our assets or insurance coverage. Moreover, even if we have adequate insurance coverage, product liability claims or recalls could result in negative publicity or force us to devote significant time and attention to those matters, which could harm our business.

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Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

As of December 31, 2015, we had approximately $166.4 million of federal and $146.4 million of state operating loss carryforwards available to offset future taxable income, which expire in varying amounts beginning in 2026 for federal and 2016 for state purposes if unused. It is possible that we will not generate taxable income in time to use these loss carryforwards before their expiration.

Section 382 of the Internal Revenue Code imposes restrictions on the use of a corporation’s net operating losses, as well as certain recognized built-in losses and other carryforwards, after an “ownership change” occurs. A Section 382 “ownership change” occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Future issuances or sales of our stock (including certain transactions involving our stock that are outside of our control) could also result in an ownership change under Section 382. If an “ownership change” occurs, Section 382 would impose an annual limit on the amount of pre-change net operating losses and other losses we can use to reduce our taxable income generally equal to the product of the total value of our outstanding equity immediately prior to the “ownership change” (subject to certain adjustments) and the applicable federal long-term tax-exempt interest rate for the month of the “ownership change.” The applicable rate for ownership changes occurring in the month of December 2015 was 2.61%.

Because U.S. federal net operating losses generally may be carried forward for up to 20 years, the annual limitation may effectively provide a cap on the cumulative amount of pre-ownership change losses, including certain recognized built-in losses that may be utilized. Such pre-ownership change losses in excess of the cap may be lost. In addition, if an ownership change were to occur, it is possible that the limitations imposed on our ability to use pre-ownership change losses and certain recognized built-in losses could cause a net increase in our U.S. federal income tax liability and U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitations were not in effect. Further, if the amount or value of these deferred tax assets is reduced, such reduction would have a negative impact on the book value of our common stock.

We completed a Section 382 analysis as of December 31, 2013 and concluded that approximately $0.5 million in federal net operating losses and approximately $0.2 million in federal research and development credits are expected to expire prior to utilization as a result of our previous ownership changes and corresponding annual limitations. We have not conducted an analysis to determine the amount of state net operating losses that are also expected to expire prior to utilization. Our existing net operating loss carryforwards or credits may be subject to significant limitations due to events occurring since December 31, 2013, and we have not updated our Section 382 analysis to consider events since December 31, 2013, including the effect of issuing common stock pursuant to a public offering in June 2014. Our inability to use these net operating loss carryforwards as a result of the Section 382 limitations could harm our financial condition.

The restatement of our previously issued financial statements has been time consuming and expensive, and matters relating to or arising from the restatement and material weaknesses in our internal control over financial reporting, including adverse publicity and potential concerns from our customers and prospective customers, regulatory inquiries and litigation matters could have a material adverse effect on our business, financial condition or stock price.

On November 10, 2015, we filed an Annual Report on Form 10-K for the year ended December 31, 2014 that included restated consolidated financial statements, selected financial data (as applicable), certain financial data in management’s discussion and analysis and other information for the fiscal year ended December 31, 2013, including related quarterly periods, and the quarterly periods ended March 31 and June 30, 2014. The restatement principally related to determinations by our Audit Committee in February 2015, following the completion of its independent investigation announced in September 2014, that as a result of the failure of certain employees to share with our finance department or our external auditors important transaction terms with distributors,

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including “inventory protection” arrangements that would permit the distributors to return to us certain unsold products, we had incorrectly recognized revenue for certain historical sales transactions with these distributors prior to satisfying the criteria for revenue recognition required under generally accepted accounting principles in the United States (“GAAP”).

As further described in Part I-Item 3-“Legal Proceedings”, we, our current and former executive officers and members of our board of directors have been named as defendants in various lawsuits asserting claims arising out of the subject matter of the Audit Committee’s independent investigation. If we do not prevail in the pending legal proceedings or any other litigation, we may be required to pay a significant amount of monetary damages that may be in excess of our insurance coverage, or may have additional penalties or other remedies imposed against us, or our current or former directors or officers, which could harm our reputation, business, results of operations, cash flows or financial condition. In addition, under Delaware law, our bylaws and certain indemnification agreements, we may have an obligation to indemnify certain current and former officers and directors in relation to these proceedings and actions. Such indemnification may have a material adverse effect on our business, results of operations, cash flows or financial condition to the extent insurance does not cover our costs. In addition, we may not have sufficient coverage under directors’ and officers’ insurance policies, in which case our business, results of operations, cash flows or financial condition may be materially and adversely affected.

We have incurred over $15.3 million in legal, accounting and other professional fees and costs in connection with the Audit Committee’s independent investigation, financial restatement and related matters (including remediation efforts, NASDAQ matters, responding to and settling an SEC investigation and the pending legal proceedings), net of insurance proceeds. Our board of directors, management and other key employees have expended, and may continue to expend, a substantial amount of time related to these matters, diverting resources and attention that would otherwise be directed toward our operations and implementation of our business strategy, all of which could materially adversely affect our business, results of operations, cash flows or financial condition.

Further, we have been and may continue to be the subject of negative publicity focusing on the financial restatement and related matters, and may be adversely impacted by negative reactions from our stockholders, creditors or others with which we do business. We believe this negative publicity has impacted our ability to attract and retain customers, employees and vendors, and may continue to do so in the future. Concerns include the perception of the work effort required to address our accounting and control environment, the ability for us to be a long-term provider to customers and our ability to timely pay outstanding balances to vendors. Moreover, we believe that our competitors have sought and will continue to seek to leverage the financial restatement and related matters to try and raise concerns about us in the minds of our customers and prospective customers. The continued occurrence of any of the foregoing could harm our business and reputation and cause the price of our common stock to decline.

Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses. If we fail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, which could subject us to civil or criminal penalties.

The complex legal and regulatory environment exposes us to compliance and litigation costs and risks that could materially affect our operations and financial results. These laws and regulations may change, sometimes significantly, as a result of political or economic events. They include environmental laws and regulations, tax laws and regulations, import and export laws and regulations, government contracting laws and regulations, labor and employment laws and regulations, securities and exchange laws and regulations, and other laws such as the Foreign Corrupt Practices Act. In addition, proposed laws and regulations in these and other areas could affect the cost of our business operations. We face the risk of changes in both domestic and foreign laws regarding trade, potential loss of proprietary information due to piracy, misappropriation or foreign laws that may be less

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protective of our intellectual property rights. Violations of any of these laws and regulations could subject us to criminal or civil enforcement actions, any of which could have a material adverse effect on our business, financial condition or results of operations.

Risks Related to Ownership of our Common Stock

Our stock price has, in the past, and may, in the future, not meet the minimum Market Value of Listed Securities (“MVLS”) and the minimum Market Value of Publicly Held Shares (“MVPHS”) for continued listing on the NASDAQ Global Market. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from The NASDAQ Global Market or if we are unable to transfer our listing to another stock market.

As previously reported on our Current Report on Form 8-K filed on January 13, 2016, on January 13, 2016, we received a letter from the Listing Qualifications Department of the NASDAQ Stock Market (“NASDAQ”) notifying us that for the preceding 30 consecutive business days, the Company’s MVLS had closed below the minimum $50.0 million requirement for continued listing on The NASDAQ Global Market, set forth in NASDAQ Listing Rule 5450(b)(2)(A). In accordance with NASDAQ Listing Rule 5810(c)(3)(C), the Company has a grace period of 180 calendar days, or until July 6, 2016, to regain compliance with NASDAQ Listing Rule 5450(b)(2)(A). Compliance can be achieved automatically and without further action if the Company’s MVLS closes at $50.0 million or more for at least 10 consecutive business days at any time during the 180-day grace period.

At the expiration of the 180-day grace period, we may request a hearing to remain on the NASDAQ Global Market. If we do not regain compliance by the end of the 180-day grace period or are not granted a hearing, NASDAQ will notify us that our common stock will be subject to delisting. Alternatively, if we do not regain compliance by the expiration of the grace period, we may transfer the listing of our common stock to the NASDAQ Capital Market, provided that we meet the applicable requirements for continued listing on the NASDAQ Capital Market based on our public filings and market information at that time.

In addition, as subsequently reported on our Current Report on Form 8-K filed on February 24, 2016, we received a letter from the Listing Qualifications Department of NASDAQ notifying us that for the preceding 30 consecutive business days, the Company’s MVPHS had closed below the minimum $15.0 million requirement for continued listing on the NASDAQ Global Market, set forth in NASDAQ Listing Rule 5450(b)(2)(C). In accordance with NASDAQ Listing Rule 5810(c)(3)(D), the Company was afforded a grace period of 180 calendar days to regain compliance with Nasdaq Listing Rule 5450(b)(2)(C). On March 9, 2016, we received a letter from NASDAQ notifying us that we had regained compliance as a result of the Company’s MVPHS closing at $15.0 million or more for 10 consecutive trading days during the 180-day grace period.

There can be no assurance that we will maintain or regain compliance with the requirements for listing our common stock on the NASDAQ Global Market, that our common stock would be eligible for transfer to the NASDAQ Capital Market and remain in compliance with the requirements for listing on that market or that we would be granted a hearing. Delisting from NASDAQ could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.

Our principal stockholders will have significant voting power and may take actions that may not be in the best interest of other stockholders.

As of December 31, 2015, our executive officers and directors and their affiliates beneficially owned or controlled, directly or indirectly, an aggregate of approximately 3.0 million shares, or 12.0% of our common stock. In addition, affiliates of Waddell & Reed Financial Inc., which beneficially own 19.99% of our common stock, hold $40.0 million of principal in senior secured promissory notes issued in August 2015. If all of these

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security holders act together, they will be able to exert significant control over our management and affairs, which could result in some corporate actions that our other stockholders do not view as beneficial such as failure to approve change of control transactions that could offer holders of our common stock a premium over the market value of our company. As a result, the market price of our common stock could be adversely affected.

Our common stock may experience extreme price and volume fluctuations, and you may not be able to resell shares of our common stock at or above the price you paid.

We are an early stage company with a limited trading history and a history of losses. Since shares of our common stock were sold in our initial public offering in August 2013 at a price of $12.00 per share, our stock price has ranged between $1.00 and $20.00 through December 31, 2015. The trading price of our common stock will likely continue to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:

• the announcement of the Audit Committee’s independent investigation, the financial restatement and the SEC investigation and lawsuits arising out of related matters;

• our small public float relative to the total number of shares of common stock that are issued and outstanding;

• quarterly variations in our results of operations, those of our competitors or those of our customers;

• announcements of technological innovations, new products or services or new commercial relationships by us or our competitors;

• our ability to develop and market new products on a timely basis;

• disruption to our operations;

• media reports and publications about pest management products;

• announcements concerning our competitors or the pest management industry in general;

• our entry into, modification of or termination of key license, research and development or collaborative agreements;

• new regulatory pronouncements and changes in regulatory guidelines or the status of our regulatory approvals;

• general and industry-specific economic conditions;

• any major change in our board of directors or management;

• the commencement of, or our involvement in, litigation;

• changes in financial estimates, including our ability to meet our future net revenues and operating profit or loss projections; and

• changes in earnings estimates or recommendations by securities analysts.

Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock. As of December 31, 2015, we had approximately 24.5 million shares of common stock outstanding, 2.2 million which were held by our directors and officers and their affiliates and an additional 12.0 million shares which were held by other beneficial holders of 5% or more of our common stock. Although these shares are subject in some cases to volume and manner of sale restrictions of Rule 144 of the Securities Act, any determination by holders of a substantial number of such

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shares to sell our stock, or the perception that such sales may occur, could cause our stock price to decline. In addition, as of December 31, 2015 we had 2.5 million shares of our common stock either issued or available for issuance under our equity incentive plans. These shares may be sold in the public market upon issuance and once vested.

Because we have no plans to pay dividends on our common stock, investors must look solely to stock appreciation for a return on their investment in us.

We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings to fund the development and growth of our business. Any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the board of directors deems relevant. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging public companies, which include, among other things:

• exemption from the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act of 2002;

• reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;

• exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements; and

• exemption from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless the SEC otherwise determines, any future audit rules that may be adopted by the Public Company Accounting Oversight Board.

We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary after our initial public offering, or until the earliest of (i) the last day of the fiscal year in which we have annual gross revenues of $1.0 billion or more; (ii) the date on which we have, during the previous three year period, issued more than $1.0 billion in non-convertible debt; or (iii) the date on which we are deemed to be a large accelerated filer under the federal securities laws. We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700.0 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

Under the JOBS Act, emerging growth companies are also permitted to elect to delay adoption of new or revised accounting standards until companies that are not subject to periodic reporting obligations are required to comply, if such accounting standards apply with non-reporting companies. We have made an irrevocable decision to opt out of this extended transition period for complying with new or revised accounting standards.

We cannot predict if investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to comply with the laws and regulations affecting public companies, which costs will increase after we are no longer an “emerging growth company.”

As a public company, we incur significant legal, accounting and other expenses, including costs associated with public company reporting and corporate governance requirements, in order to comply with the rules and regulations imposed by the Sarbanes-Oxley Act, as well as rules implemented by the SEC and NASDAQ. Such costs will increase after we cease to qualify as an emerging growth company. Our management and other personnel have needed to devote a substantial amount of time to these compliance initiatives, and our legal and accounting compliance costs have increased. We also may need to hire additional staff or consultants in the areas of investor relations, legal and accounting to continue to operate as a public company. The expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically over the past several years. We expect these rules and regulations to continue to increase our legal and financial compliance costs substantially and to make some activities more time consuming and costly. We are currently unable to estimate these costs with any degree of certainty. Greater expenditures may be necessary in the future with the advent of new laws and regulations pertaining to public companies. We also expect that, as a public company, it will continue to be expensive for us to obtain directors’ and officers’ liability insurance.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, as a public company, we are required to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. As described above, as an emerging growth company, we are not yet required to comply with the auditor attestation provisions of Section 404. However, we are required to comply with management attestations of Section 404, and our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. We expect to incur substantial accounting expense and management time on compliance-related issues with respect to Section 404. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause our stock price to decline.

For example, in September 2014, our Audit Committee initiated an independent investigation regarding certain accounting matters concerning recognition of revenue in a sales transaction. As a result of the matters relating to the Audit Committee’s independent investigation, we announced that certain of our previously filed financial statements could no longer be relied upon and subsequently completed a restatement. While we believe we have appropriately determined the errors made in our previously reported consolidated financial statements, recorded the correct adjustments in preparing our restated consolidated financial statements and remediated the material weaknesses identified in our internal control over financial reporting related to the subject matter of the Audit Committee’s independent investigation, we can provide no assurances that other material weaknesses in our internal control over financial reporting, such as the material weakness we have identified with respect to stock option grants, will not be identified in the future.

We have in the past identified material weaknesses, and if we fail to establish and maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely affect our consolidated operating results, our ability to operate our business and investors’ views of us.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure that information regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. As discussed under Part II-Item 9A-“Controls and Procedures,” in this Annual Report on Form 10-K, based on the Audit Committee’s independent

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investigation, management identified material weaknesses in internal control over financial reporting as of December 31, 2014 resulting in revenue transactions that were recognized prior to satisfaction of all required revenue recognition criteria. These include material weaknesses related to our process for recognizing revenue relating to certain former sales personnel who did not conduct their duties with the requisite level of integrity and control consciousness, leading to insufficient attention to their responsibilities and internal controls, without management having implemented mitigating controls to discourage, prevent or detect override of internal control by those personnel. In addition, it was determined that our internal controls were not effectively designed to identify instances when sales personnel made unauthorized commitments with certain distributors. We developed and implemented a plan to remediate these material weaknesses, which focuses on continued training for and communication with employees regarding our enhanced policies and procedures, and have determined that these material weaknesses were remediated as of December 31, 2015.

Also in connection with management’s assessment of our internal control over financial reporting, management identified an additional deficiency that constituted a material weakness in our internal control over financial reporting as of December 31, 2014 in our governance practices related to ineffective controls over the timeliness and accuracy of documentation related to actions of our board of directors and compensation committee specific to approving stock option grants. While no financial statement accounts or disclosures were misstated, the potential impact could have led to a material misstatement. We developed and implemented a plan to conduct training with our legal department and those charged with governance to ensure that board and compensation committee minutes are prepared in a more timely and accurate manner and are reviewed with sufficient rigor to ensure the minutes fully and accurately reflect the actions and approvals related to stock option grants and have determined that this material weakness was remediated as of December 31, 2015.

Remedying our material weaknesses has required substantial management time and attention, and ensuring that we have adequate internal control over financial reporting and procedures in place to produce accurate financial statements on a timely basis will continue to be a costly and time consuming effort. Any failure to implement effective internal control over financial reporting or to complete and maintain the remediation of our identified control deficiencies may result in additional errors, material misstatements or delays in our financial reporting, failure to meet our financial reporting obligations or failure to avoid or detect fraud in our financial reporting. This in turn would have a material adverse effect on our business and results of operations and could have a substantial adverse impact on the trading price of our common stock and our relationships with customers and suppliers.

Our management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company will have been detected. As discussed in this Annual Report on Form 10-K, our Audit Committee and management have identified control deficiencies in the past and may identify additional deficiencies in the future.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

• the right of our board of directors to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• the establishment of a classified board of directors requiring that only a subset of the members of our board of directors be elected at each annual meeting of stockholders;

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• the prohibition of cumulative voting in our election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

• the requirement that stockholders provide advance notice to nominate individuals for election to our board of directors or to propose matters that can be acted upon at a stockholders’ meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company;

• the ability of our board of directors to issue, without stockholder approval, shares of undesignated preferred stock with terms set by the board of directors, which rights could be senior to those of our common stock. The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us;

• the ability of our board of directors to alter our bylaws without obtaining stockholder approval;

• the inability of our stockholders to call a special meeting of stockholders and to take action by written consent in lieu of a meeting;

• the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws;

• the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to repeal or adopt any provision of our certificate of incorporation regarding the election of directors;

• the required approval of the holders of at least 80% of such shares to amend or repeal the provisions of our bylaws regarding the election and classification of directors; and

• the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to remove directors without cause.

As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its common stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters are located at 1540 Drew Avenue in Davis, California, in a facility consisting of approximately 27,300 square feet of office, laboratory and greenhouse space under a lease entered into in September 2013. This facility accommodates our research, development, sales, marketing, operations, finance and administrative activities. The facility includes a new, state-of-the-art fermentation lab and pilot plant, an expanded formulation lab and pilot with spray drying and granulation capabilities, an insectary, a plant pathology and nematology lab and a plant and weed sciences lab, among others. The initial term of the lease is for a period of 60 months and commenced in August 2014. In January 2016, the Company entered into an agreement with a sublessee to sublease approximately 3,800 square feet of vacant office space located in this facility pursuant to the terms of our lease agreement. The initial term of the sublease is for a period of approximately 43 months and commenced in February 2016.

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We also purchased an 11,400 square-foot manufacturing facility in Bangor, Michigan, in July 2012, which we have repurposed to accommodate large-scale manufacturing of our products. We believe that our leased facilities and our manufacturing facility are adequate to meet our needs.

ITEM 3. LEGAL PROCEEDINGS

On September 5, 2014, September 8, 2014, September 11, 2014, September 15, 2014 and November 3, 2014, we, along with certain of our current and former officers and directors and others were named as defendants in putative securities class action lawsuits filed in the U.S. District Court for the Eastern District of California. On February 13, 2015, these actions were consolidated as Special Situations Fund III QP, L.P. et al v. Marrone Bio Innovations, Inc. et al, Case No 2:14-cv-02571-MCE-KJN. On September 2, 2015, an initial consolidated complaint was filed on behalf of (i) all persons who purchased or otherwise acquired our publicly traded common stock directly in or traceable to our August 1, 2013 initial public offering; (ii) all persons who purchased or otherwise acquired our publicly traded common stock directly in our June 6, 2014 secondary offering; and (iii) all persons who purchased or otherwise acquired our publicly traded common stock on the open market between March 7, 2014 and September 2, 2014 (the “Class Action”). In addition to us, the initial consolidated complaint names certain of our current and former officers and directors and our independent registered public accounting firm as defendants. The initial consolidated complaint alleges violations of the Securities Act of 1933, the Securities Exchange Act of 1934 and SEC Rule 10b-5, arising out of the issuance of allegedly false and misleading statements about our business and prospects, including our financial statements, product revenues and system of internal controls. Plaintiffs contend that such statements caused our stock price to be artificially inflated. The action includes claims for damages, fees and expenses, including an award of attorneys’ and experts’ fees to the putative class. An amended consolidated complaint was filed on January 11, 2016. On February 4, 2016, the Court approved a stipulation between the parties deferring action pending the outcome of a mediation proceeding, and ordered the parties to provide a status update on May 4, 2016. The outcome of this matter is not presently determinable.

On September 9, 2014 and November 25, 2014, shareholder derivative actions were filed in the Superior Court of California, County of Yolo (Case No. CV14-1481) and the U.S. District Court for the Eastern District of California (Case No. 1:14-cv-02779-JAM-CKD), purportedly on our behalf, against certain current and former officers and members of our board of directors (the “2014 Derivative Actions”). The plaintiffs in the 2014 Derivative Actions allege that the defendants breached their fiduciary duties, committed waste, were unjustly enriched and aided and abetted breaches of fiduciary duty by causing us to issue allegedly false and misleading statements. The issues in the 2014 Derivative Actions overlap substantially with those at issue in the Class Action described above. The plaintiffs in the 2014 Derivative Actions seek, purportedly on behalf of us, an unspecified award of damages including, but not limited to, various corporate governance reforms, an award of restitution, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Courts may deem just and proper. The Courts have granted the parties’ stipulations to defer litigation activity, subject to certain conditions and pending certain developments in the Class Action.

On October 14, 2015, a shareholder derivative action was filed in the Superior Court of California, County of Yolo (Case No. CV15-1423), purportedly on our behalf, against certain current and former officers and members of our board of directors and our independent registered public accounting firm (the “2015 Derivative Action,” and with the 2014 Derivative Actions, the “Derivative Actions”). The plaintiff in the 2015 Derivative Action alleges that the director and officer defendants breached their fiduciary duties, committed waste and were unjustly enriched by causing us to issue allegedly false and misleading statements. The plaintiff in the 2015 Derivative Action also alleges that our independent registered public accounting firm committed professional negligence and malpractice. The issues in the 2015 Derivative Action overlap substantially with those at issue in the 2014 Derivative Actions and the Class Action described above. On February 5, 2016, the Court approved a stipulation between the parties deferring action pending the outcome of a mediation proceeding, and ordered the parties to provide a status update on May 5, 2016. Given the preliminary nature of the Derivative Actions, we are not in a position to express any opinion regarding the outcome in these matters.

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We advised the staff of the Division of Enforcement of the SEC in September 2014 that the Audit Committee of our board of directors had commenced an internal investigation. The SEC commenced a formal investigation of these matters, and in February 2016, we entered into a settlement agreement with the SEC. In agreeing to the settlement, we neither admit nor deny the SEC’s allegations that we violated certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Under the terms of the settlement agreement, we paid a $1.75 million civil penalty in March 2016 and consented to an injunction against future violations of such laws. We had previously recorded expenses of $1.75 million in our consolidated statements of operations for the year ended December 31, 2014 for an accrual of our estimate of the penalties arising from such enforcement action.

Publicity surrounding the foregoing or any enforcement action as a result of the Division of Enforcement’s investigation, even if ultimately resolved favorably, could have an adverse impact on our reputation, business, financial position, results of operations or cash flows.

From time to time we may be involved in litigation that we believe is of the type common to companies engaged in our line of business, including intellectual property and employment issues. While the outcome of these other claims cannot be predicted with certainty, we do not believe that the outcome of any of these other legal matters will have a material adverse effect on our results of operations, financial condition or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock has been listed on the NASDAQ Global Market under the symbol “MBII” since August 2, 2013. Prior to that time, there was no public market for our stock. The following table sets forth for the indicated periods the high and low intra-day sales prices per share for our common stock on the NASDAQ Global Market.

	HIGH		LOW
2015
First Quarter	$	5.01	$	3.30
Second Quarter	$	4.43	$	1.84
Third Quarter	$	2.27	$	1.74
Fourth Quarter	$	4.00	$	1.00
2014
First Quarter	$	19.64	$	13.05
Second Quarter	$	14.03	$	8.21
Third Quarter	$	11.84	$	2.41
Fourth Quarter	$	3.75	$	1.85

Holders of Record

As of December 31, 2015, there were 71 stockholders of record of our common stock, and the closing price of our common stock was $1.10 per share as reported on the NASDAQ Global Market. Because some of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Dividend Policy

We have never declared or paid any cash dividend on our common stock. We intend to retain any future earnings and do not expect to pay dividends in the foreseeable future.

Equity Compensation Plan Information

Information regarding equity compensation plans approved and not approved by stockholders is summarized in the following table as of December 31, 2015:

PLAN CATEGORY	NUMBER OF SECURITIES TO BE ISSUED UPON CONVERSION OF RESTRICTED STOCK UNITS AND EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS		WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS		NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (a))(1)
	(a)		(b)
Equity compensation plans approved by stockholders		2,223,214	$	8.90		2,478,625
Equity compensation plans not approved by stockholders		—		—		—
Total		2,223,214	$	8.90		2,478,625

⁽¹⁾  Consists of shares available for issuance under our 2013 Stock Incentive Plan.

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Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Marrone Bio Innovations, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.

The following graph shows a comparison from August 2, 2013 (the date our common stock commenced trading on the NASDAQ Global Market) through December 31, 2015 of the cumulative total return for our common stock, the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and the Nasdaq Composite Index (“NASDAQ Composite”). The graph assumes that $100 was invested at the close of the market on August 2, 2013 in the common stock of Marrone Bio Innovations, Inc., the S&P 500 Index and the NASDAQ Composite, and data for the S&P 500 Index and the NASDAQ Composite assumes reinvestments of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.

ITEM 6. SELECTED FINANCIAL DATA

You should read the following selected consolidated financial data in connection with Part II-Item 7-“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

The consolidated statements of operations data for each of the years ended December 31, 2015, 2014, and 2013 and the consolidated balance sheet data as of December 31, 2015 and 2014 are derived from our audited consolidated financial statements included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The consolidated statements of operations data for the years ended December 31, 2012 and 2011 and the consolidated balance sheet data as of December 31, 2013, 2012 and 2011 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of our results in any future period.

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Consolidated Statements of Operations Data:

	YEAR ENDED DECEMBER 31,
	2015			2014			2013			2012			2011
	(In thousands, except per share data)
Revenues:
Product	$	8,976		$	7,750		$	7,588		$	6,777		$	5,044
License		333			232			193			179			57
Related party		492			1,154			665			184			150
Total revenues		9,801			9,136			8,446			7,140			5,251
Cost of product revenues, including cost of product revenues to related parties of $254, $561, $374, $126 and $50 for the years ended December 31, 2015, 2014, 2013, 2012 and 2011, respectively		9,256			9,438			7,243			4,333			2,172
Gross profit (loss)		545			(302	)		1,203			2,807			3,079
Operating expenses:
Research, development and patent		13,500			19,281			17,905			12,741			9,410
Non-cash charge associated with a convertible note		—			—			—			3,610			—
Selling, general and administrative		26,502			28,950			15,017			10,294			6,793
Total operating expenses		40,002			48,231			32,922			26,645			16,203
Loss from operations		(39,457	)		(48,533	)		(31,719	)		(23,838	)		(13,124	)
Other income (expense):
Interest income		51			59			49			16			22
Interest expense		(2,764	)		(2,907	)		(6,056	)		(2,466	)		(88	)
Interest expense to related parties		(1,599	)		—			—			—			—
Change in estimated fair value of financial instruments(1)		—			—			6,717			(12,461	)		1
Gain on extinguishment of debt		—			—			49			—			—
Other income (expense), net		41			(278	)		(282	)		(45	)		9
Total other income (expense), net		(4,271	)		(3,126	)		477			(14,956	)		(56	)
Loss before income taxes		(43,728	)		(51,659	)		(31,242	)		(38,794	)		(13,180	)
Income taxes		—			—			—			—			—
Net loss		(43,728	)		(51,659	)		(31,242	)		(38,794	)		(13,180	)
Deemed dividend on convertible notes		—			—			(1,378	)		(2,039	)		—
Net loss attributable to common stockholders	$	(43,728	)	$	(51,659	)	$	(32,620	)	$	(40,833	)	$	(13,180	)
Net loss per common share(2):
Basic	$	(1.79	)	$	(2.32	)	$	(3.74	)	$	(32.48	)	$	(10.64	)
Diluted	$	(1.79	)	$	(2.32	)	$	(4.25	)	$	(32.48	)	$	(10.64	)
Weighted-average shares outstanding used in computing net loss per common share(2):
Basic		24,469			22,314			8,731			1,257			1,239
Diluted		24,469			22,314			8,911			1,257			1,239

⁽¹⁾  Prior to the completion of the initial public offering, we accounted for the outstanding warrants exercisable into shares of our Series A, Series B and Series C convertible preferred stock and the outstanding warrants exercisable into a variable number of shares of common stock as liability instruments, as the Series A, Series B and Series C convertible preferred stock and the common stock into which these warrants were convertible

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were contingently redeemable upon the occurrence of certain events or transactions. In addition, convertible notes were accounted for at estimated fair value. The warrant instruments and convertible notes were adjusted to fair value at each reporting period with the change in fair value recorded in the consolidated statements of operations. These charges did not continue after the completion of the initial public offering as the preferred stock warrants were exercised and the convertible notes automatically converted into common stock in accordance with their terms upon the completion of the initial public offering. The common stock warrants were, in accordance with their terms upon the completion of the initial public offering, either automatically exercised for shares of common stock or represent the right to purchase a fixed number of shares. See Part II-Item 7-“Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Key Components of Our Results of Operations—Change in Estimated Fair Value of Financial Instruments and Deemed Dividend on Convertible Notes.”

⁽²⁾  Includes the effect of a 1-for-3.138458 reverse stock split, effective August 1, 2013.

Balance Sheet Data:

	DECEMBER 31,
	2015			2014		2013		2012			2011
	(In thousands)
Cash and cash equivalents	$	19,838		$	35,324	$	24,455	$	10,006		$	2,215
Short-term investments		—			—		13,677		—			2,000
Working capital (deficit) (1)		23,144			23,521		44,221		(11,468	)		5,030
Total assets		71,767			77,182		69,918		33,778			9,818
Debt and capital leases (net of unamortized discount)		58,496			24,327		14,972		16,740			806
Convertible notes		—			—		—		41,860			—
Preferred stock warrant liability		—			—		—		1,884			27
Common stock warrant liability		—			—		—		301			—
Total liabilities		73,789			43,951		30,887		68,413			4,306
Convertible preferred stock		—			—		—		39,612			39,612
Total stockholders’ equity (deficit)		(2,022	)		33,231		39,031		(74,247	)		(34,100	)

⁽¹⁾  Working capital (deficit) is defined as total current assets minus total current liabilities.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in connection with our consolidated financial statements and the related notes included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part I-Item 1A-“Risk Factors.”

Overview

We make bio-based pest management and plant health products. Bio-based products are comprised of naturally occurring microorganisms, such as bacteria and fungi, and plant extracts. Our current products target the major markets that use conventional chemical pesticides, including certain agricultural and water markets, where our bio-based products are used as alternatives for, or mixed with, conventional chemical products. We also target new markets for which (i) there are no available conventional chemical pesticides or (ii) the use of conventional chemical pesticides may not be desirable or permissible either because of health and environmental concerns (including for organically certified crops) or because the development of pest resistance has reduced the efficacy of conventional chemical pesticides. We believe our current portfolio of EPA-approved and registered “biopesticide” products and our pipeline address the growing global demand for effective, efficient and environmentally responsible products to control pests, increase crop yields and reduce crop stress.

The agricultural industry is increasingly dependent on effective and sustainable pest management practices to maximize yields and quality in a world of increased demand for agricultural products, rising consumer awareness of food production processes and finite land and water resources. In addition, our research has shown that the global market for biopesticides is growing substantially faster than the overall market for pesticides. This demand is in part a result of conventional growers acknowledging that there are tangible benefits to adopting bio-based pest management products into integrated pest management (“IPM”) programs, as well as increasing consumer demand for organic food. We seek to capitalize on these global trends by providing both conventional and organic growers with solutions to a broad range of pest management needs through strategies such as adding new products to our product portfolio, continuing to broaden the commercial applications of our existing product lines, leveraging growers’ positive experiences with existing product lines, educating growers with on-farm product demonstrations and controlled product launches with key target customers and other early adopters. To that end, in March 2016 we entered into an agreement with Isagro USA to distribute Bio-Tam 2.0, a biofungicide for soil-borne disease control and grapevine trunk disease control that complements our existing products, particularly Regalia. We believe this approach enables us to stay ahead of our competition in providing innovative pest management solutions, enhances our sales process at the distributor level and helps us to capture additional value from our products.

Although our long-term, global vision for our business and our commitment to that vision remain fundamentally unchanged, to date, we have not achieved anticipated growth in sales of our products, which has resulted in an increase in inventory write-offs, higher proportional levels of operating expenses, increases in cost of product revenues and decreases in product margins. In response to the business challenges reflected in our financial results for recent periods, we have been implementing a prioritization plan that focuses our resources on continuing to improve and promote our commercially available products, advancing product candidates that are expected to have the greatest impact on near-term growth potential and expanding international presence and commercialization. Our goal has been to reduce expenses, to conserve cash and improve operating efficiencies, to extract greater value from our products and product pipeline and to improve our communication to and connection with the global sustainability movement that is core to our cultural values.

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In connection with this strategy, we have significantly reduced overall headcount, while building a new sales and marketing organization with increased training and ability to educate and support customers in specialty crop markets, as well as providing our product development staff with greater responsibility for technical sales support, field trials and demonstrations to promote sales growth. For markets other than high-value specialty crops, such as row crops and seed treatments, we are seeking to expand our network of distribution partners, focusing on regional and national distributors operating in countries that present a significant opportunity for near-term revenue generation. In addition, our research and development efforts are now focused on supporting existing commercial products with a focus on reducing cost of product revenues, further understanding the modes of action, manufacturing support and improving formulations. Accordingly, while we believe that we have developed a robust pipeline of novel product candidates, we are currently limiting our internal efforts to four promising product candidates. Simultaneously, we are seeking collaborations with third parties to develop and commercialize more early stage candidates on which we have elected not to expend significant internal resources given our reduced budget. We believe collectively, these measures, together with our competitive strengths, including our leadership in the biologicals industry, commercially available products, robust pipeline of novel product candidates, proprietary discovery and development processes and industry experience, position us for growth.

We sell our crop protection products to leading agrichemical distributors while also working directly with growers to increase existing and generate new product demand. To date, we have marketed our bio-based pest management and plant health products for agricultural applications to U.S. growers, through distributors and our own sales force, and we have focused primarily on high value specialty crops such as grapes, citrus, tomatoes and leafy greens. A large portion of our sales are currently attributable to conventional growers who use our bio-based pest management products either to replace conventional chemical pesticides or enhance the efficacy of their IPM programs. In addition, a portion of our sales are attributable to organic farmers who cannot use conventional pesticides and have few alternatives for pest management. As we continue to demonstrate the efficacy of our bio-based pest management and plant health products on new crops or for new applications, we may either continue to sell our products through our in-house sales force or collaborate with third parties for distribution to select markets.

Although we have historically sold a significant majority of our products in the United States, expanding our international presence and commercialization is an important component of our growth strategy. Regalia is currently available in select international markets under distribution agreements with major agrichemical companies. Going forward, our plan is to focus on key countries and regions with the largest and fastest growing biopesticide and plant health product markets for specialty crops and selected row crops. We intend to work with regional distributors and distributors in key countries who have brand recognition and established customer bases and who can conduct field trials and grower demonstrations and lead or assist in regulatory processes and market development.

We currently market our water treatment product, Zequanox, through our sales and technical workforce to a selected group of U.S. power and industrial companies. Due to our prioritization plan, we have not committed sufficient resources to Zequanox in order to market it full-scale. We are seeking sales and distribution partners for in-pipe and open water uses, and are currently in discussions with large water treatment companies to further develop Zequanox and expand it commercially. In addition, we continue to work with state, federal and bi-national partners to further develop Zequanox in the Great Lakes/Upper Mississippi River Basin as a habitat restoration tool and potential harmful algal bloom management tool. We believe that Zequanox presents a unique opportunity for generating long-term revenue as there are limited water treatment options available to date, most of which are time-consuming, costly or subject to high levels of regulation. Our ability to generate significant revenues from Zequanox is dependent on our ability to persuade customers to evaluate the costs of our Zequanox products compared to the overall cost of the chlorine treatment process, the primary current alternative to using Zequanox, rather than the cost of purchasing chemicals alone. In the fourth quarter of 2015, we implemented a new process at our manufacturing plant that reduced the cost of product revenues to be more competitive with other mussel treatment chemicals. Sales of Zequanox have also remained lower than our other products due to the length of the treatment cycle, the longer sales cycle (the bidding process with utility companies and

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governmental agencies occurs on a yearly or multi-year basis) and the unique nature of the treatment approach for each customer based on the extent of the infestation and the design of the facility.

Although our initial EPA-approved master labels cover our products’ anticipated crop-pest use combinations, we launch early formulations of our pest management and plant health products to targeted customers under commercial labels that list a limited number of crops and applications that our initial efficacy data can best support. We then gather new data from experiments, field trials and demonstrations, gain product knowledge and get feedback to our research and development team from customers, researchers and agricultural agencies. Based on this information, we enhance our products, refine our recommendations for their use in optimal IPM programs, expand our commercial labels and submit new product formulations to the EPA and other regulatory agencies. For example, we began sales of Regalia SC, an earlier formulation of Regalia, in the Florida fresh tomatoes market in 2008, while a more effective formulation of Regalia with an expanded master label, including listing for use in organic farming, was under review by the EPA. In 2011, we received EPA approval of a further expanded Regalia master label covering hundreds of crops and various new uses for applications to soil and through irrigation systems, and we recently expanded sales of Regalia in large-acre row crops as a plant health product, in addition to its beneficial uses as a fungicide. In January 2016, we launched a new formulation of Regalia that no longer contains hexanol, a solvent that is difficult to source and is likely to experience future regulatory restrictions. This new formulation of Regalia disperses better in water and is easier to mix and rinse from containers and spray equipment. Similarly, ongoing field development research on the microbe used in Venerate, one of our insecticide products, led to our October 2015 registration of Majestene as a nematicide. We believe we have opportunities to broaden the commercial applications and expand the use of our existing products lines to help drive significant growth for our company.

Our total revenues were $9.8 million, $9.1 million and $8.4 million for the years ended December 31, 2015, 2014 and 2013, respectively, and have risen as growers have adopted our products and have used our products on an expanded number of crops. We generate our revenues primarily from product sales, which are principally attributable to sales of our Regalia and Grandevo product lines. Various factors have impeded growth in sales of these products in recent years, and may continue to impede growth. For example, we believe adverse conditions in the U.S. agricultural industry, including low commodity prices, may have reduced demand for our products. Further delays in regulatory approvals of certain of our products in Europe and other jurisdictions may slow international growth, and any delay in a product launch that causes us to miss a growing season may require us to wait a year to enter that market. The extended drought in California and other markets has reduced demand for our products as fewer acres are planted, changes in weather patterns in Florida resulted in a shortened bloom cycle for the citrus market and few pesticide and plant health products being used, and certain of our strategic collaborations have not resulted in increases in sales of Regalia outside of the Unites States. Due to our prioritization plan, we have not committed sufficient resources to Zequanox in order to market it full-scale, and our collaboration efforts with regard to this product may not result in increased sales. In addition, the departure of our former chief operating officer and significant members of our sales staff in the third quarter of 2014, and subsequent turnover in our sales and marketing department, disrupted the 2014 launch of Venerate as well as growth in sales of our other commercialized products, including Regalia and Grandevo. Further, we believe that following the announcement of the matters relating to our recent restatement, some customers and potential customers were concerned about our reported investigation efforts, and therefore, were reluctant to do business with us until after we had reached a settlement with the SEC.

Since 2011, we have also recognized revenues from our strategic collaboration and distribution agreements, which amounted to $0.3 million for the year ended December 31, 2015 and $0.2 million for each of the years ended December 31, 2014 and 2013, excluding related party revenues. We have a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of our common stock, Syngenta Ventures Pte. LTD (“Syngenta Ventures”). In connection with our secondary offering in June 2014, Syngenta Ventures sold 0.6 million shares of our common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. For the years ended December 31, 2014 and 2013, we recognized $0.3 million and $0.1 million, respectively, of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake.

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We currently rely, and expect to continue to rely, on a limited number of distributors for a significant portion of our revenues since we sell through highly concentrated, traditional distribution channels. Distributors to which 10% or more of our total revenues are attributable for any one of the periods presented consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C
For the years ended December 31,
2015		28	%		10	%		8	%
2014		30	%		4	%		13	%
2013		20	%		9	%		8	%

While we expect product sales to a limited number of distributors to continue to be our primary source of revenues, as we continue to develop our pipeline and introduce new products to the marketplace, we anticipate that our revenue stream will be diversified over a broader product portfolio and customer base.

Our cost of product revenues was $9.3 million, $9.4 million and $7.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. Cost of product revenues included $0.3 million, $0.6 million and $0.4 million of cost of product revenues to related parties for the years ended December 31, 2015, 2014 and 2013, respectively. Cost of product revenues consists principally of the cost of inventory, which includes the cost of raw materials, and third party services and allocation of operating expenses of our manufacturing plant related to procuring, processing, formulating, packaging and shipping our products. Cost of product revenues also include charges recorded for write-downs of inventory, which has increased in recent years, and, beginning in 2014, idle capacity at our manufacturing plant when the manufacturing plant was placed into service. We expect our cost of product revenues related to the cost of inventory to increase and cost of product revenues relating to write-downs of inventory and idle capacity of our manufacturing plant to decrease as we expand sales and increase production of our existing commercial products Regalia, Grandevo, Venerate, Majestene and Zequanox and introduce new products to the market. Our cost of product revenues related to the cost of inventory has increased as a percentage of total revenues primarily due to a change in product mix, with Grandevo representing an increased percentage of total revenues as Grandevo is early in its life cycle. We expect to see a gradual increase in gross margin over the life cycle of each of our products, including Grandevo, as we improve production processes, gain efficiencies and increase product yields. These increases may be offset by additional charges for inventory write-downs and idle capacity at our manufacturing plant until overall volume in the plant increases significantly.

Our research, development and patent expenses have historically comprised a significant portion of our operating expenses, amounting to $13.5 million, $19.3 million and $17.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. We have reduced the size of our research and development staff compared to prior periods and are reducing costs spent on various research and development and patent efforts as part of our efforts to streamline business operations and focus on our pipeline product priorities. However, we have made, and will continue to make, substantial investments in research and development and we intend to continue to devote significant resources toward the advancement of product candidates that are expected to have the greatest impact on near-term growth potential. Simultaneously, we are seeking collaborations with third parties to develop and commercialize more early stage candidates, which we have elected not to expend significant resources on given our reduced budget.

Selling, general and administrative expenses incurred to establish and build our market presence and business infrastructure have generally comprised the remainder of our operating expenses, amounting to $26.5 million, $29.0 million and $15.0 million for the years ended December 31, 2015, 2014 and 2013, respectively. While we have reduced headcount in comparison to prior periods, in connection with our new strategy, we have been building a new sales and marketing organization which provides for increased training and a better ability to educate and support customers as well as transitioning our product development staff to undertake greater responsibility for technical sales support, field trials and demonstrations to promote sales growth. We expect that in the future, our selling, general and administrative expenses will increase due to our expanded product portfolio

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and due to additional costs incurred related to being a public company. In addition, for the years ended December 31, 2015 and 2014, we incurred $7.7 million and $5.8 million, respectively, in costs related to the Audit Committee’s independent investigation, which commenced in September 2014, and the subsequent restatement of our financial statements, net of insurance proceeds. In addition, in February 2016, we entered into a settlement agreement with the SEC with respect to the SEC’s investigation, which was principally related to the accounting and other matters that were initially identified by us and that led to the financial restatement completed by us on November 10, 2015. Under the terms of the settlement agreement, we paid a $1.75 million civil penalty in March 2016. We had previously recorded expenses of $1.75 million in our consolidated statements of operations for the year ended December 31, 2014 for an accrual of our estimate of the penalties arising from such enforcement action.

Historically, we have funded our operations from the issuance of shares of common stock, preferred stock, warrants and convertible notes, the issuance of debt and entry into financing arrangements, product sales, payments under strategic collaboration and distribution agreements and government grants, but we have experienced significant losses as we invested heavily in research and development. We expect to incur additional losses related to our investment in the continued development, expansion and marketing of our product portfolio.

In August 2013, we closed an initial public offering of 5.5 million shares of our common stock. The public offering price of the shares sold in the offering was $12.00 per share. Our total gross proceeds from the offering were $65.6 million, and after deducting underwriting discounts and commissions and offering expenses payable by us, the aggregate net proceeds that we received totaled approximately $56.1 million. Upon the closing of the IPO, all shares of our outstanding convertible preferred stock and all of our outstanding convertible notes automatically converted into shares of common stock, and all outstanding warrants to purchase convertible preferred stock and certain warrants to purchase common stock were exercised for shares of common stock.

In June 2014 we completed a public offering of 4.6 million shares of our common stock. The public offering price of the shares sold in the offering was $9.50 per share. Our total gross proceeds from the offering were $43.5 million, and after deducting underwriting discounts and commissions and offering expenses payable by us, the aggregate net proceeds that we received totaled $39.9 million.

In addition, in June 2014, we borrowed $10.0 million pursuant to a promissory note with Five Star Bank, and in August 2015, we issued and sold to affiliates of Waddell & Reed Financial, Inc. in a private placement senior secured promissory notes in the aggregate principal amount of $40.0 million and warrants to purchase up to 4.0 million shares of our common stock at an exercise price of $1.91 per share for aggregate consideration of $40.0 million.

Critical Accounting Policies and Estimates

Our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenue, costs and expenses, and any related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the assumptions and estimates associated with revenue recognition, including assumptions and estimates used in determining the timing and amount of revenue to recognize for those transactions accounted for on a “sell-through” method, inventory valuation and share-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and

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estimates. See Note 2 to our accompanying Notes to Consolidated Financial Statements included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding our significant accounting policies.

Key Components of Our Results of Operations

Product Revenues

Product revenues consist of revenues generated primarily from sales to distributors, net of rebates and cash discounts. Product revenues, not including related party revenues, constituted 92%, 85% and 90% of our total revenues for the years ended December, 2015, 2014 and 2013, respectively. Product revenues in the United States, not including related party revenues, constituted 84%, 78% and 77% of our total revenues for the years ended December 31, 2015, 2014 and 2013, respectively.

In some cases, we recognize distributor revenue as title and risk of loss passes, provided all other revenue recognition criteria have been satisfied (the “sell-in” method). For certain sales to certain distributors, the revenue recognition criteria for distributor sales are not satisfied at the time title and risk of loss passes to the distributor; specifically, in instances where “inventory protection” arrangements were offered to distributors that permitted these distributors to return to the Company certain unsold products, we consider the arrangement not to be fixed or determinable, and accordingly, revenue is deferred until products are resold to customers of the distributor (the “sell-through” method). The cost of goods sold associated with such deferral are also deferred and classified as deferred cost of product revenues in the consolidated balance sheets. Cash received from customers related to delivered product that may not represent a true sale is classified as customer refund liabilities in the consolidated balance sheets and the related cost of inventory remains in inventory in the consolidated balance sheets until the product is returned or is resold to customers of the distributor and revenue is recognized. For the years ended December 31, 2015, 2014 and 2013, 42%, 63% and 26%, respectively, of product revenues, not including related party revenues, were recognized on a sell-through basis.

License Revenues

License revenues generally consist of revenues recognized under our strategic collaboration and distribution agreements for exclusive distribution rights, either for Regalia or for our broader pipeline of products, for certain geographic markets or for market segments that we are not addressing directly through our internal sales force. Our strategic collaboration and distribution agreements generally outline overall business plans and include payments we receive at signing and for the achievement of certain testing validation, regulatory progress and commercialization events. As these activities and payments are associated with exclusive rights that we provide over the term of the strategic collaboration and distribution agreements, revenues related to the payments received are deferred and recognized as revenues over the term of the exclusive period of the respective agreements, which we estimate to be between 5 and 17 years based on the terms of the contract and the covered products and regions. For the years ended December 31, 2015, 2014 and 2013, license revenues constituted 3%, 2% and 2% of total revenues, respectively. As of December 31, 2015, including agreements with related parties discussed below, we had received an aggregate of $3.6 million in payments and had $0.3 million recorded in accounts receivable under our strategic collaboration and distribution agreements. In addition, there will be an additional $0.3 million in payments due on certain anniversaries of regulatory approval and an additional $1.1 million in payments under these agreements that we could potentially receive if the testing validation, regulatory progress and commercialization events occur.

Related Party Revenues

Related party revenues consist of both product revenues and license revenues. Les Lyman, a member of our board of directors, is the chairman and significant indirect shareholder of The Tremont Group, Inc., which purchases our products for further distribution and resale. In January 2016, Les Lyman resigned from our board of directors. Accordingly, revenue recognized for sales to The Tremont Group, Inc. subsequent to his resignation in January 2016 will not be included in related party revenues. In addition, we have a strategic collaboration and

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distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of our common stock, Syngenta Ventures. In connection with our secondary offering in June 2014, Syngenta Ventures sold 0.6 million shares of our common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. For the years ended December 31, 2015, 2014 and 2013, related party revenues constituted 5%, 13% and 8% of total revenues, respectively. For the years ended December 31, 2015, 2014 and 2013, 100%, 71% and 63%, respectively, of related party revenues, were recognized on a sell-through basis.

Cost of Product Revenues and Gross Profit (Loss)

Cost of product revenues consists principally of the cost of raw materials, including inventory costs and third-party services related to procuring, processing, formulating, packaging and shipping our products. As we have used our Bangor, Michigan manufacturing plant to produce certain of our products, cost of product revenues includes an allocation of operating costs including direct and indirect labor, productions supplies, repairs and maintenance, depreciation, utilities and property taxes. The amount of indirect labor and overhead allocated to finished goods is determined on a basis presuming normal capacity utilization. Operating costs incurred in excess of production allocations, considered idle capacity, are expensed to cost of product revenues in the period incurred rather than added to the cost of the finished goods produced. Cost of product revenues may also include charges due to inventory adjustments and reserves. In addition, costs associated with license revenues have been included in cost of product revenues as they have not been significant. Gross profit (loss) is the difference between total revenues and cost of product revenues. Gross margin is gross profit (loss) expressed as a percentage of total revenues.

We have entered into in-license technology agreements with respect to the use and commercialization of three of our commercially available product lines, Regalia, Grandevo and Zequanox, and certain products under development. Under these licensing arrangements, we typically make royalty payments based on net product revenues, with royalty rates varying by product and ranging between 2% and 5% of net sales, subject in certain cases to aggregate dollar caps. These royalty payments are included in cost of product revenues, but they have historically not been significant. The exclusivity and royalty provisions of these agreements are generally tied to the expiration of underlying patents. The patents for Regalia and Zequanox will expire in 2017 and the in-licensed U.S. patent for Grandevo is expected to expire in 2024. There is, however, a pending in-licensed patent application relating to Grandevo, which could expire later than 2024 if issued. After the termination of these provisions, we may continue to produce and sell these products. While third parties thereafter may develop products using the technology under expired patents, we do not believe that they can produce competitive products without infringing other aspects of our proprietary technology, including pending patent applications related to Regalia, Grandevo and Zequanox, and we therefore do not expect the expiration of the patents or the related exclusivity obligations to have a significant adverse financial or operational impact on our business.

We expect to see increases in gross profit over the life cycle of each of our products as gross margins are expected to increase over time as production processes improve and as we gain efficiencies and increase product yields. While we expect margins to improve on a product-by-product basis, our overall gross margins may vary as we introduce new products. In particular, we are experiencing and expect further near-term downward pressure on overall gross margins as we expand sales of Grandevo, Venerate, Majestene and Zequanox and when we introduce new products. Gross margin has been and will continue to be affected by a variety of factors, including plant utilization, product manufacturing yields, changes in production processes, new product introductions, product mix and average selling prices.

In July 2012, we acquired a manufacturing facility, which we repurposed for manufacturing operations. We began full-scale manufacturing using this facility in 2014. We continue to use third party manufacturers for Venerate and Majestene and for spray-dried powder formulations of Grandevo and Zequanox. We expect gross margins to improve using this facility when sales volumes recover enough to reduce overhead and idle capacity charges from our facility.

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Research, Development and Patent Expenses

Research, development and patent expenses include personnel costs, including salaries, wages, benefits and share-based compensation, related to our research, development and patent staff in support of product discovery and development activities. Research, development and patent expenses also include costs incurred for laboratory supplies, field trials and toxicology tests, quality control assessment, consultants and facility and related overhead costs.

Beginning in the fourth quarter of 2014, we reduced our research and development staff and prioritized our pipeline candidates, focusing first on those that can be in the market in the next two years. We expect research, development and patent expenses to decrease in the near term as we have reduced headcount and will focus our efforts on select pipeline products. We are working to find partners to assist with the development of other pipeline candidates.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel costs, including salaries, wages, benefits and share-based compensation, related to our executive, sales, marketing, finance and human resources personnel, as well as professional fees, including legal and accounting fees, and other selling costs incurred related to business development and to building product and brand awareness. We create brand awareness through programs such as speaking at industry events, trade show displays and hosting local-level grower and distributor meetings. In addition, we dedicate significant resources to technical marketing literature, targeted advertising in print and online media, webinars and radio advertising. Costs related to these activities, including travel, are included in selling expenses. Our administrative expenses have increased in recent periods primarily as a result of becoming a public company and incurring significant costs in connection with the Audit Committee’s independent investigation and subsequent restatement of our financial statements.

We expect our selling expenses to increase in the near-term, both in absolute dollars and as a percentage of total revenues. For the years ended December 31, 2015 and 2014, we incurred $7.7 million and $5.8 million, respectively, in costs related to the Audit Committee’s independent investigation and the subsequent restatement of our financial statements, net of insurance proceeds. As a result of pending litigation, we also expect to incur additional costs relating to directors’ and officers’ liability insurance in future periods. In addition, in February 2016, we entered into a settlement agreement with the SEC with respect to the SEC’s investigation, which was principally related to the accounting and other matters that were initially identified by us in September 2014 and that led to the financial restatement completed by us on November 10, 2015. Under the terms of the settlement agreement, we paid a $1.75 million civil penalty in March 2016. We had previously recorded expenses of $1.75 million in our consolidated statements of operations for the year ended December 31, 2014 for an accrual of our estimate of the penalties arising from such enforcement action.

Interest Expense

We recognize interest expense on notes payable, convertible notes and other debt obligations. During 2013, we issued $6.5 million in convertible notes and $4.95 million in promissory notes, including the partial conversion of $1.25 million of a convertible note into a promissory note. Accordingly, our interest expense increased both in absolute terms and as a percentage of total revenues. In May 2013, we issued a $3.0 million convertible note, and we incurred $1.2 million of interest expense for the year ended December 31, 2013 as a result of the excess in the $4.2 million estimated fair value of the convertible note on the date of issuance compared to the cash received. Immediately following the completion of the IPO in August 2013, the convertible notes converted into shares of our common stock. Accordingly, we ceased to incur the interest expense associated with these convertible notes. In addition, in connection with the early repayment of a $10.0 million senior secured promissory note issued in April 2012, we wrote-off the unamortized debt discount totaling $0.8 million and incurred an early termination fee of $0.3 million, which were recorded to interest expense for the year ended December 31, 2013. In June 2014, we entered into a $10.0 million promissory note with a variable interest rate that varies with the prime rate.

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Accordingly, our interest expense will increase as the prime rate increases. In August 2015, pursuant to a purchase agreement, we issued and sold to affiliates of Waddell & Reed Financial, Inc. senior secured promissory notes in the aggregate principal amount of $40.0 million with a fixed interest rate and warrants to purchase up to 4.0 million shares of our common stock at an exercise price of $1.91 per share for aggregate consideration of $40.0 million. Accordingly, interest expense will increase as a result of the additional debt outstanding.

We have also acquired equipment under capital leases, which results in interest expense over the lease term. Our capital lease obligations were $0.7 million and $2.0 million as of December 31, 2015 and 2014, respectively.

Interest Income

Interest income consists primarily of interest earned on cash balances. Our interest income will vary each reporting period depending on our average cash balances during the period and market interest rates.

Change in Estimated Fair Value of Financial Instruments and Deemed Dividend on Convertible Notes

Until the effective date of the IPO, we accounted for the outstanding warrants exercisable into shares of our Series A, Series B and Series C convertible preferred stock as liability instruments. We also accounted for the outstanding warrants exercisable into a variable number of common shares at a fixed monetary amount as liability instruments. Our convertible notes were recorded at estimated fair value on a recurring basis as the predominant settlement feature of the convertible notes was to settle a fixed monetary amount in a variable number of shares. We adjusted the warrants and the convertible notes to fair value at each reporting period and on the effective date of the IPO with the change in estimated fair value recorded in the consolidated statements of operations.

Based on our operating performance (including the closing of several debt financings and the IPO) and changes in the probability and timing of, and estimated proceeds from, the completion of a an IPO in which we receive gross cash proceeds, before underwriting discounts, commissions and fees, of at least $30.0 million (a “Qualified IPO”) or a sale of substantially all of our assets or a series of transactions that result in the transfer of more than 50% of our outstanding voting power (an “Acquisition”) between reporting dates or the issuance dates of the warrants, we recognized a net gain due to the change in the estimated fair value of financial instruments related to the warrants of $0.4 million during the year ended December 31, 2013.

We issued $24.1 million in convertible notes during the year ended December 31, 2012. During the year ended December 31, 2013, we issued $6.5 million in convertible notes and converted $1.25 million of a convertible note into a promissory note. Based on our operating performance and changes in the probability and timing of, and estimated proceeds from, the completion of a Qualified IPO or an Acquisition between the reporting dates, or the issuance dates of these notes, we recognized a net gain due to the change in estimated fair value of financial instruments of $6.3 million during the year ended December 31, 2013 relating to convertible notes. In addition to the ongoing adjustments to the estimated fair value of our convertible notes, we also recognized a one-time deemed dividend in connection with the issuance of certain convertible notes to preferred stockholders because we estimated the fair value of the convertible notes as of the issuance dates to be greater than the cash proceeds received. Accordingly, we determined that the excess of the estimated fair value of the convertible notes on the dates of issuance over cash proceeds to us represented a deemed dividend to preferred stockholders, and $1.4 million was reflected in the net loss attributable to common stockholders during the year ended December 31, 2013.

As a result of the automatic exercise of all Series A and Series B convertible preferred stock warrants and certain common stock warrants for shares of common stock, the automatic conversion of all convertible notes into common stock in accordance with their terms and the exercise of all Series C convertible preferred stock warrants for shares of common stock in connection with our IPO in August 2013, there will not be any further adjustments to these warrants and convertible notes. In addition, upon completion of the IPO, the exercise price

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and number of shares to be issued upon exercise of the remaining outstanding common stock warrants became known. Accordingly, after the IPO, the fair value of the outstanding common stock warrant liability on the date of the IPO was reclassified to equity and will no longer be adjusted to its estimated fair value on each reporting date.

Income Tax Provision

Since our inception, we have been subject to income taxes principally in the United States. We anticipate that as we further expand our sales into foreign countries, we will become subject to taxation based on the foreign statutory rates and our effective tax rate could fluctuate accordingly.

Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect during the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of December 31, 2015, based on the available information, it is more likely than not that our deferred tax assets will not be realized, and accordingly we have taken a full valuation allowance against all of our U.S. deferred tax assets.

As of December 31, 2015, we had net operating loss carryforwards for federal income tax reporting purposes of $166.4 million, which begin to expire in 2026, and California and other state net operating loss carryforwards of $107.3 million and $39.1 million, respectively, which begin to expire in 2016. Additionally, as of December 31, 2015, we had federal research and development tax credit carryforwards of $1.9 million, which begin to expire in 2026, and state research and development tax credit carryforwards of $2.0 million, which have no expiration date.

Our ability to use our federal and state net operating loss carryforwards and federal and state tax credit carryforwards to reduce future taxable income and future taxes, respectively, may be subject to restrictions attributable to equity transactions that may have resulted in a change of ownership as defined by Internal Revenue Code Section 382. In the event we have had such a change in ownership, utilization of these carryforwards could be severely restricted and could result in significant amounts of these carryforwards expiring prior to benefitting us.

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Results of Operations

The following table sets forth certain statements of operations data as a percentage of total revenues:

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
Revenues:
Product		92	%		85	%		90	%
License		3			2			2
Related party		5			13			8
Total revenues		100			100			100
Cost of product revenues (1)		94			103			86
Gross profit (loss)		6			(3	)		14
Operating expenses:
Research, development and patent		138			211			212
Selling, general and administrative		270			317			178
Total operating expenses		408			528			390
Loss from operations		(402	)		(531	)		(376	)
Other income (expense):
Interest income		1			1			1
Interest expense		(28	)		(32	)		(72	)
Interest expense to related parties		(16	)		—			—
Change in estimated fair value of financial instruments		—			—			80
Gain on extinguishment of debt		—			—			—
Other expense, net		—			(3	)		(3	)
Total other income (expense), net		(43	)		(34	)		6
Income taxes		—			—			—
Net loss		(445	)%		(565	)%		(370	)%

⁽¹⁾  Includes 3%, 6% and 4% in cost of product revenues to related parties during the years ended December 31, 2015, 2014 and 2013, respectively. See Note 15 of our accompanying Notes to Consolidated Financial Statements included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion.

Comparison of the Years Ended December 31, 2015, 2014 and 2013

Product Revenues

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
Product revenues	$	8,976		$	7,750		$	7,588
% of total revenues		92	%		85	%		90	%

Product revenues increased by $1.2 million, or 16%, in 2015 compared to 2014 and $0.2 million, or 2%, in 2014 compared to 2013. Product revenues increased in 2015 compared to 2014 primarily due to an increase in revenue recognized on a sell-in basis. Product revenues increased in 2014 compared to 2013 primarily due to revenue recognized on a sell-through basis that was deferred from sales made in prior periods. The growth in product revenues has been impacted by the extended drought in California and other markets, which has reduced demand for our products as fewer acres are planted, as well as changes in weather patterns in Florida, which resulted in a

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shortened bloom cycle for the citrus market and few pesticide and plant health products being used. Additionally, the growth in product revenues has been impacted by the departures of our former chief operating officer and significant members of our sales staff in the third quarter of 2014 and subsequent turnover in our sales and marketing department which disrupted the 2014 launch of Venerate as well as growth in sales of our other commercialized products, including Regalia and Grandevo. Further, we believe that following the announcement of the matters relating to our recent restatement, some customers and potential customers were concerned about our reported investigation efforts, and therefore, were reluctant to do business with us until after we reached a settlement with the SEC.

License Revenues

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
License revenues	$	333		$	232		$	193
% of total revenues		3	%		2	%		2	%

License revenues related to certain strategic collaboration and distribution agreements increased by 44% in 2015 compared to 2014 and 20% in 2014 compared to 2013, but do not comprise a significant portion of our total revenues.

Related Party Revenues

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
Related party revenues	$	492		$	1,154		$	665
% of total revenues		5	%		13	%		8	%

Related party revenues decreased by $0.7 million, or 57%, in 2015 compared to 2014 and increased by $0.5 million, or 74%, in 2014 compared to 2013. Related party revenues decreased in 2015 compared to 2014 as $0.3 million was recognized during the year ended December 31, 2014 upon the termination of one of our strategic collaboration and distribution agreements with Syngenta. Syngenta is an affiliate of a former beneficial owner of more than 5% of our common stock, Syngenta Ventures. In connection with the secondary offering in June 2014, Syngenta Ventures sold 0.6 million shares of our common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized subsequent to June 2014 under the remaining agreements has not been included in related party revenues. There was also a decrease of $0.3 million in revenue recognized on a sell-through basis that was deferred from sales to The Tremont Group, Inc. made in prior periods.

Related party revenues increased in 2014 compared to 2013 as $0.3 million was recognized upon the termination of one of our strategic collaboration and distribution agreements with Syngenta, as discussed above, and due to an increase of $0.4 million in revenue recognized on a sell-through basis that was deferred from sales to the Tremont Group, Inc. made in prior periods.

Cost of Product Revenues and Gross Profit (Loss)

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
Cost of product revenues	$	9,256		$	9,438		$	7,243
% of total revenues		94	%		103	%		86	%
Gross profit (loss)	$	545		$	(302	)	$	1,203
% of total revenues (gross margin)		6	%		(3	)%		14	%

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Cost of product revenues decreased by $0.2 million, or 2%, in 2015 compared to 2014 and increased by $2.2 million, or 30%, in 2014 compared to 2013. Our gross margins increased from a negative 3% to 6% in 2015 compared to 2014 and decreased from 14% to a negative 3% in 2014 compared to 2013. Cost of product revenues decreased and gross margin increased in 2015 compared to 2014 primarily due to a decrease of $1.3 million in inventory-related cost of product revenues, as during the prior year we wrote-off a large volume of inventory not suitable for sale in future periods either because the inventory did not pass quality inspection or the efficacy had declined, and we also significantly increased our inventory reserve during the prior year as a result of lower production and sales forecasts. In addition, cost of product revenues decreased and gross margin increased in 2015 compared to 2014 due to a change in product mix as each of our products have different margins. This decrease in cost of product revenues was partially offset by an increase of $1.7 million in operating costs of the manufacturing plant that were recorded to cost of product revenues and were not allocated to inventory.

Cost of product revenues increased and gross margin decreased in 2014 compared to 2013 primarily due to adjustments to our inventory reserve of $0.7 million for inventory that may not be used prior to expiration as a result of lower production and sales forecasts, a $0.9 million write-off of inventory primarily due to the identification of inventory that would not suitable for sale in future periods either due to the inventory not passing quality inspection or the efficacy had declined and a $0.3 million write-down of the carrying value of inventory to net realizable value. In addition, our manufacturing plant began full-scale production in 2014, and as a result of actual utilization of the plant being less than what is considered normal capacity, $0.9 million in operating costs of the manufacturing plant were recorded to cost of product revenues in 2014 and were not allocated to the cost of inventory. Cost of product revenues and gross margin were also negatively impacted in 2013 by a $0.2 million write-down of the carrying value of inventory to net realizable value, a $0.2 million write-off of inventory primarily due to the identification of inventory that was not suitable for sale and a $0.2 million write-down of the carrying value of deferred cost of product revenues to net realizable value.

Research, Development and Patent Expenses

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
Research, development and patent expenses	$	13,500		$	19,281		$	17,905
% of total revenues		138	%		211	%		212	%

Research, development and patent expenses decreased by $5.8 million, or 30%, in 2015 compared to 2014 and increased by $1.4 million, or 8%, in 2014 compared to 2013. Research, development and patent expenses decreased in 2015 compared to 2014 primarily due to a general decrease in expenses related to the reduction in headcount, including a decrease of $2.8 million in employee related expenses, which consisted primarily of salaries, wages and share-based compensation, a decrease of $0.2 million in supplies and materials and a decrease of $0.1 million in travel costs. In addition, there was a decrease of $2.7 million in direct testing, field trials and outside consulting as we have narrowed our focus on our pipeline product priorities. This was offset by an increase in depreciation expense relating to new equipment purchased in connection with our move to our new corporate headquarters and laboratory space in December 2014.

Research, development and patent expenses increased in 2014 compared to 2013 primarily due to an increase of $1.1 million in employee-related expenses, which consisted primarily of salaries, wages, severance and share-based compensation, $0.5 million in direct testing costs, $0.1 million in depreciation and $0.2 million in increased rent. This was offset by a decrease of $0.1 million in outside services, $0.2 million in supplies and materials and $0.2 million in travel-related expenses.

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Selling, General and Administrative Expenses

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
Selling, general and administrative expenses	$	26,502		$	28,950		$	15,017
% of total revenues		270	%		317	%		178	%

Selling, general and administrative expenses decreased by $2.4 million, or 8%, in 2015 compared to 2014 and increased by $13.9 million, or 93%, in 2014 compared to 2013. Selling, general and administrative expenses decreased in 2015 compared to 2014 in part because we recorded $1.75 million in expenses in 2014 relating to an accrual for estimated penalties in connection with the SEC investigation, and there were no such expenses recorded in 2015. In addition, there was a decrease of $1.0 million in employee related expenses, which consisted primarily of salaries, wages and share-based compensation, $0.6 million in travel expenses due to a reduction in headcount, $0.1 million in supplies and materials and $1.7 million in expenses associated with the manufacturing plant as a result of such expenses either being capitalized as inventory or allocated to cost of product revenues if actual utilization of the plant is less than what is considered normal capacity as we began full-scale production in 2014. These decreases were offset by an increase of $2.0 million in accounting, consulting and legal fees incurred, net of insurance proceeds, as a result of the Audit Committee’s independent investigation, which began in September 2014, and the subsequent restatement of our financial statements and an increase of $0.4 million in fixed expenses due to an increase in rent and directors’ and officers’ liability insurance.

Selling, general and administrative expenses increased in 2014 compared to 2013 primarily due to an accrual of $1.75 million in 2014 for estimated penalties in connection with the SEC investigation and a $6.7 million increase in outside services, primarily related to approximately $5.8 million in accounting, consulting and legal fees incurred as a result of the Audit Committee’s independent investigation. Employee related expenses, which consisted primarily of salaries, wages, and share based compensation, also contributed to $3.2 million of the increase. An additional $1.4 million in startup and operating costs were incurred associated with the manufacturing facility, which commenced full-scale inventory production in 2014, which were not included in inventory or cost of product revenues. General costs increased $0.3 million primarily due to increased costs associated with being a public company after the IPO in August 2013. Fixed expenses increased $0.4 million primarily due to increased rent and depreciation associated with the new corporate headquarters and laboratory space. In addition, travel and supplies and materials increased $0.2 million.

Other Income (Expense), Net

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(Dollars in thousands)
Interest income	$	51		$	59		$	49
Interest expense		(2,764	)		(2,907	)		(6,056	)
Interest expense to related parties		(1,599	)		—			—
Change in estimated fair value of financial instruments		—			—			6,717
Gain on extinguishment of debt		—			—			49
Other income (expense), net		41			(278	)		(282	)
Total other income (expense), net	$	(4,271	)	$	(3,126	)	$	477

Interest income, consisting primarily of interest on cash and short-term investments, was largely unchanged. Interest expense decreased in 2015 compared to 2014 as we have not entered into any new capital lease agreements. Interest expense decreased in 2014 compared to 2013 primarily as a result of the conversion of convertible notes to common stock upon completion of the IPO in August 2013. This was partially offset by an

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increase in interest expense as a result of the issuance of a $10.0 million variable rate promissory note in June 2014. The remainder of the change in interest expense was due to increased borrowings under notes payable, convertible notes and capital lease agreements.

Interest expense to related parties increased in 2015 compared to 2014 and 2013 as we issued and sold to affiliates of Waddell & Reed Financial, Inc., a beneficial owner of more than 5% of our common stock, senior secured promissory notes in the aggregate principal amount of $40.0 million in August 2015. The notes bear interest at a rate of 8% per annum. In connection with the notes, we issued warrants to purchase 4.0 million shares of our common stock. The fair value of the warrants at the date of issuance of $4.6 million was recorded as a discount to the notes and is being amortized to interest expense to related parties over the term of the arrangement.

The change in the estimated fair value of financial instruments was associated with outstanding warrants and convertible notes issued in 2012 and 2013. We issued $30.6 million in convertible notes, warrants to purchase 0.2 million shares of Series C convertible preferred stock and warrants for the issuance of a variable number of shares of common stock based on a fixed monetary amount during that time. This was offset by a decrease in convertible notes of $1.3 million in May 2013 in connection with the conversion of a portion of a convertible note in exchange for a promissory note. Upon the closing of the IPO, all shares of our outstanding convertible preferred stock and convertible notes automatically converted into shares of common stock and outstanding warrants to purchase convertible preferred stock and certain warrants to purchase common stock were exercised for shares of common stock. Accordingly, we ceased incurring the change in estimated fair value of financial instruments associated with the convertible preferred stock and convertible notes.

Other income (expense) during the year ended December 31, 2014 and 2013 primarily reflects losses on the disposal of fixed assets in the amount of $0.2 million in each year. There were no significant losses on the disposal of fixed assets during the year ended December 31, 2015. The remainder of the change in other income (expense) relates to foreign currency transaction expenses.

Seasonality and Quarterly Results

The level of seasonality in our business overall is difficult to evaluate as a result of our relatively early stage of development, our relatively limited number of commercialized products, our expansion into new geographical territories, the introduction of new products, the timing of introductions of new formulations and products and our recognition of revenue on both a “sell-in” and “sell-through” basis, depending on the transaction. It is possible that our business may become more seasonal, or experience seasonality in different periods, than anticipated, particularly if we expand into new geographical territories, add or change distributors or distributor programs or introduce new products with different applicable growing seasons, or if a more significant component of our revenue becomes comprised of sales of Zequanox, which has a separate seasonal sales cycle compared to our crop protection products. Notwithstanding any such seasonality, we expect substantial fluctuation in sales year over year and quarter over quarter as a result of a number of variables on which sales of our products are dependent. Weather conditions, natural disasters and other factors affect planting and growing seasons and incidence of pests and plant disease, and accordingly affect decisions by our distributors, direct customers and end users about the types and amounts of pest management and plant health products to purchase and the timing of use of such products. In addition, disruptions that cause delays by growers in harvesting or planting can result in the movement of orders to a future quarter, which would negatively affect the quarter and cause fluctuations in our operating results. For example, late snows and cold temperatures in the Midwestern and Eastern United States in the first and second quarters of 2014 delayed planting and pesticide and plant health applications. Customers also may purchase large quantities of our products in a particular quarter to store and use over long periods of time or time their purchases to manage their inventories, which may cause significant fluctuations in our operating results for a particular quarter or year, and low commodity prices may discourage growers from purchasing our products in an effort to reduce their costs and increase their margins for a growing season.

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The following tables set forth our unaudited quarterly consolidated statements of operations data in dollars and as a percentage of total revenues for each of the four quarters in fiscal years 2015 and 2014. We have prepared the quarterly consolidated statements of operations data on a basis consistent with the audited consolidated financial statements included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. In the opinion of management, the financial information reflects all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of this information. This information should be read in connection with the audited consolidated financial statements and related notes included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The results of operations for historical periods are not necessarily indicative of the results of operations for any future period.

Fiscal Year 2015:

	MARCH 31, 2015			JUNE 30, 2015			SEPTEMBER 30, 2015			DECEMBER 31, 2015
	(In thousands)
	(Unaudited)
Revenues:
Product	$	1,774		$	3,091		$	2,295		$	1,816
License		83			83			83			84
Related party		199			183			97			13
Total revenues		2,056			3,357			2,475			1,913
Cost of product revenues (1)		1,998			2,994			2,340			1,924
Gross profit (loss)		58			363			135			(11	)
Operating expenses:
Research, development and patent		3,422			3,328			3,442			3,308
Selling, general and administrative		7,887			7,411			5,317			5,887
Total operating expenses		11,309			10,739			8,759			9,195
Loss from operations		(11,251	)		(10,376	)		(8,624	)		(9,206	)
Other income (expense):
Interest income		9			6			14			22
Interest expense		(669	)		(659	)		(687	)		(749	)
Interest expense to related parties		—			—			(501	)		(1,098	)
Other income (expense), net		(3	)		44			(1	)		1
Total other expense		(663	)		(609	)		(1,175	)		(1,824	)
Income taxes		—			—			—			—
Net loss	$	(11,914	)	$	(10,985	)	$	(9,799	)	$	(11,030	)

⁽¹⁾  Includes $0.1 million in cost of product revenues to related parties for each of the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015, and less than $0.1 million in cost of product revenues for the quarter ended December 31, 2015. See Note 15 of our accompanying Notes to Consolidated Financial Statements included in Part II-Item 8-“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further discussion.

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	MARCH 31, 2015			JUNE 30, 2015			SEPTEMBER 30, 2015			DECEMBER 31, 2015
	(Unaudited)
Revenues:
Product		86	%		92	%		93	%		95	%
License		4			2			3			4
Related party		10			6			4			1
Total revenues		100			100			100			100
Cost of product revenues (1)		97			89			95			101
Gross profit (loss)		3			11			5			(1	)
Operating expenses:
Research, development and patent		166			99			139			173
Selling, general and administrative		384			221			215			308
Total operating expenses		550			320			354			481
Loss from operations		(547	)		(309	)		(349	)		(482	)
Other income (expense):
Interest income		—			—			1			1
Interest expense		(33	)		(20	)		(28	)		(39	)
Interest expense to related parties		—			—			(20	)		(57	)
Other income (expense), net		—			1			—			—
Total other expense, net		(33	)		(19	)		(47	)		(95	)
Income taxes		—			—			—			—
Net loss		(580	)%		(328	)%		(396	)%		(577	)%

⁽¹⁾  Includes 4%, 3%, 2% and less than 1% in cost of product revenues to related parties for the quarters ended March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015, respectively. See Note 15 of our accompanying Notes to Consolidated Financial Statements included in Part II-Item 8-“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further discussion.

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Fiscal Year 2014:

	MARCH 31, 2014			JUNE 30, 2014			SEPTEMBER 30, 2014			DECEMBER 31, 2014
	(In thousands)
	(Unaudited)
Revenues:
Product	$	2,054		$	2,877		$	1,881		$	938
License		45			51			65			71
Related party		605			206			254			89
Total revenues		2,704			3,134			2,200			1,098
Cost of product revenues (1)		1,793			2,711			3,502			1,432
Gross profit (loss)		911			423			(1,302	)		(334	)
Operating expenses:
Research, development and patent		4,297			4,264			4,817			5,903
Selling, general and administrative		6,324			5,920			7,394			9,312
Total operating expenses		10,621			10,184			12,211			15,215
Loss from operations		(9,710	)		(9,761	)		(13,513	)		(15,549	)
Other income (expense):
Interest income		10			11			21			17
Interest expense		(606	)		(863	)		(769	)		(669	)
Other expense, net		(9	)		(98	)		(139	)		(32	)
Total other expense		(605	)		(950	)		(887	)		(684	)
Income taxes		—			—			—			—
Net loss	$	(10,315	)	$	(10,711	)	$	(14,400	)	$	(16,233	)

⁽¹⁾  Includes $0.2 million, $0.1 million, $0.2 million and less than $0.1 million in cost of product revenues to related parties for the quarters ended March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014, respectively. See Note 15 of our accompanying Notes to Consolidated Financial Statements included in Part II- Item 8-“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further discussion.

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	MARCH 31, 2014			JUNE 30, 2014			SEPTEMBER 30, 2014			DECEMBER 31, 2014
	(Unaudited)
Revenues:
Product		76	%		92	%		85	%		85	%
License		2			2			3			7
Related party		22			6			12			8
Total revenues		100			100			100			100
Cost of product revenues (1)		66			87			159			130
Gross profit (loss)		34			13			(59	)		(30	)
Operating expenses:
Research, development and patent		159			136			219			538
Selling, general and administrative		234			188			336			848
Total operating expenses		393			324			555			1,386
Loss from operations		(359	)		(311	)		(614	)		(1,416	)
Other income (expense):
Interest income		—			—			1			2
Interest expense		(22	)		(28	)		(35	)		(61	)
Other expense, net		—			(3	)		(6	)		(3	)
Total other expense		(22	)		(31	)		(40	)		(62	)
Income taxes		—			—			—			—
Net loss		(381	)%		(342	)%		(654	)%		(1,478	)%

⁽¹⁾  Includes 6%, 4%, 10% and 4% in cost of product revenues to related parties for the quarters ended March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014, respectively. See Note 15 of our accompanying Notes to Consolidated Financial Statements included in Part II-Item 8-“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion.

Liquidity and Capital Resources

From our inception until the IPO in August 2013, our operations have been financed primarily by net proceeds from the private placements of convertible preferred stock, convertible notes, promissory notes and term loans, as well as proceeds from the sale of our products and payments under strategic collaboration and distribution agreements and government grants.

In the IPO, we issued 5.5 million shares of our common stock (inclusive of 0.7 million shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $12.00 per share. The total gross proceeds from the offering to us were $65.6 million, and after deducting underwriting discounts and commissions and offering expenses payable by us, the aggregate net proceeds received totaled $56.1 million.

In June 2014, we completed a public offering of 4.6 million shares of our common stock (inclusive of 0.7 million shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $9.50 per share. The total gross proceeds from the offering to us were $43.5 million, and after deducting underwriting discounts and commissions and offering expenses payable by us, the aggregate net proceeds received totaled $39.9 million.

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In June 2014, we also borrowed $10.0 million pursuant to a promissory note with a bank. This note requires us to maintain a deposit balance with the lender of $1.6 million. In addition, until we provide documentation that proceeds from the loan were used for construction of our manufacturing plant, proceeds from the loan will be maintained in a restricted deposit account. As of December 31, 2015, we had $1.9 million remaining in the restricted deposit account.

In August 2015, we issued and sold to affiliates of Waddell & Reed, Inc. senior secured promissory notes in the aggregate principal amount of $40.0 million. The notes bear interest at a rate of 8% per annum payable semi-annually on June 30 or December 31 of each year, commencing on December 31, 2015, with $10.0 million payable three years from the closing, $10.0 million payable four years from the closing and $20.0 million payable five years from the closing. These notes require us to maintain a cash and cash equivalents balance of $15.0 million.

As of December 31, 2015, our cash and cash equivalents totaled $19.8 million and we had restricted cash of $18.4 million relating to cash that we are contractually obligated to maintain in accordance with our debt agreements. We currently estimate that by the fourth quarter of 2016 without entering into strategic agreements that include significant cash payments upfront, significantly increasing revenues from sales or raising additional capital through the issuance of equity or debt, we will be below the $15.0 million minimum cash balance requirement in our promissory notes with affiliates of Waddell & Reed as noted above. Further, although under a promissory note with Five Star Bank our requirement to remain below a maximum debt-to-worth ratio under this agreement has been waived through December 31, 2016, management expects that immediately after the waiver has expired we will be in violation of this covenant as well. As of December 31, 2015, we had an accumulated deficit of $203.6 million and we estimate that we will continue to incur losses, which will further increase our accumulated deficit. These circumstances raise substantial doubt about our ability to continue as a going concern, which depends on our ability to obtain further waivers of our covenants, enter into strategic agreements that include significant cash payments upfront and/or raise additional capital. There is no assurance that we will be able to obtain waivers of our debt covenants or raise capital, or if we are able to raise capital, that it will be on favorable terms. Adequate funds for these and the other purposes may not be available to us when needed or on acceptable terms, and we may need to raise capital that may not be available on favorable or acceptable terms, if at all. If we cannot raise money when needed, we may have to reduce or slow sales and product development activities, further reduce operating expenses and/or reduce capital investment. We incorporated additional information regarding risks related to our capital and liquidity in Part I-Item 1A”Risk Factors” of this Annual Report on Form 10-K, which should be read in connection with this disclosure.

Since our inception, we have incurred significant net losses, and, as of December 31, 2015, we had an accumulated deficit of $203.6 million. We expect to incur additional losses related to the continued development and expansion of our business. Our liquidity may be negatively impacted as a result of slower than expected adoption of our products. We have certain strategic collaboration and distribution agreements under which we receive payments for the achievement of certain testing validation, regulatory progress and commercialization events. As of December 31, 2015, we had received an aggregate of $3.6 million in payments and had $0.3 million recorded in accounts receivable under these agreements. In addition, there will be an additional $0.3 million in payments due on certain anniversaries of regulatory approval and an additional $1.1 million in payments under these agreements that we could potentially receive if the testing validation, regulatory progress and commercialization events occur.

During the years ended December 31, 2015, 2014 and 2013, we used $1.7 million, $13.0 million and $4.0 million, respectively, in cash to fund capital expenditures. In July 2012, we acquired a manufacturing facility, formerly used as a biodiesel plant. Repurposing of the facility was completed in 2014 and included the installation of fermentation tanks and the construction of a dedicated building to house them. In December 2013, we produced the first test batch of Grandevo at this facility and began full-scale production of our products using our own manufacturing capacity in 2014. The facility now accommodates full-scale production of Regalia and full-scale fermentation of Grandevo and Zequanox.

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We had the following debt arrangements in place as of December 31, 2015, in each case as discussed below (dollars in thousands):

DESCRIPTION	STATED ANNUAL INTEREST RATE			PRINCIPAL BALANCE (INCLUDING ACCRUED INTEREST)		PAYMENT/MATURITY
Promissory Notes (1)		18.00	%	$	12,637	Monthly(4)/October 2017
Promissory Note (2)		5.25	%	$	9,647	Monthly/June 2036
Promissory Notes (3)		8.00	%	$	41,175	Biannually(5)/August 2020

⁽¹⁾  See “—October 2012 and April 2013 Secured Promissory Notes.”

⁽²⁾  See “—June 2014 Secured Promissory Note.”

⁽³⁾  See “—August 2015 Senior Secured Promissory Notes.”

⁽⁴⁾  Monthly payments are interest only until maturity.

⁽⁵⁾ Biannual payments are interest only until maturity with principal payments due in increments at three, four and five years from the closing date.

October 2012 and April 2013 Secured Promissory Notes

In October 2012, we completed the sale of promissory notes in the aggregate principal amount of $7.5 million to twelve lenders in a private placement. In addition, in April 2013, we completed the sale of an additional $4.95 million of promissory notes to ten lenders in a private placement under an amendment to the note purchase agreement in exchange for $3.7 million in cash and $1.25 million in cancellation of indebtedness under a previously outstanding convertible note. In August 2015, the terms of the notes were amended, resulting in an increase in the interest rate to 18% effective September 1, 2015 for the remaining term of the notes. In addition, in accordance with terms of the notes whereby the maturity date may be extended for a period of two years from the original maturity date of October 2015, we provided a written notice in September 2015 to extend the maturity date to October 2017.

These promissory notes are secured by a security interest in all of our present and future accounts receivable, chattel paper, commercial tort claims, goods, inventory, equipment, personal property, instruments, investment properties, documents, letter of credit rights, deposit accounts, general intangibles, records, real property, appurtenances and fixtures, tenant improvements and intellectual property, which consists of our patents, copyrights and other intangibles.

As of December 31, 2014, we were in breach of our covenants under the notes as a result of our failure to provide annual financial statements in a timely manner and our being in breach of certain of our covenants on our June 2014 Secured Promissory Note as described below. However, in November 2015, we received an extension from the lending agent with respect to compliance with the requirements to deliver annual financial statements to the earlier of (i) November 15, 2015 or (ii) such time such financial statements are filed with the SEC. Further, the covenant breach was cured in November 2015 as a result of obtaining this extension and the waiver of certain of our covenants with respect to the June 2014 Secured Promissory Note as described below.

June 2014 Secured Promissory Note

In June 2014, we borrowed $10.0 million pursuant to a business loan agreement and promissory note with Five Star Bank which bears interest at prime rate plus 2% per annum. The interest rate is subject to change from time to time to reflect changes in the prime rate; however, the interest rate shall not be less than 5.25% or more than the maximum rate allowed by applicable law. If the interest rate increases, the lender, may, at its option, increase the amount of each monthly payment to ensure that the note would be paid in full by the maturity date, increase

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the amount of each monthly payment to reflect the change in interest rate, increase the number of monthly payments or keep the monthly payments the same and increase the final payment amount. As of December 31, 2015, the interest rate was 5.25%.

The June 2014 Secured Promissory Note is repayable in monthly payments of $64,390 commencing in July 2014, with the final payment due in June 2036. Certain of our deposit accounts and our subsidiary’s inventories, chattel paper, accounts, equipment and general intangibles have been pledged as collateral for the promissory note. We are required to maintain a deposit balance with the lender of $1.6 million, which was recorded as restricted cash included in non-current assets. In addition, until we provide documentation that the proceeds from the loan were used for construction of the manufacturing plant, proceeds from the loan will be maintained in a restricted deposit account. As of December 31, 2015, we had $1.9 million remaining in this restricted deposit account, which was recorded as restricted cash included in current assets.

We may prepay 20% of the outstanding principal loan balance each year without penalty. A prepayment fee of 10% will be charged if prepayments exceed 20% in the first year, and the prepayment fee will decrease by 1% each year for the first ten years of the loan.

We are required to maintain a current ratio of not less than 1.25-to-1.0, a debt-to-worth ratio of no greater than 4.0-to-1.0 and a loan-to-value ratio of no greater than 70% as determined by the lender. We are also required to comply with certain affirmative and negative covenants under the loan agreement discussed above. In the event of default on the debt, the lender may declare the entire unpaid principal and interest immediately due and payable. As of December 31, 2014, we were in breach of certain of our covenants under the loan agreement as a result of our annual and quarterly reports not being filed within the prescribed time period and our being in breach of covenants on the October 2012 and April 2013 Secured Promissory Notes described above. In addition, effective September 30, 2015, our debt-to-worth ratio was greater than 4.0-to-1.0 as a result of the issuance of $40.0 million in promissory notes in August 2015 as described below, which increased our debt while we continued to incur net losses, which decreased stockholders’ equity. However, in November 2015, we received a waiver from the lender with respect to compliance with the requirements to (i) deliver annual financial statements (extended to November 15, 2015), (ii) maintain a current ratio greater than 1.25-to-1.0 (extended to December 31, 2015) and (iii) maintain a debt-to-worth ratio less than 4.0-to-1.0 (extended to December 31, 2016). The receipt of this waiver and the extension to provide financial statements under the October 2012 and April 2013 Secured Promissory Notes cured our being in breach of the covenants under the loan agreement.

August 2015 Senior Secured Promissory Notes

On August 20, 2015, we issued and sold senior secured promissory notes to three affiliated lenders in the aggregate principal amount of $40.0 million. The notes bear interest at a rate of 8% per annum payable semi-annually on June 30 or December 31 of each year, commencing on December 31, 2015, with $10.0 million payable three years from the closing, $10.0 million payable four years from the closing and $20.0 million payable five years from the closing. The notes contain customary covenants, in addition to the obligation to maintain cash and cash equivalents of at least $15.0 million, which was recorded as restricted cash included in non-current assets and is not required to be segregated from our operational cash.

The notes are secured by substantially all of our personal property assets. The lenders shall be entitled to have a first priority lien on our intellectual property assets, pursuant to intercreditor arrangements with certain of our existing lenders. The notes provide for various events of default, including, among others, default in payment of principal or interest, breach of any representation or warranty by us or any subsidiary under any agreement or document delivered in connection with the notes, a continued breach of any other condition or obligation under any loan documents, certain bankruptcy, liquidation, reorganization or change of control events, the acquisition by any person or persons acting as group, other than the lenders, of beneficial ownership of 40% or more of our outstanding voting stock and certain events in which Pamela G. Marrone, Ph.D. ceases to serve as our Chief Executive Officer. Upon an event of default, the entire unpaid principal and interest may be declared immediately due and payable. As of September 30, 2015, we were in breach of our covenants under the August

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2015 Senior Secured Promissory Notes as we were in breach of our covenants under our October 2012 and April 2013 Secured Promissory Notes and June 2014 Secured Promissory Note. However, this covenant breach was cured in November 2015 as we obtained an extension to deliver our annual financial statements with respect to the October 2012 and April 2013 Secured Promissory Notes and a waiver of certain of our covenants with respect to the June 2014 Secured Promissory Note as discussed above.

The following table sets forth a summary of our cash flows for the periods indicated:

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(In thousands)
Net cash used in operating activities	$	(36,174	)	$	(35,935	)	$	(34,064	)
Net cash provided by (used in) investing activities		(1,646	)		671			(17,620	)
Net cash provided by financing activities		22,334			46,133			66,133
Net increase (decrease) in cash and cash equivalents	$	(15,486	)	$	10,869		$	14,449

Cash Flows from Operating Activities

Net cash used in operating activities of $36.2 million during the twelve months ended December 31, 2015 primarily resulted from our net loss of $43.7 million, which included $3.5 million of depreciation and amortization expense, $3.8 million of share-based compensation expense and $0.8 million of non-cash interest expense. The net loss also includes approximately $7.7 million in accounting, consulting and legal fees incurred, net of insurance proceeds, as a result of the Audit Committee’s independent investigation, which began in September 2014, and subsequent restatement of our financial statements. In addition, net cash used in operating activities resulted from an increase in accounts receivable of $0.6 million, and decreases in accounts payable of $3.5 million, accrued and other liabilities of $0.1 million, deferred revenue from related parties of $0.5 million and customer refund liabilities of $1.0 million. This was offset by decreases in inventories of $3.6 million, prepaid expenses and other assets of $0.1 million and deferred cost of product revenues of $0.2 million, and an increase in accrued interest due to related parties of $1.2 million.

Net cash used in operating activities of $35.9 million during the twelve months ended December 31, 2014 primarily resulted from our net loss of $51.7 million, which included $4.6 million of share-based compensation expense, $2.6 million of depreciation and amortization expense, loss on disposal assets of $0.2 million and $0.8 million of non-cash interest expense. The net loss also included approximately $5.8 million in accounting, consulting, and legal fees incurred as a result of the Audit Committee’s independent investigation. In addition, net cash used in operating activities resulted from decreases in deferred revenue of $0.1 million and deferred revenue from related parties of $0.7 million and increases in prepaid expenses and other assets of $0.3 million. This was offset by decreases in accounts receivable of $2.0 million, deferred cost of product revenues of $1.1 million, inventories of $0.1, million and accounts receivable from related parties of $0.9 million, and increases in customer refund liabilities of $1.0 million, accounts payable of $1.7 million and accrued and other liabilities of $1.9 million.

Net cash used in operating activities of $34.1 million during the twelve months ended December 31, 2013 primarily resulted from our net loss of $31.2 million, which included a gain of $6.7 million in connection with a change in the fair value of financial instruments and $4.3 million in non-cash interest expense, $2.3 million in share-based compensation expense, $1.0 million in depreciation and amortization expense and $0.2 million in loss on disposal of equipment. In addition, net cash used in operating activities resulted from increases in accounts receivable of $1.0 million, accounts receivable due from related parties of $0.8 million, inventories of $7.8 million and deferred cost of product revenues of $2.9 million. This was offset by increases in deferred revenue of $3.5 million, deferred revenue from related parties of $0.9 million, accounts payable of $1.7 million and accrued and other liabilities of $1.1 million, and a decrease in prepaid expenses and other assets of $1.4 million.

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Cash Flows from Investing Activities

Net cash used in investing activities of $1.6 million during the twelve months ended December 31, 2015 primarily resulted from $1.7 million used for the purchase of property, plant and equipment to support growth of our operations.

Net cash provided by investing activities of $0.7 million during the twelve months ended December 31, 2014 primarily resulted from $13.7 million provided from maturities of short-term investments, which was offset by $13.0 million used for the purchase of property, plant and equipment, primarily associated improvements related to the manufacturing plant.

Net cash used in investing activities of $17.6 million during the twelve months ended December 31, 2013 primarily resulted from $4.0 million used for the purchase of property, plant and equipment, primarily associated with improvements related to the manufacturing plant and $17.5 million used for the purchase of short-term investments, which was offset by $3.8 million in cash provided by maturities of short-term investments.

Cash Flows from Financing Activities

Net cash provided by financing activities of $22.3 million during the twelve months ended December 31, 2015 consisted primarily of $39.7 million in proceeds from the issuance of debt due to related parties, net of financing costs. This was offset by $0.4 million in payments on our debt, $2.0 million in payments on our capital lease obligations and $15.0 million of restricted cash relating to the debt due to related parties.

Net cash provided by financing activities of $46.1 million during the twelve months ended December 31, 2014 consisted primarily of $39.9 million in proceeds from the secondary offering, net of offering costs and underwriter commissions, $9.7 million from the issuance of debt and warrants, net of financing costs, $4.7 million in proceeds from the line of credit and $1.4 million in proceeds from the exercise of stock options and warrants. This was offset by $4.7 million in payments on the line of credit, $1.5 million in payments on our debt and capital leases and $3.4 million transferred to restricted cash.

Net cash provided by financing activities of $66.1 million during the twelve months ended December 31, 2013 consisted primarily of $56.1 million in proceeds from the initial public offering, net of offering costs and underwriter commissions, $6.5 million from the issuance of convertible notes, $3.7 million from the issuance of debt, net of financing costs, $9.1 million from the release of restricted cash, $2.9 million in proceeds from secured borrowing and $0.3 million in proceeds from the exercise of stock options. This was offset by $9.6 million in payments on our debt and capital leases and $2.9 million in reductions of secured borrowing.

Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2015:

	TOTAL		2016		2017-2018		2019-2020		2021 AND BEYOND
	(In thousands)
Operating lease obligations	$	3,534	$	1,029	$	1,890	$	615	$	—
Debt and capital leases		62,736		914		23,047		30,642		8,133
Interest payments relating to debt and capital leases		23,952		7,133		8,958		4,037		3,824
Total	$	90,222	$	9,076	$	33,895	$	35,294	$	11,957

Operating leases consist of contractual obligations from agreements for non-cancelable office space and leases used to finance the acquisition of equipment. Debt and capital equipment lease payments and the interest payments relating thereto include promissory notes and capital lease obligations in accordance with the payment terms under the agreements.

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In September 2013 and then amended in April 2014, we entered into a lease agreement for approximately 27,300 square feet of office and laboratory space located in Davis, California. The initial term of the lease is for a period of 60 months and commenced in August 2014. The monthly base rent is $44,000 for the first 12 months with a 3% increase each year thereafter. Concurrent with this amendment, in April 2014, we entered into a lease agreement with an affiliate of the landlord to lease approximately 17,400 square feet of office and laboratory space in the same building complex in Davis, California. The initial term of the lease is for a period of 60 months and commenced in August 2014. The monthly base rent is $28,000 with a 3% increase each year thereafter. In addition, we continue to lease a portion of the location of our old headquarters in Davis, California until that lease expires in October 2016.

In January 2016, we entered into an agreement with a sublessee to sublease approximately 3,800 square feet of vacant office space in the aforementioned building complex pursuant to the terms of our lease agreement. The initial term of the sublease is for a period of approximately 43 months and commenced on February 1, 2016. The monthly base rent is approximately $5,000 per month for the first 12 months with a 5% increase each year thereafter.

Since December 31, 2015, we have not added any additional leases that would qualify as operating leases.

Inflation

We believe that inflation has not had a material impact on our results of operations during the years ended December 31, 2015, 2014 and 2013.

Off-Balance Sheet Arrangements

We have not been involved in any material off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements included in this Annual Report on Form 10-K in Part II-Item 8-“Financial Statements and Supplementary Data.”

Critical Accounting Policies and Estimates

Inventories

Inventories are stated at the lower of cost or market value (net realizable value or replacement cost) and include the cost of material and external and internal labor and manufacturing costs. Cost is determined on the first-in, first-out basis. We provide for inventory reserves when conditions indicate that the selling price may be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Additionally, we provide reserves for excess and slow-moving inventory on hand that is not expected to be sold to reduce the carrying amount of excess and slow-moving inventory to its estimated net realizable value. The reserves are based upon estimates about future demand from our customers and distributors and market conditions.

Fair Value of Financial Instruments

Fair value is defined as an exit price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A three tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows: Level 1, observable inputs such as quoted prices in active markets; Level 2, inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3, unobservable inputs in which there is little or no market data, which requires that we develop our own assumptions. This hierarchy requires the use of observable data, when available, and minimizes the use of unobservable inputs when determining fair value.

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Until the effective date of the IPO, we accounted for the outstanding warrants exercisable into shares of our Series A, Series B and Series C convertible preferred stock as liability instruments, as these warrants were convertible into Series A, Series B and Series C convertible preferred stock upon the occurrence of certain events or transactions. We also accounted for the outstanding warrants exercisable into a variable number of shares of common stock at a fixed monetary amount as liability instruments. Our convertible notes were recorded at estimated fair value on a recurring basis as the predominant settlement feature of the convertible notes was to settle a fixed monetary amount in a variable number of shares. We adjusted the warrants and the convertible notes to estimated fair value at each reporting period and on the effective date of the IPO, with the change in estimated fair value recorded in the consolidated statements of operations.

In fiscal year 2012, as we closed several debt financings and as an IPO became more probable as we began investing significant time and resources into the IPO process, we changed our valuation methodology to estimate the fair value of our financial instruments, including our outstanding warrants and convertible notes, from the option method to the probability weighted expected return method (“expected return method”). The expected return method analyzes the returns afforded to common equity holders under multiple possible future scenarios. Under the expected return method, share value is based upon the probability-weighted present value of expected future net cash flows (distributions to shareholders) under each of the possible scenarios, giving consideration to the rights and preferences of each share class. This method is most appropriate when the long-term outlook for an enterprise is largely known and multiple possible future scenarios can be reasonably estimated. As the expected return method estimated the fair value of our warrants and convertible notes using unobservable inputs, they were both considered to be Level 3 fair value measurements. Changes in the probability weights and discount rates used in the expected return method valuation model and the estimated time to a liquidity event may have a significant impact on the estimated fair value of the preferred and common stock warrant liabilities and the convertible notes.

As a result of the automatic exercise of all Series A and Series B convertible preferred stock warrants and certain common stock warrants for shares of common stock, the automatic conversion of all convertible notes into common stock in accordance with their terms and the exercise of all Series C convertible preferred stock warrants for shares of common stock in connection with our IPO in August 2013, there will not be any further adjustments to these warrants and convertible notes. In addition, upon completion of the IPO, the exercise price and number of shares to be issued upon exercise of the remaining outstanding common stock warrants became known. Accordingly, after the IPO, the fair value of the common stock warrant liability on the date of the IPO was reclassified to equity and will no longer be adjusted to its estimated fair value on each reporting date.

Revenue Recognition

We recognize revenues when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. If contractual obligations, acceptance provisions or other contingencies exist which indicate that the price is not fixed or determinable, revenue is recognized after such obligations or provisions are fulfilled or expire.

Product revenues consist of revenues generated from sales of our products to distributors and direct customers, net of rebates and cash discounts. For sales of products made to distributors, we recognize revenue either on a sell-in or sell-through basis depending on the specific facts and circumstances of the transaction(s) with the distributor. Factors considered include, but are not limited to, whether the payment terms offered to the distributor are structured to correspond to when product is resold, the distributor history of adhering to the terms of its contractual arrangements with us, whether we have a pattern of granting concessions for the benefit of the distributor and whether there are other conditions that may indicate that the sale to the distributor is not substantive.

In some cases, we recognize distributor revenue as title and risk of loss passes, provided all other revenue recognition criteria have been satisfied (the “sell-in” method). For certain sales to certain distributors, the revenue recognition criteria for distributor sales are not satisfied at the time title and risk of loss passes to the

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distributor; specifically, in instances where “inventory protection” arrangements were offered to distributors that permitted these distributors to return to us certain unsold products, we consider the arrangement not to be fixed or determinable, and accordingly, revenue is deferred until products are resold to customers of the distributor (the “sell-through” method). As of December 31, 2015 and 2014, we recorded current deferred product revenues of $2.8 million and $3.2 million, respectively, including current deferred product revenues from related parties of $0.2 million and $0.7 million, respectively. The cost of product revenues associated with such deferral are also deferred and classified as deferred cost of product revenues in the consolidated balance sheets. Cash received from customers related to delivered product that may not represent a true sale is classified as customer refund liabilities in the consolidated balance sheets and the related cost of inventory remains in inventory in the consolidated balance sheets until the product is returned or is resold to customers of the distributor and revenue is recognized. During the years ended December 31, 2015, 2014 and 2013, 47%, 53% and 23%, respectively, of total revenues were recognized on a sell-through basis.

From time to time, we offer certain product rebates to our distributors and growers, which are estimated and recorded as reductions to product revenues, and an accrued liability is recorded at the later of when the revenues are recorded or the rebate is being offered.

We recognize license revenues pursuant to strategic collaboration and distribution agreements under which we receive payments for the achievement of certain testing validation, regulatory progress and commercialization events. As these activities and payments are associated with exclusive rights that we provide in connection with strategic collaboration and distribution agreements over the term of the agreements, revenues related to the payments received are deferred and recognized over the term of the exclusive distribution period of the respective agreement. During the year ended December 31, 2015, we received payments totaling $0.8 million under these agreements, and as of December 31, 2015, an additional $0.3 million was included in accounts receivable. During the year ended December 31, 2014, we received payments totaling $0.5 million under these agreements, and as of December 31, 2014, an additional $0.8 million was included in accounts receivable. No payments were received under these agreements during the year ended December 31, 2013. During the years ended December 31, 2015, 2014 and 2013, we recognized $0.3 million, $0.2 million and $0.2 million, respectively, as license revenues, excluding related party revenues.

We have a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of our common stock, Syngenta Ventures. In connection with our public offering in June 2014, Syngenta Ventures sold 0.6 million shares of our common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. During the year ended December 31, 2014, we recognized $0.3 million of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake. During the year ended December 31, 2013, we recognized $0.1 million of related party revenues under this agreement.

As of December 31, 2015, we recorded current and non-current deferred revenues of $0.3 million and $2.0 million, respectively, related to payments received under these agreements. As of December 31, 2014, we recorded current and non-current deferred revenues of $0.3 million and $2.1 million, respectively, related to payments received under these agreements.

Share-Based Compensation

We recognize share-based compensation expense for all stock options and restricted stock units granted to employees and directors based on estimated fair values.

We estimate the fair value of restricted stock units based on the closing bid price of our common stock on the date of grant. During the year ended December 31, 2015, we recognized $96,000 of share-based compensation expense on restricted stock units. Total share-based compensation expense related to restricted stock units not yet recognized as of December 31, 2015 was $50,000, which is expected to be recognized over a weighted average period of 0.4 years.

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We estimate the fair value of stock options on the date of grant using an option-pricing model. The value of the portion of the stock options that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. Forfeitures are estimated on the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The estimated fair value of options vested during the years ended December 31, 2015, 2014 and 2013 was $5.0 million, $3.9 million and $1.3 million, respectively. The weighted-average estimated fair value of options granted during the years ended December 31, 2015, 2014 and 2013 was $0.75 per share, $6.10 per share and $10.35 per share, respectively. During the years ended December 31, 2015, 2014 and 2013, we recorded share-based compensation expense related to stock options of $3.7 million, $4.6 million and $2.3 million, respectively. As of December 31, 2015, the total share-based compensation expense related to unvested stock options granted to employees under our share-based compensation plans but not yet recognized was $3.3 million. These costs will be amortized to expense on a straight-line basis over a weighted-average remaining term of 1.9 years.

On November 7, 2013, we announced that our chief financial officer, Donald J. Glidewell, had decided to retire, and we entered into a transition agreement with Mr. Glidewell which provided, among other things, for the vesting of his outstanding equity awards through the transition date. During the years ended December 31, 2014 and 2013, we recorded share-based compensation expense of $0.4 million and $0.3 million, respectively, relating to the acceleration of vesting of Mr. Glidewell’s equity awards. No share-based compensation expense was recognized relating to the acceleration of vesting of Mr. Glidewell’s equity awards during the year ended December 31, 2015, and as of December 31, 2015, there was no share-based compensation expense related to unvested options granted to Mr. Glidewell under the Company’s stock option plans not yet recognized.

We use the Black-Scholes-Merton (“BSM”) option-pricing model to calculate the estimated fair value of stock options on the measurement date (generally, the date of grant). The required inputs in the option-pricing model include the expected life of the stock options, estimated volatility factor, risk-free interest rate and expected dividend yield. These inputs are subjective and generally require significant judgment. During the years ended December 31, 2015, 2014 and 2013, we calculated the fair value of stock options granted based on the following assumptions:

	YEAR ENDED DECEMBER 31,
	2015	2014	2013
Expected life (years)	6.08	5.46-6.08	5.29-7.71
Estimated volatility factor	46%-47%	49%-71%	70%-75%
Risk-free interest rate	1.86%-1.93%	1.63%-2.05%	1.27%-2.11%
Expected dividend yield	—	—	—

Expected Life. Expected life represents the period that share-based payment awards are expected to be outstanding. We use the “simplified method” in accordance with Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment (“SAB No. 107”), and SAB No. 110, Simplified Method for Plain Vanilla Share Options (“SAB No. 110”), to calculate the expected term of stock options determined to be “plain vanilla.” Under this approach, the expected term is presumed to be the midpoint between the vesting date and the contractual end of the stock option grant. For stock options granted with an exercise price not equal to the determined fair market value, we estimate the expected life based on historical data and management’s expectations about exercises and post-vesting termination behavior. We will use the simplified method until we have sufficient historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107 and SAB No. 110.

Estimated Volatility Factor. As our common stock has a limited trading history, we calculate the estimated volatility factor based on the trading history and calculated volatility of the common stock of comparable agricultural biotechnology companies.

Risk-Free Interest Rate. We calculate the risk-free interest rate based on the implied yield currently available on U.S. Treasury constant-maturity securities with the same or substantially equivalent remaining term as the expected life of the stock options.

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Expected Dividend Yield. We have not declared dividends nor do we expect to in the foreseeable future. Therefore, a zero value was assumed for the expected dividend yield.

Estimated Forfeitures. We consider voluntary and involuntary termination behavior and actual stock option forfeitures when estimating forfeitures.

If, in the future, we determine that other methods for calculating these assumptions are more reasonable, or if other methods are prescribed by authoritative guidance, the fair value calculated for our stock options could change significantly. Higher volatility factors and longer expected lives result in an increase to the share-based compensation expense determined at the date of grant. Share-based compensation expense is recorded in research, development and patent expense and selling, general and administrative expense.

The BSM option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in our stock options. Existing valuation models, including the BSM option-pricing model, may not provide reliable measures of the fair values of our stock options. Consequently, there is a risk that our estimates of the fair values of the stock options on the grant dates may bear little resemblance to the actual values realized upon exercise. Stock options may expire or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in the consolidated financial statements. Alternatively, value may be realized from these instruments that is significantly higher than the fair values originally estimated on the grant date and reported in the consolidated financial statements.

Income Taxes

We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent that deferred tax assets cannot be recognized under the preceding criteria, we establish valuation allowances, as necessary, to reduce deferred tax assets to the amounts expected to be realized. As of December 31, 2015 and 2014, all deferred tax assets were fully offset by a valuation allowance. The realization of deferred tax assets is dependent upon future federal, state and foreign taxable income. Our judgments regarding deferred tax assets may change due to future market conditions, as we expand into international jurisdictions, due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to our deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period in which such determinations are made.

We recognize liabilities for uncertain tax positions based upon a two-step process. To the extent that a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the consolidated financial statements. If a tax position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. Our policy is to analyze our tax positions taken with respect to all applicable income tax issues for all open tax years in each respective jurisdiction. As of December 31, 2015 and 2014, we concluded that no uncertain tax positions were required to be recognized in our consolidated financial statements.

We recognize interest and penalties related to income tax matters in income tax expense. No amounts were recognized for interest and penalties during the years ended December 31, 2015, 2014 and 2013.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We currently have minimal exposure to the effect of interest rate changes, foreign currency fluctuations and changes in commodity prices. We are exposed to changes in the general economic conditions in the countries where we conduct business, which currently is substantially all in the United States. Our current investment strategy is to invest in financial instruments that are highly liquid, readily convertible into cash and which mature within six months from the date of purchase. To date, we have not used derivative financial instruments to manage any of our market risks or entered into transactions using derivative financial instruments for trading purposes.

We do not believe our cash equivalents have significant risk of default or illiquidity. While we believe our cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value.

Interest Rate Risk

We had cash and cash equivalents of $19.8 million as of December 31, 2015, which was held for working capital purposes. We do not enter into investments for trading or speculative purposes. We entered into a promissory note in June 2014, which bears interest at the prime rate plus 2%. A change in market interest rates of 1% would have an impact of approximately $0.1 million on our future annual interest expense. All of our other debt is at fixed interest rates and thus a change in market interest rates would not have an impact on interest expense.

Foreign Currency Risk

Revenue and expenses have been primarily denominated in U.S. dollars and foreign currency fluctuations have not had a significant impact on our historical results of operations. In addition, our strategic collaboration and distribution agreements for current products provide for payments in U.S. dollars. As we market new products internationally, our product revenues and expenses may be in currencies other than U.S. dollars, and accordingly, foreign currency fluctuations may have a greater impact on our financial position and operating results.

Commodity Risk

Our exposure to market risk for changes in commodity prices currently is minimal. As our commercial operations grow, our exposure will relate mostly to the demand side as our end users are exposed to fluctuations in prices of agricultural commodities.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Report of Independent Registered Public Accounting Firm		88
Consolidated Balance Sheets as of December 31, 2015 and 2014		89
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013		90
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 2013		91
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2015, 2014 and 2013		92
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013		94
Notes to Consolidated Financial Statements		96

87

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Marrone Bio Innovations, Inc.

We have audited the accompanying consolidated balance sheets of Marrone Bio Innovations, Inc. (“the Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Marrone Bio Innovations, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses since inception, has a net capital deficiency, and has restrictive debt covenants that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Ernst & Young LLP

Sacramento, California

March 30, 2016

88

MARRONE BIO INNOVATIONS, INC.

Consolidated Balance Sheets

(In Thousands, Except Par Value)

	DECEMBER 31,
	2015			2014
Assets
Current assets:
Cash and cash equivalents	$	19,838		$	35,324
Restricted cash for debt covenants, current portion		1,856			1,856
Accounts receivable		2,347			1,787
Inventories, net		9,064			12,644
Deferred cost of product revenues, including deferred cost of product revenues to related parties of $79 and $333 as of December 31, 2015 and 2014, respectively		1,596			1,797
Prepaid expenses and other current assets		1,315			1,315
Total current assets		36,016			54,723
Property, plant and equipment, net		18,445			20,166
Restricted cash for debt covenants, less current portion		16,560			1,560
Other assets		746			733
Total assets		71,767			77,182
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,007		$	5,841
Accrued liabilities		5,689			6,321
Accrued interest due to related parties		1,175			—
Deferred revenue, current portion		2,919			2,861
Deferred revenue from related parties		168			660
Customer refund liabilities		—			1,044
Capital lease obligations, current portion		647			1,839
Debt, current portion		267			12,636
Total current liabilities		12,872			31,202
Deferred revenue, less current portion		2,021			2,050
Capital lease obligations, less current portion		18			185
Debt, less current portion		21,776			9,667
Debt due to related parties		35,788			—
Other liabilities		1,314			847
Total liabilities		73,789			43,951
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock: $0.00001 par value; 20,000 shares authorized and no shares issued or outstanding at December 31, 2015 and December 31, 2014		—			—
Common stock: $0.00001 par value; 250,000 shares authorized and 24,536 shares issued and outstanding at December 31, 2015; 250,000 shares authorized and 24,465 shares issued and outstanding at December 31, 2014		—			—
Additional paid in capital		201,554			193,079
Accumulated deficit		(203,576	)		(159,848	)
Total stockholders’ equity (deficit)		(2,022	)		33,231
Total liabilities and stockholders’ equity	$	71,767		$	77,182

See accompanying notes.

89

MARRONE BIO INNOVATIONS, INC.

Consolidated Statements of Operations

(In Thousands, Except Per Share Data)

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
Revenues:
Product	$	8,976		$	7,750		$	7,588
License		333			232			193
Related party		492			1,154			665
Total revenues		9,801			9,136			8,446
Cost of product revenues, including cost of product revenues to related parties of $254, $561 and $374 for the years ended December 31, 2015, 2014 and 2013, respectively		9,256			9,438			7,243
Gross profit (loss)		545			(302	)		1,203
Operating expenses:
Research, development and patent		13,500			19,281			17,905
Selling, general and administrative		26,502			28,950			15,017
Total operating expenses		40,002			48,231			32,922
Loss from operations		(39,457	)		(48,533	)		(31,719	)
Other income (expense):
Interest income		51			59			49
Interest expense		(2,764	)		(2,907	)		(6,056	)
Interest expense to related parties		(1,599	)		—			—
Change in estimated fair value of financial instruments		—			—			6,717
Gain on extinguishment of debt		—			—			49
Other income (expense), net		41			(278	)		(282	)
Total other income (expense), net		(4,271	)		(3,126	)		477
Loss before income taxes		(43,728	)		(51,659	)		(31,242	)
Income taxes		—			—			—
Net loss		(43,728	)		(51,659	)		(31,242	)
Deemed dividend on convertible notes		—			—			(1,378	)
Net loss attributable to common stockholders	$	(43,728	)	$	(51,659	)	$	(32,620	)
Net loss per common share:
Basic	$	(1.79	)	$	(2.32	)	$	(3.74	)
Diluted	$	(1.79	)	$	(2.32	)	$	(4.25	)
Weighted-average shares outstanding used in computing net loss per common share:
Basic		24,469			22,314			8,731
Diluted		24,469			22,314			8,911

See accompanying notes.

90

MARRONE BIO INNOVATIONS, INC.

Consolidated Statements of Comprehensive Loss

(In Thousands)

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
Net loss	$	(43,728	)	$	(51,659	)	$	(31,242	)
Other comprehensive loss		—			—			—
Comprehensive loss	$	(43,728	)	$	(51,659	)	$	(31,242	)

See accompanying notes.

91

MARRONE BIO INNOVATIONS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In Thousands)

	CONVERTIBLE PREFERRED STOCK
	SERIES A						SERIES B						SERIES C						TOTAL
	SHARES			AMOUNT			SHARES			AMOUNT			SHARES			AMOUNT			SHARES			AMOUNT
Balance at December 31, 2012		1,484			3,747			2,242			10,758			4,778			25,107			8,504			39,612
Net loss		—			—			—			—			—			—			—			—
Exercise of stock options		—			—			—			—			—			—			—			—
Share-based compensation		—			—			—			—			—			—			—			—
Deemed dividend on convertible notes		—			—			—			—			—			—			—			—
Cash exercise of preferred stock warrants		—			—			10			47			—			—			10			47
Net exercise of preferred stock warrants		—			—			—			—			—			—			—			—
Conversion of preferred stock into common stock		(1,484	)		(3,747	)		(2,252	)		(10,805	)		(4,778	)		(25,107	)		(8,514	)		(39,659	)
Convertible notes converted into common stock		—			—			—			—			—			—			—			—
Cash exercise of common stock warrants		—			—			—			—			—			—			—			—
Net exercise of common stock warrants		—			—			—			—			—			—			—			—
Reclassification of warrants from liability to equity		—			—			—			—			—			—			—			—
Issuance of common stock upon initial public offering, net of offering costs and underwriter commissions		—			—			—			—			—			—			—			—
Balance at December 31, 2013		—			—			—			—			—			—			—			—
Net loss		—			—			—			—			—			—			—			—
Exercise of stock options		—			—			—			—			—			—			—			—
Share-based compensation		—			—			—			—			—			—			—			—
Cash exercise of common stock warrants		—			—			—			—			—			—			—			—
Issuance of common stock in follow-on offering, net of offering costs and underwriter commissions		—			—			—			—			—			—			—			—
Balance at December 31, 2014		—			—			—			—			—			—			—			—
Net loss		—			—			—			—			—			—			—			—
Exercise of stock options		—			—			—			—			—			—			—			—
Share-based compensation		—			—			—			—			—			—			—			—
Issuance of common stock warrants		—			—			—			—			—			—			—			—
Conversion of restricted stock units		—			—			—			—			—			—			—			—
Balance at December 31, 2015		—		$	—			—		$	—			—		$	—			—		$	—

92

MARRONE BIO INNOVATIONS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) - Continued

(In Thousands)

	COMMON STOCK				ADDITIONAL PAID IN CAPITAL		ACCUMULATED DEFICIT			TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
	SHARES		AMOUNT
Balance at December 31, 2012		1,267		—		1,322		(75,569	)		(74,247	)
Net loss		—		—		—		(31,242	)		(31,242	)
Exercise of stock options		217		—		250		—			250
Share-based compensation		—		—		2,300		—			2,300
Deemed dividend on convertible notes		—		—		—		(1,378	)		(1,378	)
Cash exercise of preferred stock warrants		—		—		—		—			—
Net exercise of preferred stock warrants		71		—		—		—			—
Conversion of preferred stock into common stock		8,514		—		39,659		—			39,659
Convertible notes converted into common stock		3,741		—		44,890		—			44,890
Cash exercise of common stock warrants		3		—		25		—			25
Net exercise of common stock warrants		47		—		—		—			—
Reclassification of warrants from liability to equity		—		—		2,669		—			2,669
Issuance of common stock upon initial public offering, net of offering costs and underwriter commissions		5,463		—		56,105		—			56,105
Balance at December 31, 2013		19,323		—		147,220		(108,189	)		39,031
Net loss		—		—		—		(51,659	)		(51,659	)
Exercise of stock options		561		—		1,305		—			1,305
Share-based compensation		—		—		4,555		—			4,555
Cash exercise of common stock warrants		6		—		50		—			50
Issuance of common stock in follow-on offering, net of offering costs and underwriter commissions		4,575		—		39,949		—			39,949
Balance at December 31, 2014		24,465		—		193,079		(159,848	)		33,231
Net loss		—		—		—		(43,728	)		(43,728	)
Exercise of stock options		61		—		54		—			54
Share-based compensation		—		—		3,811		—			3,811
Issuance of common stock warrants		—		—		4,610		—			4,610
Conversion of restricted stock units		10		—		—		—			—
Balance at December 31, 2015		24,536	$	—	$	201,554	$	(203,576	)	$	(2,022	)

See accompanying notes.

93

MARRONE BIO INNOVATIONS, INC.

Consolidated Statements of Cash Flows

(In Thousands)

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
Cash flows from operating activities
Net loss	$	(43,728	)	$	(51,659	)	$	(31,242	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,510			2,581			976
Loss (gain) on disposal of equipment		(39	)		243			231
Share-based compensation		3,811			4,555			2,300
Non-cash interest expense		803			780			4,315
Change in estimated fair value of financial instruments		—			—			(6,717	)
Gain on extinguishment of debt		—			—			(49	)
Amortization of investment securities premiums/discounts, net		—			10			18
Net changes in operating assets and liabilities:
Accounts receivable		(560	)		1,997			(950	)
Accounts receivable from related parties		—			903			(767	)
Inventories		3,580			73			(7,845	)
Prepaid expenses and other assets		142			(309	)		1,374
Deferred cost of product revenues		201			1,064			(2,861	)
Accounts payable		(3,486	)		1,667			1,682
Accrued and other liabilities		(76	)		1,895			1,141
Accrued interest due to related parties		1,175			—			—
Deferred revenue		29			(108	)		3,464
Deferred revenue from related parties		(492	)		(671	)		866
Customer refund liabilities		(1,044	)		1,044			—
Net cash used in operating activities		(36,174	)		(35,935	)		(34,064	)
Cash flows from investing activities
Purchases of property, plant and equipment		(1,653	)		(13,002	)		(3,966	)
Proceeds from sale of equipment		7			6			41
Purchase of short-term investments		—			(49	)		(17,477	)
Maturities of short-term investments		—			13,716			3,782
Net cash provided by (used in) investing activities		(1,646	)		671			(17,620	)
Cash flows from financing activities
Proceeds from public offerings, net of offering costs and underwriter commissions		—			39,949			56,105
Proceeds from issuance of convertible notes payable		—			—			6,529
Proceeds from issuance of debt, net of financing costs		—			9,696			3,700
Proceeds from issuance of debt due to related parties, net of financing costs		39,698			—			—
Proceeds from line of credit		—			4,687			—
Repayment of line of credit		—			(4,687	)		—
Repayment of debt		(435	)		(378	)		(9,433	)
Repayment of capital leases		(1,983	)		(1,073	)		(229	)
Proceeds from secured borrowing		—			—			2,880
Reductions in secured borrowing		—			—			(2,880	)
Change in restricted cash		(15,000	)		(3,416	)		9,139
Proceeds from exercise of stock options		54			1,305			250
Proceeds from exercise of preferred stock warrants		—			—			47
Proceeds from exercise of common stock warrants		—			50			25
Net cash provided by financing activities		22,334			46,133			66,133
Net increase (decrease) in cash and cash equivalents		(15,486	)		10,869			14,449
Cash and cash equivalents, beginning of year		35,324			24,455			10,006
Cash and cash equivalents, end of year	$	19,838		$	35,324		$	24,455

94

MARRONE BIO INNOVATIONS, INC.

Consolidated Statements of Cash Flows - Continued

(In Thousands)

	YEAR ENDED DECEMBER 31,
	2015		2014		2013
Supplemental disclosure of cash flow information
Cash paid for interest, net of capitalized interest of $4, $668 and $636 for the years ended December 31, 2015, 2014 and 2013, respectively	$	2,297	$	2,102	$	1,692
Supplemental disclosure of non-cash investing and financing activities
Property, plant and equipment included in accounts payable and accrued liabilities	$	499	$	204	$	1,009
Equipment acquired under capital leases	$	787	$	834	$	2,106
Equipment acquired in association with operating lease	$	—	$	285	$	—
Interest added to the principal of convertible notes	$	—	$	—	$	1,623
Reclassification of warrants from liabilities to equity	$	—	$	—	$	2,669
Conversion of convertible notes to common stock	$	—	$	—	$	44,890
Conversion of preferred stock to common stock	$	—	$	—	$	39,659

See accompanying notes.

95

MARRONE BIO INNOVATIONS, INC.

Notes to Consolidated Financial Statements

December 31, 2015

1. Summary of Business, Basis of Presentation and Liquidity

Marrone Bio Innovations, Inc. (“Company”), formerly Marrone Organic Innovations, Inc., was incorporated under the laws of the State of Delaware on June 15, 2006, and is located in Davis, California. In July 2012, the Company formed a wholly-owned subsidiary, Marrone Michigan Manufacturing LLC (“MMM LLC”), which holds the assets of a manufacturing plant the Company purchased in July 2012. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. The Company makes bio-based pest management and plant health products. The Company targets the major markets that use conventional chemical pesticides, including certain agricultural and water markets where its bio-based products are used as alternatives for, or mixed with, conventional chemical pesticides. The Company also targets new markets for which (i) there are no available conventional chemical pesticides or (ii) the use of conventional chemical pesticides may not be desirable or permissible either because of health and environmental concerns (including for organically certified crops) or because the development of pest resistance has reduced the efficacy of conventional chemical pesticides. The Company delivers EPA-approved and registered biopesticide products and other bio-based products that address the global demand for effective, safe and environmentally responsible products.

In August 2013, the Company closed its initial public offering of 5,462,500 shares of its common stock (inclusive of 712,500 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares) (“IPO”). The public offering price of the shares sold in the offering was $12.00 per share. The total gross proceeds from the offering to the Company were $65,550,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled approximately $56,105,000. Upon the closing of the IPO, all shares of the Company’s outstanding convertible preferred stock and convertible notes automatically converted into shares of common stock and outstanding warrants to purchase convertible preferred stock and certain warrants to purchase common stock were exercised for shares of common stock (see Note 17). In connection with the IPO, on August 1, 2013, the Company amended and restated its certificate of incorporation to effect a 1-for-3.138458 reverse stock split (see Note 16).

In June 2014, the Company completed a public offering of 4,575,000 shares of its common stock (inclusive of 675,000 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $9.50 per share. The total gross proceeds from the offering to the Company were $43,463,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled $39,949,000.

The Company is an early stage company with a limited operating history and has a limited number of commercialized products. As of December 31, 2015, the Company had an accumulated deficit of $203,576,000, has incurred significant losses since inception and expects to continue to incur losses for the foreseeable future. Until the completion of the IPO in August 2013, the Company had funded operations primarily with net proceeds from the private placements of convertible preferred stock, convertible notes, promissory notes and term loans, as well as with the proceeds from the sale of its products and payments under strategic collaboration and distribution agreements and government grants. The Company will need to generate significant revenue growth to achieve and maintain profitability. As of December 31, 2015, the Company had working capital of $23,144,000, including cash and cash equivalents of $19,838,000. In addition, as of December 31, 2015, the Company had debt and debt due to related parties of $22,043,000 and $35,788,000, respectively, for which the underlying debt agreements contain various financial and non-financial covenants, as well as certain material adverse change clauses. If the Company breaches any of the covenants contained within the debt agreements or if

96

the material adverse change clauses are triggered, the entire unpaid principal and interest balances would be due and payable upon demand. In addition, as of December 31, 2015, the Company had a total of $18,416,000 of restricted cash relating to these debt agreements (see Notes 6 and 15).

The Company participates in a heavily regulated and highly competitive crop protection industry and believes that adverse changes in any of the following areas could have a material effect on the Company’s future financial position, results of operations or cash flows: inability to obtain regulatory approvals, increased competition in the pesticide market, market acceptance of the Company’s products, weather and other seasonal factors beyond the Company’s control, litigation or claims against the Company related to intellectual property, patents, products or governmental regulation, and the Company’s ability to support increased growth.

Although the Company recognizes that it will likely need to raise additional funds in the future, there can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of such financing will not be unfavorable. Any future equity financing may result in dilution to existing shareholders and any debt financing may include additional restrictive covenants. Any failure to obtain additional financing or to achieve the revenue growth necessary to fund the Company with cash flows from operations will have a material adverse effect upon the Company and will likely result in a substantial reduction in the scope of the Company’s operations and impact the Company’s ability to achieve its planned business objectives.

Management currently estimates that by the fourth quarter of 2016 without entering into strategic agreements that include significant cash payments upfront, significantly increasing revenues from sales or raising additional capital through the issuance of equity or debt, the Company will be below the $15,000,000 minimum cash balance requirement in the promissory notes with affiliates of Waddell & Reed. Further, although under a promissory note with Five Star Bank the Company’s requirement to remain below a maximum debt-to-worth ratio under this agreement has been waived through December 31, 2016, management expects that immediately after the waiver has expired, the Company will be in violation of this covenant as well. In addition, a violation of a covenant in one debt agreement will cause the Company to be in violation of certain covenants under each of its other debt agreements. Breach of covenants included in the Company’s debt agreements, which could result in the lenders demanding payment of the unpaid principal and interest balances, will have a material adverse effect upon the Company and would likely require the Company to seek to renegotiate these debt arrangements with the lenders. If such negotiations are unsuccessful, the Company may be required to seek protection from creditors through bankruptcy proceedings. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management is focused on efforts to increase liquidity in the near-term and plans to request relief of the minimum cash balance requirement and an extension of the waiver on the debt-to-worth ratio. Such strategic collaborations and relief under the debt agreements may not be available or may be on terms that are not favorable to the Company. The Company’s inability to maintain compliance with its debt covenants could have a negative impact on the Company’s financial condition and ability to continue as a going concern. If the Company becomes unable to continue as a going concern, the Company may have to liquidate its assets, and might realize significantly less than the values at which they are carried on its financial statements, and stockholders may lose all or part of their investment in the Company’s common stock.

The accompanying financial statements have been prepared under the assumption that the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of

97

assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents consists of cash on deposit, money market funds and certificates of deposit accounts with U.S. financial institutions. The Company is exposed to credit risk in the event of default by financial institutions to the extent that cash and cash equivalents balances with financial institutions are in excess of amounts that are insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses on these deposits.

Restricted Cash

The Company’s restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its June 2014 Secured Promissory Note and the terms of its August 2015 Senior Secured Promissory Notes. See Notes 6 and 15, respectively, for further discussion.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

ASC 820 requires that the valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three tier value hierarchy, which prioritizes inputs that may be used to measure fair value as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):

	DECEMBER 31, 2015
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	3,750	$	3,750	$	—	$	—
	DECEMBER 31, 2014
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	14,746	$	14,746	$	—	$	—

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The Company’s money market funds are held at registered investment companies. As of December 31, 2015 and 2014, the money market funds were in active markets and, therefore, are measured based on the Level 1 valuation hierarchy.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and debt. The Company deposits its cash and cash equivalents with high credit quality domestic financial institutions with locations in the U.S. Such deposits may exceed federal deposit insurance limits. The Company believes the financial risks associated with these financial instruments are minimal.

The Company’s customer base is dispersed across many different geographic areas, and currently most customers are pest management distributors in the U.S. Generally, receivables are due up to 120 days from the invoice date and are considered past due after this date, although the Company may offer extended terms from time to time.

During the years ended December 31, 2015, 2014 and 2013, 9%, 12% and 16%, respectively, of the Company’s revenues were generated from international customers.

The Company’s principal sources of revenues are its Regalia and Grandevo product lines. These two product lines accounted for 89%, 91% and 95% of the Company’s total revenues during the years ended December 31, 2015, 2014 and 2013, respectively.

Customers to which 10% or more of the Company’s total revenues are attributable for any one of the periods presented consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C
Year ended December 31,
2015		28	%		10	%		8	%
2014		30	%		4	%		13	%
2013		20	%		9	%		8	%

Customers to which 10% or more of the Company’s outstanding accounts receivable are attributable as of either December 31, 2015 or 2014 consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C			CUSTOMER D
December 31, 2015		32	%		29	%		12	%		0	%
December 31, 2014		10	%		37	%		9	%		23	%

Concentrations of Supplier Dependence

The active ingredient in the Company’s Regalia product line is derived from the giant knotweed plant, which the Company obtains from China. The Company’s single supplier acquires raw knotweed from numerous regional sources and performs an extraction process on this plant, creating a dried extract that is shipped to the Company’s manufacturing plant. A disruption at this supplier’s manufacturing site or a disruption in trade between the U.S. and China could negatively impact sales of Regalia. The Company currently uses one supplier and does not have a long-term supply contract with this supplier. Although the Company has identified additional sources of raw knotweed, there can be no assurance that the Company will continue to be able to obtain dried extract from China at a competitive price.

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Accounts Receivable

The carrying value of the Company’s receivables represents their estimated net realizable values. The Company generally does not require collateral and estimates any required allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the allowance is recorded accordingly. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. During the years ended December 31, 2015, 2014 and 2013, no receivable balances were written-off. As of December 31, 2015 and 2014, the Company had no allowance for doubtful accounts.

Inventories

Inventories are stated at the lower of cost or market value (net realizable value or replacement cost) and include the cost of material and external and internal labor and manufacturing costs. Cost is determined on the first-in, first-out basis. The Company provides for inventory reserves when conditions indicate that the selling price may be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Additionally, the Company provides reserves for excess and slow-moving inventory on hand that is not expected to be sold to reduce the carrying amount of excess and slow-moving inventory to its estimated net realizable value. The reserves are based upon estimates about future demand from the Company’s customers and distributors and market conditions.

During the year ended December 31, 2015, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves of $19,000 due to quantities on hand that may not be used or sold prior to expiration, and an adjustment of $2,545,000 as a result of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity.

During the year ended December 31, 2014, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves of $695,000 due to quantities on hand that may not be used prior to expiration as a result of lower production and sales forecasts; an $894,000 write-off of inventory primarily due to the identification of inventory that would not be suitable for sale in future periods either because the inventory did not pass quality inspection or the efficacy had declined; an adjustment of $890,000 as a result of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity; and a $270,000 write-down of the carrying value of inventory to net realizable value.

During the year ended December 31, 2013, the Company recorded, as a component of cost of product revenues, an inventory write-off of $205,000 primarily due to the identification of inventory that would not be suitable for sale and an adjustment of $194,000 to write-down its Zequanox inventory to net realizable value.

Inventories, net consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Raw materials	$	5,110	$	5,692
Work in progress		1,044		1,150
Finished goods		2,910		5,378
Finished goods held at customers		—		424
	$	9,064	$	12,644

As of December 31, 2015 and 2014, the Company had $24,000 and $668,000, respectively, in reserves against its inventories.

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Deferred Cost of Product Revenues

Deferred cost of product revenues are stated at the lower of cost or net realizable value and include product sold where title has transferred but the criteria for revenue recognition have not been met. As of December 31, 2015 and 2014, the Company recorded deferred cost of product revenues of $1,596,000 and $1,797,000, respectively, including deferred cost of product revenues to related parties of $79,000 and $333,000, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The Company generally uses the following estimated useful lives for each asset category:

ASSET CATEGORY	ESTIMATED USEFUL LIFE
Building		30 years
Computer equipment		2-3 years
Machinery and equipment		3-20 years
Office equipment		3-5 years
Furniture		3-5 years
Leasehold improvements		Shorter of lease term or useful life
Software		3 years

Amortization of assets under capital leases is included in depreciation expense. Maintenance, repairs and minor renewals are expensed as incurred. Expenditures that substantially increase an asset’s useful life are capitalized.

Deferred Financing Costs

Deferred financing costs, net include fees and costs incurred to obtain long-term financing. The costs are being amortized over the terms of the respective loans on a basis that approximates level yield. Unamortized deferred financing costs are written-off when debt is retired before the maturity date. Upon the amendment or termination of a debt agreement, unamortized deferred financing costs are accounted for in accordance with ASC 470-50-40, Debt Modifications and Extinguishments (“ASC 470-50-40”). As of December 31, 2015, $104,000 and $452,000 of deferred financing costs were recorded as a component of current and non-current other assets, respectively, and are being amortized to interest expense. As of December 31, 2014, $172,000 and $269,000 of deferred financing costs were recorded as a component of current and non-current other assets, respectively, and are being amortized to interest expense.

Impairment of Long-Lived Assets

Impairment losses related to long-lived assets are recognized in the event the net carrying value of such assets is not recoverable and exceeds fair value. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). If the carrying amount of a long-lived asset (asset group) is considered is not recoverable, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. To date, the Company has not recognized any such impairment loss associated with its long-lived assets.

Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. If contractual obligations, acceptance provisions or other contingencies exist which indicate that the price is not fixed or determinable, revenue is recognized after such obligations or provisions are fulfilled or expire.

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Product revenues consist of revenues generated from sales of the Company’s products to distributors and direct customers, net of rebates and cash discounts. For sales of products made to distributors, the Company recognizes revenue either on a sell-in or sell-through basis depending on the specific facts and circumstances of the transaction(s) with the distributor. Factors considered include, but are not limited to, whether the payment terms offered to the distributor are structured to correspond to when product is resold, the distributor history of adhering to the terms of its contractual arrangements with the Company, whether the Company has a pattern of granting concessions for the benefit of the distributor and whether there are other conditions that may indicate that the sale to the distributor is not substantive.

In some cases, the Company recognizes distributor revenue as title and risk of loss passes, provided all other revenue recognition criteria have been satisfied (the “sell-in” method). For certain sales to certain distributors, the revenue recognition criteria for distributor sales are not satisfied at the time title and risk of loss passes to the distributor; specifically, in instances where “inventory protection” arrangements were offered to distributors that permitted these distributors to return to the Company certain unsold products, the Company considers the arrangement not to be fixed or determinable, and accordingly, revenue is deferred until products are resold to customers of the distributor (the “sell-through” method). As of December 31, 2015 and 2014, the Company recorded current deferred product revenues of $2,760,000 and $3,190,000, respectively, including current deferred product revenues from related parties of $168,000 and $660,000, respectively. The cost of product revenues associated with such deferral are also deferred and classified as deferred cost of product revenues in the consolidated balance sheets. Cash received from customers related to delivered product that may not represent a true sale is classified as customer refund liabilities in the consolidated balance sheets and the related cost of inventory remains in inventory in the consolidated balance sheets until the product is returned or is resold to customers of the distributor and revenue is recognized. During the years ended December 31, 2015, 2014 and 2013, 47%, 53% and 23%, respectively, of total revenues were recognized on a sell-through basis.

From time to time, the Company offers certain product rebates to its distributors and growers, which are estimated and recorded as reductions to product revenues, and an accrued liability is recorded at the later of when the revenues are recorded or the rebate is being offered.

The Company recognizes license revenues pursuant to strategic collaboration and distribution agreements under which the Company receives payments for the achievement of certain testing validation, regulatory progress and commercialization events. As these activities and payments are associated with exclusive rights that the Company provides in connection with strategic collaboration and distribution agreements over the term of the agreements, revenues related to the payments received are deferred and recognized over the term of the exclusive distribution period of the respective agreement. During the year ended December 31, 2015, the Company received payments totaling $750,000 under these agreements, and as of December 31, 2015, an additional $300,000 was included in accounts receivable. During the year ended December 31, 2014, the Company received payments totaling $500,000 under these agreements, and as of December 31, 2014, an additional $750,000 was included in accounts receivable. No payments were received under these agreements during the year ended December 31, 2013. During the years ended December 31, 2015, 2014 and 2013, the Company recognized $333,000, $232,000 and $193,000, respectively, as license revenues, excluding related party revenues.

The Company has a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of the Company’s common stock, Syngenta Ventures Pte. LTD (“Syngenta Ventures”). In connection with the Company’s public offering in June 2014, Syngenta Ventures sold 600,000 shares of the Company’s common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. During the year ended December 31, 2014, the Company recognized $333,000 of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake. During the year ended December 31, 2013, the Company recognized $131,000 of related party revenues under this agreement.

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As of December 31, 2015, the Company recorded current and non-current deferred revenues of $327,000 and $2,021,000, respectively, related to payments received under these agreements. As of December 31, 2014, the Company recorded current and non-current deferred revenues of $331,000 and $2,050,000, respectively, related to payments received under these agreements.

Research, Development and Patent Expenses

Research and development expenses include payroll-related expenses, field trial costs, toxicology costs, regulatory costs, consulting costs and lab costs. Patent expenses include legal costs relating to the patents and patent filing costs. These costs are expensed to operations as incurred. During the years ended December 31, 2015, 2014 and 2013, research and development expenses totaled $12,392,000, $18,110,000 and $16,918,000, respectively, and patent expenses totaled $1,108,000, $1,171,000 and $987,000, respectively.

Shipping and Handling Costs

Amounts billed for shipping and handling are included as a component of product revenues. Related costs for shipping and handling have been included as a component of cost of product revenues.

Advertising

The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2015, 2014 and 2013 were $456,000, $557,000 and $760,000, respectively.

Share-Based Compensation

The Company recognizes share-based compensation expense for all stock options and restricted stock units granted to employees and directors based on estimated fair values.

The Company estimates the fair value of restricted stock units based on the closing bid price of the Company’s common stock on the date of grant.

The Company estimates the fair value of stock options on the date of grant using an option-pricing model. The value of the portion of the stock options that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. Forfeitures are estimated on the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company uses the Black-Scholes-Merton option-pricing model to calculate the estimated fair value of stock options on the measurement date (generally, the date of grant). The required inputs in the option-pricing model include the expected life of the stock options, estimated volatility factor, risk-free interest rate and expected dividend yield. These inputs are subjective and generally require significant judgment. During the years ended December 31, 2015, 2014 and 2013, the Company calculated the fair value of stock options granted based on the following assumptions:

	YEAR ENDED DECEMBER 31,
	2015	2014	2013
Expected life (years)	6.08	5.46-6.08	5.29-7.71
Estimated volatility factor	46%-47%	49%-71%	70%-75%
Risk-free interest rate	1.86%-1.93%	1.63%-2.05%	1.27%-2.11%
Expected dividend yield	—	—	—

Expected Life. Expected life represents the period that share-based payment awards are expected to be outstanding. The Company uses the “simplified method” in accordance with Staff Accounting Bulletin (“SAB”)

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No. 107, Share-Based Payment (“SAB No. 107”), and SAB No. 110, Simplified Method for Plain Vanilla Share Options (“SAB No. 110”), to calculate the expected term of stock options determined to be “plain vanilla.” Under this approach, the expected term is presumed to be the midpoint between the vesting date and the contractual end of the stock option grant. For stock options granted with an exercise price not equal to the determined fair market value, the Company estimates the expected life based on historical data and management’s expectations about exercises and post-vesting termination behavior. The Company will use the simplified method until it has sufficient historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107 and SAB No. 110.

Estimated Volatility Factor. As the Company’s common stock has a limited trading history, the Company calculates the estimated volatility factor based on the trading history and calculated volatility of the common stock of comparable agricultural biotechnology companies.

Risk-Free Interest Rate. The Company calculates the risk-free interest rate based on the implied yield currently available on U.S. Treasury constant-maturity securities with the same or substantially equivalent remaining term as the expected life of the stock options.

Expected Dividend Yield. The Company has not declared dividends nor does it expect to in the foreseeable future. Therefore, a zero value was assumed for the expected dividend yield.

Estimated Forfeitures. The Company considers voluntary and involuntary termination behavior and actual stock option forfeitures when estimating forfeitures.

If, in the future, the Company determines that other methods for calculating these assumptions are more reasonable, or if other methods are prescribed by authoritative guidance, the fair value calculated for the Company’s stock options could change significantly. Higher volatility factors and longer expected lives result in an increase to the share-based compensation expense determined at the date of grant. Share-based compensation expense is recorded in the Company’s research, development and patent expense and selling, general and administrative expense.

Other Income (Expense), Net

Other income (expense), net primarily included net losses resulting from transactions in foreign currencies of $8,000, $47,000 and $53,000 during the years ended December 31, 2015, 2014 and 2013, respectively, gains on disposal of fixed assets of $39,000 during the year ended December 31, 2015 and losses on disposal of fixed assets of $243,000 and $231,000 during the years ended December 31, 2014 and 2013, respectively.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent that deferred tax assets cannot be recognized under the preceding criteria, the Company establishes valuation allowances, as necessary, to reduce deferred tax assets to the amounts expected to be realized. As of December 31, 2015 and 2014, all deferred tax assets were fully offset by a valuation allowance. The realization of deferred tax assets is dependent upon future federal, state and foreign taxable income. The Company’s judgments regarding deferred tax assets may change due to future market conditions, as the Company expands into international jurisdictions, due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the Company’s deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period in which such determinations are made.

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The Company recognizes liabilities for uncertain tax positions based upon a two-step process. To the extent that a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the consolidated financial statements. If a tax position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s policy is to analyze the Company’s tax positions taken with respect to all applicable income tax issues for all open tax years in each respective jurisdiction. As of December 31, 2015 and 2014, the Company concluded that no uncertain tax positions were required to be recognized in its consolidated financial statements.

The Company recognizes interest and penalties related to income tax matters in income tax expense. No amounts were recognized for interest and penalties during the years ended December 31, 2015, 2014 and 2013.

Comprehensive Loss

Comprehensive loss represents the net loss for the period adjusted for the results of certain changes to stockholders’ equity (deficit) that are not reflected in the consolidated statements of operations, if applicable. Net loss is the only component of the Company’s comprehensive loss for the periods presented.

Segment Information

The Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates resources to the business as a whole.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (Topic 842) Leases: Amendments to the FASB Accounting Standards Codifications (“ASU 2016-02”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Companies must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating ASU 2016-02 to determine the potential impact to its consolidated financial statements and related disclosures.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation and disclosure of financial instruments. Among other things, ASU 2016-01 (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (iv) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (v) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (vi) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity

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has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vii) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, ASU 2016-01is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating ASU 2016-01 to determine the potential impact to its consolidated financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which amends the current requirement for organizations to present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet. Organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. ASU 2015-17 is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently evaluating ASU 2015-17 to determine the potential impact to its consolidated financial statements and related disclosures.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), which applies guidance on the subsequent measurement of inventory. ASU 2015-11 states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. The guidance excludes inventory measured using last-in, first-out or the retail inventory method. ASU 2015-11 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is not planning to early adopt ASU 2015-11 and is currently evaluating ASU 2015-11 to determine the potential impact to its consolidated financial statements and related disclosures.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. Upon adoption, the Company will reclassify debt issuance costs from prepaid expenses and other current assets and other assets as a reduction to debt and debt due to related parties in the consolidated balance sheets. The Company is not planning to early adopt ASU 2015-03 and does not anticipate that the adoption of ASU 2015-03 will materially impact its consolidated financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to evaluate for each annual and interim reporting period whether conditions or events give rise to substantial doubt that an entity has the ability to continue as a going concern within one year following issuance of the financial statements and requires specific disclosures regarding the conditions or events leading to substantial doubt. The new guidance is effective for annual and interim periods ending after December 15, 2016, with early adoption permitted. The Company is not planning to early adopt ASU 2014-15 and is currently evaluating ASU 2014-15 to determine the potential impact to its consolidated financial statements and related disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 provides new, globally applicable converged guidance

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concerning recognition and measurement of revenue. As a result, significant additional disclosures are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual and interim periods beginning on or after December 15, 2017, with early adoption permitted. Companies are allowed to transition using either the modified retrospective or full retrospective adoption method. If full retrospective adoption is chosen, three years of financial information must be presented in accordance with the new standard. The Company is not planning to early adopt ASU 2014-09 and is currently evaluating the alternative methods of adoption and the effect on its consolidated financial statements and related disclosures.

3. Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

	DECEMBER 31,
	2015			2014
Land	$	1		$	1
Buildings		6,598			6,583
Computer equipment and software		522			522
Furniture, fixtures and office equipment		347			347
Machinery and equipment		15,964			15,519
Leasehold improvements		2,372			1,259
Construction in progress		3			1,023
		25,807			25,254
Less accumulated depreciation		(7,362	)		(5,088	)
	$	18,445		$	20,166

The Company has granted interests in certain property, plant and equipment to third parties in connection with certain financing arrangements (see Note 6).

The Company recognized depreciation and amortization expense during the years ended December 31, 2015, 2014 and 2013 of $3,510,000, $2,581,000 and $976,000, respectively, which included amortization expense related to capital leases during those periods (see Note 11).

4. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, restricted stock units, convertible notes, convertible preferred stock and warrants, result in the issuance of common stock which share in the losses of the Company. Certain potential shares of common stock have been excluded from the computation of diluted net loss per share for certain periods as their effect would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce the loss per share. The treasury stock method has been applied to determine the dilutive effect of warrants.

The following table sets forth the potential shares of common stock as of the end of each period presented that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive (in thousands):

	DECEMBER 31,
	2015		2014		2013
Stock options outstanding		2,116		2,831		2,608
Warrants to purchase common stock		4,027		145		151
Restricted stock units outstanding		107		—		—

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	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(In thousands, except per share data)
Numerator:
Net loss	$	(43,728	)	$	(51,659	)	$	(31,242	)
Deemed dividend on convertible notes		—			—			(1,378	)
Net loss attributable to common stockholders	$	(43,728	)	$	(51,659	)	$	(32,620	)
Effect of potentially dilutive securities:
Convertible notes		—			—			(4,392	)
Warrants to purchase preferred stock		—			—			(840	)
Net loss for diluted net loss per share	$	(43,728	)	$	(51,659	)	$	(37,852	)
Denominator
Weighted average shares used for basic net loss per share		24,469			22,314			8,731
Effect of potentially dilutive securities:
Convertible notes		—			—			127
Warrants to purchase preferred stock		—			—			53
Weighted average shares outstanding for diluted net loss per share		24,469			22,314			8,911
Basic net loss per share:	$	(1.79	)	$	(2.32	)	$	(3.74	)
Diluted net loss per share:	$	(1.79	)	$	(2.32	)	$	(4.25	)

5. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Accrued compensation	$	999	$	1,348
Accrued severance		209		—
Accrued warranty costs		384		202
Accrued legal costs		915		301
Accrued SEC civil penalty (Note 12)		1,750		1,750
Accrued liabilities, other		1,432		2,720
	$	5,689	$	6,321

On January 14, 2015, James Iademarco was appointed as the Company’s President and Chief Operating Officer. On August 20, 2015, the Company entered into a separation agreement with Mr. Iademarco whereby he resigned effective August 31, 2015, but agreed to remain available to advise the Company in a consulting capacity for an additional period of up to 90 days to assist with the transition of various pending matters. Pursuant to the separation agreement, Mr. Iademarco is entitled to receive, among other things, an amount equal to one-twelfth of his prior base salary of $290,000 on or before the 15th day of each of the twelve months following August 31, 2015 and certain premium payments for health and vision insurance coverage, in partial consideration for Mr. Iademarco granting the Company a general release of liability and claims. During the year ended December 31, 2015, the Company recorded severance expenses in the amount of $313,000 to selling, general and administrative expenses based on the terms of Mr. Iademarco’s separation agreement, of which $209,000 was accrued as of December 31, 2015.

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During the year ended December 31, 2015, the Company reduced overall headcount as part of its measures to streamline business operations, reduce operating expenses and conserve cash. During the year ended December 31, 2015, the Company recorded severance expenses in the amount of $180,000 to research, development and patent expenses and $115,000 to selling, general and administrative expenses based on the terms of the employees’ separation agreements, all of which had been paid as of December 31, 2015.

During the year ended December 31, 2014, the Company also reduced overall headcount as part of its measures to streamline business operations, reduce operating expenses and conserve cash, and recorded severance expenses in the amount of $258,000 to research, development and patent expenses and $147,000 to selling, general and administrative expenses based on the terms of the employees’ separation agreements, all of which had been paid as of December 31, 2014.

The Company warrants the specifications and/or performance of its products through implied product warranties and has extended product warranties to qualifying customers on a contractual basis. The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time product is shipped. The Company’s estimate is based on historical experience and estimates of future warranty costs as a result of increasing usage of the Company’s products. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. Changes in the Company’s accrued warranty costs during the period are as follows (in thousands):

Balance at December 31, 2014	$	202
Warranties issued during the period		234
Settlements made during the period		(52	)
Balance at December 31, 2015	$	384

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6. Debt

Debt, including debt due to related parties, consists of the following (in thousands):

	DECEMBER 31,
	2015			2014
Term Loan (“Term Loan”) bearing interest at 7% per annum, payable monthly through April 2016, collateralized by all of the Company’s inventories, chattel paper, accounts receivable, equipment and general intangibles (excluding certain financed equipment and intellectual property). The Term Loan was repaid in August 2015.	$	—		$	183
Secured promissory notes (“October 2012 and April 2013 Secured Promissory Notes”) bearing interest at 18.00% per annum, payable monthly through October 2017, collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2015 and 2014 of $28 and $203, respectively		12,422			12,247
Secured promissory note (“June 2014 Secured Promissory Note”) bearing interest at prime plus 2% (5.25% as of December 31, 2015) per annum, payable monthly through June 2036, collateralized by certain of the Company’s deposit accounts and MMM LLC’s inventories, chattel paper, accounts, equipment and general intangibles		9,621			9,873
Senior secured promissory notes due to related parties (“August 2015 Senior Secured Promissory Notes”) bearing interest at 8% per annum, interest is payable biannually with principal payments due in increments at three, four and five years from the closing date, collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2015 of $4,212 (see Note 15)		35,788			—
Debt, including debt due to related parties		57,831			22,303
Less debt due to related parties		(35,788	)		—
Less current portion		(267	)		(12,636	)
	$	21,776		$	9,667

As of December 31, 2015, aggregate contractual future principal payments on the Company’s debt, including debt due to related parties, are due as follows (in thousands):

Year Ended December 31,
2016	$	267
2017		12,732
2018		10,297
2019		10,313
2020		20,329
Thereafter		8,133
Total future principal payments		62,071

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The fair value of the Company’s outstanding debt obligations as of December 31, 2015 and 2014 was $23,457,000 and $22,587,000, respectively, which was estimated based on a discounted cash flow model using an estimated market rate of interest of 11.25% for the fixed rate debt and 5.25% for the variable rate debt, and is classified as Level 3 within the fair value hierarchy.

Term Loan

In March 2009, October 2010 and October 2011, the Company and Five Star Bank agreed to modify the terms of its existing revolving line of credit (“Revolver”). Under the modified terms of the Revolver, the Company’s borrowings under the Revolver were limited to 75% of qualifying accounts receivable with a maximum borrowing limit of $500,000. In March 2012, the Company entered into a change in terms agreement with the bank under which the existing Revolver was replaced by the Term Loan in the amount of $500,000 bearing interest at a rate of 7% per annum, maturing April 1, 2016. The Company’s inventories, chattel paper, accounts receivable, equipment and general intangibles (excluding certain financed equipment and intellectual property) have been pledged as collateral under the Term Loan. The Term Loan was fully paid off in August 2015.

Secured Promissory Notes

On October 2, 2012, the Company borrowed $7,500,000 pursuant to senior notes (“October 2012 Secured Promissory Notes”) with a group of lenders. The October 2012 Secured Promissory Notes have an initial term of three years and can be extended for an additional two years in one year increments at the option of the Company. During the initial three-year term, the October 2012 Secured Promissory Notes bear interest at 12% per annum. If the term of the October 2012 Secured Promissory Notes is extended an additional year, the interest rate is 13% during the fourth year. If the term of the October 2012 Secured Promissory Notes is extended for an additional two years, the interest rate is 14% during the fifth year. Interest on the October 2012 Secured Promissory Notes is payable monthly through the initial maturity date of the loan, which is October 2, 2015, or through any extension period. The principal and all unpaid interest are due on the maturity date, as may be extended. In August 2015, the terms of the October 2012 Secured Promissory Notes were amended, resulting in an increase in the interest rate to 18% effective September 1, 2015 for the remaining term of the notes. The Company also provided a written notice in September 2015 to extend the maturity date to October 2, 2017. The amendments were accounted for as a modification of the loan agreement with the effective interest rate adjusted prospectively from the amendment date.

As part of the terms of the October 2012 Secured Promissory Notes, the Company is required to pay a fee of 5% of the funded principal amount to the agent that facilitated the borrowing and provides management of the relationship with the group of lenders (“Agent Fee”). This Agent Fee is payable within 30 days after all interest and principal have been paid. For each year the Company extends the maturity date of the October 2012 Secured Promissory Notes beyond the initial term, the agent will receive an additional 1% fee based on the funded principal amount. The present value of the unpaid Agent Fee, based on 5% of the funded principal amount, or $261,000, as of the closing date of the October 2012 Secured Promissory Notes was recorded as both deferred financing costs as a component of current and non-current other assets and non-current other liabilities. As the maturity date was extended two years in September 2015, the agent fee was increased to 7% of the funded principal amount. The amortization of the deferred financing costs and the accretion of the Agent Fee are recorded to interest expense over the term of the arrangement. As of December 31, 2015, $653,000 of the Agent Fee, including the amounts relating to the additional funds received from the issuance of the April 2013 Secured Promissory Notes discussed below, was recorded under non-current other liabilities. In addition, the Company incurred an additional $66,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets and are being amortized to interest expense over the term of the arrangement.

The October 2012 Secured Promissory Notes are secured by the Company’s ownership interest in MMM LLC, a security interest in the assets of the Company’s manufacturing plant and all of the Company’s other assets,

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subject to certain permitted liens. This security interest was subordinate to the security interest held by the holder of a previously outstanding promissory note issued in April 2012 and repaid in January 2013 (“April 2012 Note”), which also had a security interest in MMM LLC.

The Company also issued warrants (“Common Stock Warrants”) to the group of lenders to purchase a number of shares of common stock equal to 15% of the funded principal amount of the October 2012 Secured Promissory Notes divided by 70% of the value of common stock in a sale of the Company or a Qualified IPO, with such Common Stock Warrants having an exercise price of 70% of the value of common stock in a sale of the Company or a Qualified IPO. The Common Stock Warrants would be automatically exercised immediately prior to expiration on the earlier to occur of a Qualified IPO or a sale of the Company or the maturity of the October 2012 Secured Promissory Notes. The October 2012 Secured Promissory Notes could be prepaid six months after the initial funding date or earlier if a Qualified IPO or a sale of the Company occurs. As the predominant settlement feature of the Common Stock Warrants is to settle a fixed monetary amount in a variable number of shares, the Common Stock Warrants were accounted for under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). Accordingly, the Common Stock Warrants were recorded at estimated fair value on their issuance date and were adjusted to their estimated fair value as of each reporting date with the change in estimated fair value recorded as a component of change in estimated fair value of financial instruments in the Company’s consolidated statements of operations. The fair value of the Common Stock Warrants at the date of issuance of $282,000 was recorded as a discount to the October 2012 Secured Promissory Notes and is being amortized to interest expense over the term of the arrangement. Until the effective date of the IPO, the Company estimated the fair value of the Common Stock Warrants using a Probability-Weighted Expected Return Method (“PWERM”) valuation based on unobservable inputs, and, therefore, the Common Stock Warrants were classified as Level 3 liabilities in the fair value hierarchy. Upon closing of the IPO, the exercise price of the Common Stock Warrants was determined to be $8.40 per share and the number of shares to be issued upon exercise of the warrants was no longer variable. As a result of the IPO, the Common Stock Warrants were considered to be indexed to the Company’s stock, and accordingly, the common stock warrants liability was reclassified and included in stockholders’ equity (deficit) during the year ended December 31, 2013.

The October 2012 Secured Promissory Notes contain certain covenant requirements, which include a requirement to maintain a minimum cash balance of the lesser of the April 2012 Note indebtedness or $5,000,000. As the April 2012 Note was fully paid off in January 2013, the Company no longer has a minimum cash balance requirement under the October 2012 Secured Promissory Notes. The Company is also precluded from adding additional debt without lender approval but allowance is made if such debt is subordinated to the October 2012 Secured Promissory Notes or if such additional debt is not more than $2,000,000 in the aggregate. In the event of default on the October 2012 Secured Promissory Notes, the lenders may declare the entire unpaid principal and interest immediately due and payable.

On April 10, 2013 (“Conversion Date”), the Company entered into an amendment to increase, by up to $5,000,000, the amount available under the terms of the loan agreement with respect to the October 2012 Secured Promissory Notes. Under this amendment, an additional $4,950,000 was issued in partial consideration for $3,700,000 in cash received and in partial conversion for the cancellation of $1,250,000 of the total principal balance of the October 2012 Subordinated Convertible Note described below (collectively, “April 2013 Secured Promissory Notes”). The total amount borrowed under the amended loan agreement for the October 2012 Secured Promissory Notes and the April 2013 Secured Promissory Notes increased from $7,500,000 to $12,450,000 as of the Conversion Date. The accrued interest of $74,000 for the partially converted October 2012 Subordinated Convertible Note as of the Conversion Date shall be repaid or converted on the applicable maturity date of the October 2012 Subordinated Convertible Note.

In connection with the issuance of the April 2013 Secured Promissory Notes, the Company issued additional warrants (“Additional Common Stock Warrants”) to purchase a number of shares of common stock equal to 20% of the funded principal amount of the April 2013 Secured Promissory Notes divided by 70% of the value of common stock in a sale of the Company or a Qualified IPO, with such Additional Common Stock Warrants to

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have an exercise price of 70% of the value of common stock in a sale of the Company or a Qualified IPO. As the predominant settlement feature of the Additional Common Stock Warrants was to settle a fixed monetary amount in a variable number of shares, the Additional Common Stock Warrants were accounted for under ASC 480. Accordingly, the Additional Common Stock Warrants were recorded at estimated fair value on their issuance date and were adjusted to their estimated fair value as of each reporting date with the change in estimated fair value recorded as a component of change in estimated fair value of financial instruments in the Company’s consolidated statements of operations. The fair value of the Additional Common Stock Warrants at the date of issuance was estimated to be $465,000. The Company estimated the fair value of the Additional Common Stock Warrants using a PWERM valuation based on unobservable inputs and, therefore, the Additional Common Stock Warrants were classified as Level 3 liabilities in the fair value hierarchy. Upon closing of the IPO, the exercise price of the Additional Common Stock Warrants was determined to be $8.40 per share and the number of shares to be issued upon exercise of the warrants was no longer variable. As a result of the IPO, the Additional Common Stock Warrants were considered to be indexed to the Company’s stock, and accordingly, the common stock warrants liability was reclassified and included in stockholders’ equity (deficit) during the year ended December 31, 2013.

The debt holder who converted $1,250,000 principal balance of the October 2012 Subordinated Convertible Note (with a fair value of $1,360,000 on the date of conversion) also loaned an additional $2,500,000 in cash as part of the April 2013 Secured Promissory Notes (collectively, the “$3,750,000 Notes”). The Company accounted for the conversion as an extinguishment of debt in accordance with ASC 470-50-40, Modifications and Extinguishments. The $1,360,000 fair value of the partially converted October 2012 Subordinated Convertible Note on the Conversion Date was derecognized and the fair value of the $3,750,000 Notes with the portion of the fair value of the Additional Common Stock Warrants issued to this debt holder on the date of issuance was recorded. The Company recorded the $49,000 excess of the total fair value of the $3,750,000 Notes and the related Additional Common Stock Warrants on the issuance date over total consideration received as a gain on extinguishment of debt in the consolidated statements of operations for the year ended December 31, 2013.

The following table shows the consideration received, fair values of the notes and common stock warrants issued and calculation of the gain on extinguishment of debt for the $3,750,000 Notes (in thousands):

Consideration received
Fair value of October 2012 Subordinated Convertible Note	$	1,360
Cash		2,500
Total consideration received (a)	$	3,860
Notes and warrants issued
Principal balance of notes issued	$	3,750
Debt discount (1)		(291	)
Fair value of notes issued		3,459
Fair value of Additional Common Stock Warrants issued		352
Total fair value of notes and warrants issued (b)	$	3,811
Gain on extinguishment of debt (a—b)	$	49

⁽¹⁾  The amortization of this account is being recorded in interest expense in the consolidated statements of operations over the term of the arrangement.

The remaining fair value of the Additional Common Stock Warrants of $113,000, net of the fair value of the Additional Common Stock Warrants issued of $352,000 related to the $3,750,000 Notes discussed above, was recorded as a debt discount to the April 2013 Secured Promissory Notes and is being amortized to interest expense over the term of the arrangement.

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As a result of the amendment described above, the Company is also required to pay the Agent Fee, 5% of the $3,700,000 in cash received from the April 2013 Secured Promissory Notes, under the same terms as the October 2012 Secured Promissory Notes. In addition, the portion of the Agent Fee relating to the converted October 2012 Subordinated Convertible Note that would be due under the terms of the October 2012 Subordinated Convertible Note will be paid under the terms of the October 2012 and April 2013 Secured Promissory Notes. The present value of the unpaid Agent Fee of $172,000, based on 5% of the funded principal amount of $4,950,000, as of the closing date of the April 2013 Secured Promissory Notes was recorded as both deferred financing costs as a component of current and non-current other assets and non-current other liabilities. The amortization of the deferred financing costs and the accretion of the Agent Fee are being amortized to interest expense over the term of the arrangement. In addition, the Company incurred an additional $24,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets and are being amortized to interest expense over the term of the arrangement.

The amendment to the loan agreement also amended the interest provision applicable to the October 2012 and April 2013 Secured Promissory Notes to allow any holder of the October 2012 and April 2013 Secured Promissory Notes to request the Company to defer all interest due monthly to the applicable maturity date and the optional prepayment provision applicable to the October 2012 and April 2013 Secured Promissory Notes to allow the Company to repay the outstanding amount of the October 2012 and April 2013 Secured Promissory Notes either with the written consent of the lender or the agent on such lenders’ behalf or without such consent provided that the Company pays the interest that would have been due from the prepayment date to the initial maturity date.

Activity related to the October 2012 and April 2013 Secured Promissory Notes from December 31, 2014 through December 31, 2015 consisted of the following (in thousands):

	DECEMBER 31, 2014			ADDITIONS		AMORTIZATION OF DEBT DISCOUNT		PRINCIPAL PAYMENTS		DECEMBER 31, 2015
Principal	$	12,450		$	—	$	—	$	—	$	12,450
Debt discount related to the issuance of common stock warrants (1)		(106	)		—		94		—		(12	)
Discount related to the $3,750,000 Notes (1)		(97	)		—		81		—		(16	)
	$	12,247		$	—	$	175	$	—	$	12,422

⁽¹⁾  The amortization of this account is included in interest expense in the consolidated statements of operations and as non-cash interest expense in the consolidated statements of cash flows.

As of December 31, 2014, the Company was in breach of its covenants under the October 2012 and April 2013 Secured Promissory Notes as a result of its failure to provide annual financial statements in a timely manner and as the Company was in breach of certain of its covenants under its June 2014 Secured Promissory Note as described below. However, in November 2015, the Company received an extension from the lending agent with respect to compliance with the requirements to deliver annual financial statements to the earlier of (i) November 15, 2015 or (ii) such time such financial statements are filed with the SEC. The covenant breach was cured in November 2015 as a result of delivering annual financial statements within the timeline prescribed in the extension and the waiver of certain of the Company’s covenants with respect to the June 2014 Secured Promissory Note as described below.

Credit Facility

On June 14, 2013, the Company entered into a credit facility agreement (“June 2013 Credit Facility”) with a group of lenders that are, or that are affiliated with, existing investors in the Company. Under the June 2013

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Credit Facility, the lenders have committed to permit the Company to draw an aggregate amount of up to $5,000,000, and, subject to the Company’s obtaining additional commitments from lenders, such amount may be increased to up to $7,000,000. The June 2013 Credit Facility expired on June 30, 2014 without having been drawn upon.

During the term of the June 2013 Credit Facility, the Company could request from the lenders up to four advances, with each advance equal to one-quarter of each lender’s aggregate commitment amount. The Company would issue a promissory note in the principal amount of each such advance that would accrue interest at a rate of 10% per annum. The principal and all unpaid interest under the promissory notes would be due on the maturity date, and the Company could not prepay the promissory notes prior to the maturity date without consent of at least a majority in interest of the aggregate principal amount of the promissory notes then outstanding under the June 2013 Credit Facility.

In connection with the June 2013 Credit Facility, the Company agreed to pay a fee of 2% of the total commitment amount to the lenders. In addition, the Company incurred an additional $10,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current other assets and were fully amortized to interest expense as of December 31, 2014.

In connection with the June 2013 Credit Facility, the Company issued warrants (“June 2013 Warrants”) to purchase a number of shares of common stock equal to 10% of the total committed amount of the June 2013 Credit Facility divided by 70% of the value of common stock in a sale of the Company or a Qualified IPO, with such June 2013 Warrants to have an exercise price of 70% of the value of common stock in a sale of the Company or a Qualified IPO. The June 2013 Warrants expire upon the earlier of June 14, 2023 or the sale of the Company. As the predominant settlement feature of the June 2013 Warrants was to settle a fixed monetary amount in a variable number of shares, the June 2013 Warrants were accounted for under ASC 480. Accordingly, the June 2013 Warrants were recorded at estimated fair value on their issuance date and were adjusted to their estimated fair value as of each reporting date with the change in estimated fair value recorded as a component of change in estimated fair value of financial instruments in the Company’s consolidated statements of operations. The fair value of the June 2013 Warrants at the date of issuance of $435,000 was recorded as a deferred financing cost as a current other asset and was being amortized to interest expense over the term of the arrangement. Until the effective date of the IPO, the Company estimated the fair value of the June 2013 Warrants using a PWERM valuation based on unobservable inputs and, therefore, the June 2013 Warrants were classified as Level 3 liabilities in the fair value hierarchy. Upon closing of the IPO, the exercise price of the June 2013 Warrants was determined to be $8.40 per share and the number of shares to be issued upon exercise of the warrants was no longer variable. As a result of the IPO, the June 2013 Warrants were considered to be indexed to the Company’s stock, and accordingly, the common stock warrants liability was reclassified and included in stockholders’ equity (deficit) during the year ended December 31, 2013.

Secured Promissory Note

On April 11, 2014, the Company entered into a $3,000,000 promissory note with Five Star Bank. On April 14, 2014, the Company entered into an agreement with the bank to modify the terms of the promissory note from a single payment loan to a revolving line of credit, which allowed the Company to borrow up to $3,000,000. On April 28, 2014, the Company entered into an agreement to modify the terms of the revolving line of credit to increase the borrowing limit up to $5,000,000. In June 2014, the $4,687,000 balance on the revolving line of credit was paid off and the line was closed when the Company borrowed $10,000,000 pursuant to a business loan agreement and promissory note (“June 2014 Secured Promissory Note”) with the bank (“Lender”) which bears interest at prime rate (3.5% as of December 31, 2015) plus 2.00% per annum. The interest rate is subject to change from time to time to reflect changes in the prime rate; however, the interest rate shall not be less than 5.25% or more than the maximum rate allowed by applicable law. If the interest rate increases, the Lender, may, at its option, increase the amount of each monthly payment to ensure that the note would be paid in full by the maturity date, increase the amount of each monthly payment to reflect the change in interest rate, increase the number of monthly payments or keep the monthly payments the same and increase the final payment amount.

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The June 2014 Secured Promissory Note is repayable in monthly payments of $64,390 commencing in July 2014, with the final payment due in June 2036. Certain of the Company’s deposit accounts and MMM, LLC’s inventories, chattel paper, accounts, equipment and general intangibles have been pledged as collateral for the promissory note. The Company is required to maintain a deposit balance with the Lender of $1,560,000, which is recorded as restricted cash included in non-current assets. In addition, until the Company provides documentation that the proceeds were used for construction of the Company’s manufacturing plant, proceeds from the loan will be maintained in a restricted deposit account with the Lender. As of December 31, 2015, the Company had $1,856,000 remaining in this restricted deposit account, which is recorded as restricted cash included in current assets.

In addition, the Company incurred an additional $304,000 in financing-related costs, including USDA guarantee fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets on the date of issuance and are being amortized to interest expense over the term of the arrangement.

The Company may prepay 20% of the outstanding principal loan balance each year without penalty. A prepayment fee of 10% will be charged if prepayments exceed 20% in the first year, and the prepayment fee will decrease by 1% each year for the first ten years of the loan.

The Company is required to maintain a current ratio of not less than 1.25-to-1.0, a debt-to-worth ratio of no greater than 4.0-to-1.0 and a loan-to-value ratio of no greater than 70% as determined by the Lender. The Company is also required to comply with certain affirmative and negative covenants under the loan agreement discussed above. In the event of default on the debt, the Lender may declare the entire unpaid principal and interest immediately due and payable. As of December 31, 2014, the Company was in breach of certain of its covenants under the loan agreement as a result of its annual and quarterly reports not being filed within the prescribed time period and its being in breach of covenants on the October 2012 and April 2013 Secured Promissory Notes described above. In addition, effective September 30, 2015, the Company’s debt-to-worth ratio was greater than 4.0-to-1.0 as a result of the issuance of $40,000,000 in promissory notes in August 2015 as described in Note 15, which increased the Company’s debt while the Company continued to incur net losses, which decreased stockholders’ equity. However, in November 2015, the Company received a waiver from the Lender with respect to compliance with the requirements to (i) deliver annual financial statements (extended to November 15, 2015), (ii) maintain a current ratio greater than 1.25-to-1.0 (extended to December 31, 2015) and (iii) maintain a debt-to-worth ratio less than 4.0-to-1.0 (extended to December 31, 2016). The receipt of this waiver and the delivery of annual financial statements within the timeline prescribed in the waiver and the extension under the October 2012 and April 2013 Secured Promissory Notes cured the Company of being in breach of the covenants under the loan agreement.

7. Preferred Stock

The Company sold 1,484,000 shares of its Series A convertible preferred stock in private placements in April 2007 for $2.608 per share, including conversion of certain convertible notes payable, 2,242,000 shares of its Series B convertible preferred stock in August 2008 for $4.849 per share, including conversion of convertible notes payable, and 4,778,000 shares of its Series C convertible preferred stock from March 2010 to June 2011 for $5.317 per share, including conversion of $514,000 of convertible notes payable plus accrued interest of $5,000. The Company recorded the issuance of its Series A, Series B and Series C convertible preferred stock net of issuance costs.

In May 2012, in connection with the issuance of the Series C warrants, the Company amended its certificate of incorporation to increase the number of shares of common stock the Company is authorized to issue from 12,745,000 shares to 12,936,000 shares and to increase the number of shares of convertible preferred stock the Company is authorized to issue from 8,632,000 shares to 8,823,000 shares, of which, 1,489,000 shares were designated as Series A convertible preferred stock, 2,252,000 shares were designated as Series B convertible preferred stock and 5,082,000 shares were designated as Series C convertible preferred stock.

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Upon closing of the IPO, all shares of the Company’s outstanding convertible preferred stock automatically converted into shares of common stock. Further, in August 2013, the Company amended and restated its certificate of incorporation to effect the conversion of its outstanding convertible preferred stock into common stock on a 1-for-1 basis. The amendment also increased the number of shares of preferred stock authorized for issuance to 20,000,000.

Investors in the Company’s Series C convertible preferred stock were entitled to receive non-cumulative dividends, before and in preference to any amounts paid to Series A and Series B convertible preferred stockholders and common stockholders, and investors in the Company’s Series A and Series B convertible preferred stock were entitled to receive non-cumulative dividends on a pari passu basis, before and in preference to any amounts paid to common stockholders. Dividends would be paid only when and if declared by the board of directors. In addition, these investors were entitled to voting rights equal to the number of shares of the Company’s common stock into which the Series A, Series B and Series C convertible preferred stock were convertible as of the close of business on the record date fixed for each stockholder’s meeting. No dividends were declared on the Series A, Series B or Series C convertible preferred stock.

8. Warrants

The following table summarizes information about the Company’s common stock warrants outstanding as of December 31, 2015 (in thousands, except exercise price data):

DESCRIPTION	ISSUE DATE	EXPIRATION DATE	NUMBER OF SHARES SUBJECT TO WARRANTS ISSUED		EXERCISE PRICE
In connection with June 2013 Credit Facility (June 2013 Warrants)	June 2013	June 2023(1)		27	$	8.40
In connection with August 2015 Senior Secured Promissory Notes (August 2015 Warrants)	August 2015	August 2023		4,000	$	1.91
				4,027

⁽¹⁾  The June 2013 Warrants expire upon the earlier to occur of (i) the date listed above; (ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any transfer of more than 50% of the voting power of the Company, reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (iii) a sale of all or substantially all of the assets of the Company unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise), hold at least fifty percent (50%) of the voting power of the surviving or acquiring entity.

The June 2013 Warrants became exercisable on the date of the IPO. The August 2015 Warrants were immediately exercisable and remain exercisable subject to certain exceptions.

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9. Common Stock

In August 2013, the Company amended and restated its certificate of incorporation to increase the number of shares of common stock authorized for issuance to 250,000,000 shares with a par value of $0.00001. As of December 31, 2015, the Company had reserved shares of common stock for future issuances as follows (in thousands):

	SHARES
Shares available for future grant under stock incentive plans		2,478
Stock options outstanding		2,116
Warrants to purchase common stock		4,027
Restricted stock units		107
		8,728

10. Stock Option Plans

In July 2006, the Company authorized the 2006 Equity Incentive Plan, as amended, (“2006 Plan”). The 2006 Plan provided for the issuance of up to 1,434,000 shares of common stock underlying awards. The 2006 Plan was terminated in December 2011 and no new stock awards may be granted under the 2006 Plan.

The 2006 Plan allowed holders to exercise stock options prior to their vesting. The common stock received by the employee is restricted and follows the same vesting schedule as the underlying option. In the event the employee voluntarily or involuntarily terminates employment from the Company, the Company retains a right to repurchase the unvested common stock at the original option exercise price. As of December 31, 2015 and 2014, no options had been exercised that would be subject to repurchase.

As of December 31, 2015, options to purchase 285,000 shares of the Company’s common stock at a weighted-average exercise price of $1.01 per share were outstanding under the 2006 Plan, of which 285,000 were vested. During the year ended December 31, 2015, 50,000 and 28,000 options were exercised and cancelled, respectively, under the 2006 Plan.

In July 2011, and as amended in September 2012, the Company authorized the 2011 Stock Plan (“2011 Plan”). The 2011 Plan provided for the issuance of up to 1,167,000 shares of common stock underlying awards, plus any shares of common stock underlying awards previously issued under the 2006 Plan that terminate or expire after the date of authorization of the 2011 Plan, subject to certain adjustments. In addition, the 2011 Plan provided that the Company not deliver more than 2,446,000 shares upon the exercise of incentive stock options issued under both the 2006 Plan and 2011 Plan. The 2011 Plan was terminated in August 2013 and no new stock awards may be granted under the 2011 Plan.

As of December 31, 2015, options to purchase 361,000 shares of the Company’s common stock at a weighted-average exercise price of $7.47 per share were outstanding under the 2011 Plan, of which 302,000 were vested. During the year ended December 31, 2015, 11,000 and 261,000 options were exercised and cancelled, respectively, under the 2011 Plan.

In August 2013, the Company’s board of directors adopted the 2013 Stock Incentive Plan (“2013 Plan”) covering officers, employees, and directors of, and consultants to, the Company. Under the 2013 Plan, the Company may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and dividend equivalent rights. At the time the 2013 Plan was established, the maximum aggregate number of shares of the Company’s common stock that could be issued pursuant to the 2013 Plan was 1,600,000, plus the number of shares of common stock that were reserved for issuance pursuant to future grants under the 2011 Plan at that time. The number of shares authorized for issuance pursuant to the 2013 Plan automatically

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increases by any additional shares that would have otherwise returned to the 2011 Plan as a result of the forfeiture, termination or expiration of awards previously granted under the 2011 Plan. In addition, the number of shares authorized for issuance pursuant to the 2013 Plan will increase by a number equal to the lesser of (i) 3.5% of the number of shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year or (ii) a lesser number of shares determined by the administrator.

As of December 31, 2015, options to purchase 1,470,000 shares of the Company’s common stock at a weighted-average exercise price of $10.78 per share were outstanding under the 2013 Plan, of which 768,000 were vested. During the year ended December 31, 2015, 510,000 options were cancelled and no options were exercised under the 2013 Plan.

Generally, options vest 25% on the first anniversary from the date of grant and 1/48 per month thereafter; however, options may be granted with different vesting terms as determined by the Company’s board of directors.

During the year ended December 31, 2015, the Company granted restricted stock units under the 2013 Plan. On the date of grant, 7/12 of the restricted stock units vested immediately with 5/12 vesting equally over the five monthly anniversaries following the date of issuance of the award. One share of common stock is issuable for each vested restricted stock unit upon the earlier of the grantee’s separation of service or a change in control. As of December 31, 2015, there were 107,000 restricted stock units outstanding under the 2013 Plan.

The following table summarizes the activity under the Company’s stock option plans for the year ended December 31, 2015 (in thousands, except exercise price and remaining contractual life data):

	SHARES OUTSTANDING			WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL LIFE (IN YEARS)		AGGREGATE INTRINSIC VALUE
Balances at December 31, 2014		2,831		$	9.39		7.4	$	1,595
Options granted		145		$	1.61
Options exercised		(61	)	$	0.91
Options cancelled		(799	)	$	9.93
Balances at December 31, 2015		2,116		$	8.90		7.3	$	45
Vested and expected to vest at December 31, 2015		1,888		$	8.73		7.2	$	45
Exercisable at December 31, 2015		1,355		$	8.09		6.8	$	45

The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $35,000, $6,302,000 and $2,801,000, respectively.

The estimated fair value of options vested during the years ended December 31, 2015, 2014 and 2013 was $4,950,000, $3,863,000 and $1,314,000 respectively. The weighted-average estimated fair value of options granted during the years ended December 31, 2015, 2014 and 2013 was $0.75 per share, $6.10 per share and $10.35 per share, respectively.

During the years ended December 31, 2015, 2014 and 2013, the Company recorded share-based compensation expense related to stock options of $3,715,000, $4,555,000 and $2,300,000, respectively. During the years ended

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December 31, 2015, 2014 and 2013, the Company did not realize any tax benefit associated with its share-based compensation expense as certain of the option grants were incentive stock options for which share-based compensation expense is not deductible and as a result of the full valuation allowance on the Company’s deferred tax assets (see Note 13).

As of December 31, 2015, the total share-based compensation expense related to unvested options granted to employees under the Company’s stock option plans but not yet recognized was $3,273,000. This expense will be recognized on a straight-line basis over a weighted-average remaining term of 1.9 years.

On November 7, 2013, the Company announced that its Chief Financial Officer, Donald J. Glidewell, had decided to retire, and the Company entered into a transition agreement with Mr. Glidewell which provided, among other things, for the vesting of his outstanding equity awards through the transition date. During the years ended December 31, 2014 and 2013, the Company recorded share-based compensation expense of $444,000 and $266,000, respectively, relating to the acceleration of vesting of Mr. Glidewell’s equity awards. No share-based compensation expense was recognized relating to the acceleration of vesting of Mr. Glidewell’s equity awards during the year ended December 31, 2015, and as of December 31, 2015, there was no share-based compensation expense related to unvested options granted to Mr. Glidewell under the Company’s stock option plans not yet recognized.

The following table summarizes shares available for grant under the Company’s stock incentive plans for the year ended December 31, 2015 (in thousands):

	SHARES AVAILABLE FOR GRANT
Balances at December 31, 2014		1,086
Shares authorized		856
Options granted		(145	)
Options cancelled		799
Restricted stock units granted		(125	)
Restricted stock units forfeited		7
Balances at December 31, 2015		2,478

The following table summarizes the activity of restricted stock units for the year ended December 31, 2015 (in thousands, except weighted average grant date fair value):

	SHARES OUTSTANDING			WEIGHTED AVERAGE GRANT DATE FAIR VALUE
Nonvested at December 31, 2014		—		$	—
Granted		125		$	1.23
Vested		(73	)	$	1.23
Forfeited		(7	)	$	1.23
Nonvested at December 31, 2015		45		$	1.23

The fair value of restricted stock units is determined based on the closing bid price of the Company’s common stock on the date of grant. During the year ended December 31, 2015, the Company recognized $96,000 of share-based compensation expense related to restricted stock units. Total share-based compensation expense related to restricted stock units not yet recognized as of December 31, 2015 was $50,000, which is expected to be recognized over a weighted average period of 0.4 years.

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11. Capital Leases

The Company accounts for certain equipment acquired under financing arrangements as capital leases. This equipment is included in property, plant and equipment, and amortization of assets under capital leases is included in depreciation expense. As of December 31, 2015 and 2014, the cost of this equipment was $2,991,000 and $3,063,000, respectively, and accumulated amortization was $2,457,000 and $1,627,000, respectively.

Amortization of capital leases during the years ended December 31, 2015, 2014 and 2013 totaled $1,567,000, $1,496,000 and $470,000, respectively.

As of December 31, 2015, the Company’s aggregate contractual future minimum lease payments on the capital leases are due as follows (in thousands):

	CAPITAL LEASES
Year Ended December 31,
2016		667
2017		19
Total minimum payments required		686
Less amount representing interest		(21	)
Present value of future payments		665
Less current portion		(647	)
	$	18

12. Commitments and Contingencies

Operating Leases

The Company has a non-cancelable lease for an aggregate of approximately 24,500 square feet of non-contiguous office space in an office complex in Davis, California under which a portion of the covered space terminated beginning in February 2014. The remaining portion of the space will terminate by October 2016. The lease includes negotiated annual increases in the monthly rental payments.

In September 2013 and then amended in April 2014, the Company entered into a lease agreement for approximately 27,300 square feet of office and laboratory space located in Davis, California. The initial term of the lease is for a period of 60 months and commenced in August 2014. The monthly base rent is $44,000 per month for the first 12 months with a 3% increase each year thereafter. Concurrent with this amendment, in April 2014, the Company entered into a lease agreement with an affiliate of the landlord to lease approximately 17,400 square feet of office and laboratory space in the same building complex in Davis, California. The initial term of the lease is for a period of 60 months and commenced in August 2014. The monthly base rent is $28,000 with a 3% increase each year thereafter.

The Company recognizes expense under its operating leases on a straight-line basis over the terms of the leases. As of December 31, 2015, the Company’s aggregate contractual future minimum lease payments under non-cancelable lease agreements is as follows (in thousands):

	OPERATING LEASES
Year Ended December 31,
2016	$	1,029
2017		941
2018		949
2019		615
2020 and beyond		—
Total minimum payments required	$	3,534

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The Company incurred rent expense of $1,102,000, $1,134,000 and $691,000 during the years ended December 31, 2015, 2014 and 2013, respectively.

Litigation

On September 5, 2014, September 8, 2014, September 11, 2014, September 15, 2014 and November 3, 2014, the Company, along with certain of its current and former officers and directors and others were named as defendants in putative securities class action lawsuits filed in the U.S. District Court for the Eastern District of California. On February 13, 2015, these actions were consolidated as Special Situations Fund III QP, L.P. et al v. Marrone Bio Innovations, Inc. et al, Case No 2:14-cv-02571-MCE-KJN. On September 2, 2015, an initial consolidated complaint was filed on behalf of (i) all persons who purchased or otherwise acquired the Company’s publicly traded common stock directly in or traceable to the Company’s August 1, 2013 initial public offering; (ii) all persons who purchased or otherwise acquired the Company’s publicly traded common stock directly in the Company’s June 6, 2014 secondary offering; and (iii) all persons who purchased or otherwise acquired the Company’s publicly traded common stock on the open market between March 7, 2014 and September 2, 2014 (the “Class Action”). In addition to the Company, the initial consolidated complaint names certain of the Company’s current and former officers and directors and the Company’s independent registered public accounting firm as defendants. The initial consolidated complaint alleges violations of the Securities Act of 1933, the Securities Exchange Act of 1934 and SEC Rule 10b-5, arising out of the issuance of allegedly false and misleading statements about the Company’s business and prospects, including its financial statements, product revenues and system of internal controls. Plaintiffs contend that such statements caused the Company’s stock price to be artificially inflated. The action includes claims for damages, fees and expenses, including an award of attorneys’ and experts’ fees to the putative class. An amended consolidated complaint was filed on January 11, 2016. On February 4, 2016, the Court approved a stipulation between the parties deferring action pending the outcome of a mediation proceeding, and ordered the parties to provide a status update on May 4, 2016. The outcome of this matter is not presently determinable.

On September 9, 2014 and November 25, 2014, shareholder derivative actions were filed in the Superior Court of California, County of Yolo (Case No. CV14-1481) and the U.S. District Court for the Eastern District of California (Case No. 1:14-cv-02779-JAM-CKD), purportedly on the Company’s behalf, against certain current and former officers and members of its board of directors (the “2014 Derivative Actions”). The plaintiffs in the 2014 Derivative Actions allege that the defendants breached their fiduciary duties, committed waste, were unjustly enriched and aided and abetted breaches of fiduciary duty by causing the Company to issue allegedly false and misleading statements. The issues in the 2014 Derivative Actions overlap substantially with those at issue in the Class Action described above. The plaintiffs in the 2014 Derivative Actions seek, purportedly on behalf of the Company, an unspecified award of damages including, but not limited to, various corporate governance reforms, an award of restitution, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Courts may deem just and proper. The Courts have granted the parties’ stipulations to defer litigation activity, subject to certain conditions and pending certain developments in the Class Action.

On October 14, 2015, a shareholder derivative action was filed in the Superior Court of California, County of Yolo (Case No. CV15-1423), purportedly on the Company’s behalf, against certain current and former officers and members of the Company’s board of directors and the Company’s independent registered public accounting firm (the “2015 Derivative Action,” and with the 2014 Derivative Actions, the “Derivative Actions”). The plaintiff in the 2015 Derivative Action alleges that the director and officer defendants breached their fiduciary duties, committed waste and were unjustly enriched by causing the Company to issue allegedly false and misleading statements. The plaintiff in the 2015 Derivative Action also alleges that the Company’s independent registered public accounting firm committed professional negligence and malpractice. The issues in the 2015 Derivative Action overlap substantially with those at issue in the 2014 Derivative Actions and the Class Action described above. On February 5, 2016, the Court approved a stipulation between the parties deferring action

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pending the outcome of a mediation proceeding, and ordered the parties to provide a status update on May 5, 2016. Given the preliminary nature of the Derivative Actions, the Company is not in a position to express any opinion regarding the outcome in these matters.

The Company is currently unable to estimate a range of reasonably possible loss for the litigation as these matters involve significant uncertainties. Those uncertainties include the legal theory or the nature of the claims, the complexity of the facts, the results of any investigation or litigation and the timing of resolution of the investigations or litigation. Although the Company cannot estimate a range of reasonably possible loss based on currently available information, the resolution of these matters could have a material adverse effect on its financial position, results of operations and cash flows.

SEC Investigation

In September 2014, the Company advised the staff of the Division of Enforcement of the SEC that the Audit Committee of the Company’s board of directors had commenced an internal investigation. The SEC commenced a formal investigation of these matters, and in February 2016, the Company entered into a settlement agreement with the SEC. In agreeing to the settlement, the Company neither admits nor denies the SEC’s allegations that the Company violated certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Under the terms of the settlement agreement, the Company paid a $1,750,000 civil penalty in March 2016 and consented to an injunction against future violations of such laws. The Company had previously recorded expenses of $1,750,000 in its consolidated statements of operations for the year ended December 31, 2014 for an accrual of its estimate of the penalties arising from such enforcement action.

13. Income Taxes

As of December 31, 2015, the Company had net operating loss carryforwards for federal income tax reporting purposes of $166,379,000, which begin to expire in 2026, and California and various other state net operating loss carryforwards of $107,329,000 and $39,050,000, respectively, which begin to expire in 2016. California net operating loss carryforwards of $257,000 and $1,744,000 will expire in 2016 and 2017, respectively. California and various other state net operating loss carryforwards of $105,328,000 and $39,050,000, respectively, will expire from 2028 through 2035. In addition, as of December 31, 2015, the Company had federal research and development tax credit carryforwards of $1,889,000, which begin to expire in 2026, and state research and development tax credit carryforwards of $2,027,000, which have no expiration date.

The Company’s ability to utilize its federal and state net operating loss carryforwards and federal and state tax credit carryforwards to reduce future taxable income and future taxes, respectively, may be subject to restrictions attributable to equity transactions that may have resulted in a change in ownership as defined by Internal Revenue Code (“IRC”) Section 382. In the event that the Company has such a change in ownership, the Company’s utilization of these carryforwards could be severely restricted and could result in the expiration of a significant amount of these carryforwards prior to the Company recognizing their benefit. The Company completed a Section 382 analysis as of December 31, 2013 and concluded that $493,000 in federal net operating loss carryforwards and $151,000 in federal research and development tax credit carryforwards are expected to expire prior to utilization as a result of the Company’s previous ownership changes and corresponding annual limitations. The Company has not, however, conducted a Section 382 study for any periods subsequent to December 31, 2013, and as such, the Company cannot provide any assurance that a change in ownership within the meaning of the IRC has not occurred since that date.

As of December 31, 2015, deferred tax assets of $68,969,000, arising primarily as a result of the Company’s net operating loss carryforwards, tax credits and certain costs capitalized for tax purposes, were fully offset by a valuation allowance. The valuation allowance increased by $15,241,000, $18,459,000 and $12,869,000 during the years ended December 31, 2015, 2014 and 2013, respectively. The deferred tax asset balances as of December 31, 2015 and 2014 excluded excess tax benefits from stock option exercises of $2,096,000 and $2,092,000, respectively.

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The temporary timing differences that give rise to the deferred tax assets are as follows (in thousands):

	DECEMBER 31,
	2015			2014
Components of deferred taxes:
Net operating loss carryforwards	$	62,255		$	47,723
Research and development tax credits		2,418			2,106
Other, net		4,296			3,899
Net deferred tax assets		68,969			53,728
Less valuation allowance		(68,969	)		(53,728	)
Net deferred tax assets	$	—		$	—

The Company had no deferred tax liabilities as of December 31, 2015 and 2014.

The Company recognized no income tax expense and received no benefit from income taxes during the years ended December 31, 2015, 2014 and 2013. The provision for income taxes is different than the amount computed using the applicable statutory federal income tax rate with the difference for each year summarized below:

	DECEMBER 31,
	2015			2014
Federal tax benefit at statutory rate		34	%		34	%
State tax benefit, net of federal benefit		4			5
Interest expense		(1	)		(1	)
Share-based compensation expense		(1	)		(2	)
Other		(1	)		—
Adjustment due to change in valuation allowance		(35	)		(36	)
Provision for income taxes		—	%		—	%

As of December 31, 2015, the Company had unrecognized tax benefits of $982,000. The unrecognized tax benefits, if recognized, would not impact the Company’s effective tax rate as the recognition of these tax benefits would be offset by changes in the Company’s valuation allowance. The Company does not believe there will be any material changes in its unrecognized tax position during the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2015		2014
Balance at January 1	$	853	$	660
Increase related to prior year tax positions		—		—
Increase related to current year tax positions		129		193
Balance at December 31	$	982	$	853

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal and state income tax examination for 2006 through 2014 due to unutilized net operating loss carryforwards and research and development tax credit carryforwards.

14. Employee Benefit Plan

The Company offers a defined contribution plan to all eligible employees, which is qualified under Section 401(k) of the IRC. The Company currently provides a matching contribution based on a formula which provides for a dollar-for-dollar matching contribution of the employee’s 401(k) contribution up to 3% of eligible

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pay plus a 50% matching contribution on the employee’s 401(k) contribution between 3% and 5% of eligible pay. Each participant is 100% vested in elective contributions and the Company’s matching contribution. The Company provided 401(k) matching contributions during the years ended December 31, 2015, 2014 and 2013 of $330,000, $370,000 and $294,000, respectively.

15. Related Party Transactions

August 2015 Senior Secured Promissory Notes

On August 20, 2015, the Company entered into a purchase agreement with Ivy Science & Technology Fund, Waddell & Reed Advisors Science & Technology Fund and Ivy Funds VIP Science and Technology, each an affiliate of Waddell & Reed, which is a beneficial owner of more than 5% of the Company’s common stock. Pursuant to such purchase agreement, the Company sold to such affiliates senior secured promissory notes (“August 2015 Senior Secured Promissory Notes”) in the aggregate principal amount of $40,000,000. The August 2015 Senior Secured Promissory Notes bear interest at a rate of 8% per annum payable semi-annually on June 30 or December 31 of each year, commencing on December 31, 2015, with $10,000,000 payable three years from the closing, $10,000,000 payable four years from the closing and $20,000,000 payable five years from the closing. Debt due to related parties as of December 31, 2015 was $35,788,000, net of unamortized debt discount of $4,212,000. The fair value of the Company’s debt due to related parties was $34,923,000 as of December 31, 2015, which was estimated based on a discounted cash flow model using an estimated market rate of interest of 11.25%, and is classified as Level 3 within the fair value hierarchy. Accrued interest due to related parties as of December 31, 2015 was $1,175,000.

The August 2015 Senior Secured Promissory Notes contain customary covenants, in addition to the contractual obligation to maintain cash and cash equivalents of at least $15,000,000, which is recorded as restricted cash included in non-current assets. The $15,000,000 that the Company is required to maintain is not required to be segregated from the Company’s operational cash.

In addition, the Company incurred an additional $302,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets and are being amortized to interest expense over the term of the arrangement.

The August 2015 Senior Secured Promissory Notes are secured by substantially all the Company’s personal property assets. The agent, acting on behalf of the lenders, shall be entitled to have a first priority lien on the Company’s intellectual property assets, pursuant to intercreditor arrangements with certain of the Company’s existing lenders.

In connection with the August 2015 Senior Secured Promissory Notes, the Company issued warrants (“August 2015 Warrants”) to purchase 4,000,000 shares of common stock of the Company. The August 2015 Warrants are immediately exercisable at an exercise price of $1.91 per share and may be exercised at a holder’s option at any time on or before August 20, 2023 (subject to certain exceptions). The fair value of the August 2015 Warrants at the date of issuance of $4,610,000 was recorded as a discount to the August 2015 Senior Secured Promissory Notes as a component of non-current other liabilities and is being amortized to interest expense to related parties over the term of the arrangement.

The August 2015 Senior Secured Promissory Notes provide for various events of default, including, among others, default in payment of principal or interest, breach of any representation or warranty by the Company or any subsidiary under any agreement or document delivered in connection with the notes, a continued breach of any other condition or obligation under any loan document, certain bankruptcy, liquidation, reorganization or change of control events, the acquisition by any person or persons acting as group, other than the lenders, of beneficial ownership of 40% or more of the outstanding voting stock of the Company and certain events in which Pamela G. Marrone, Ph.D. ceases to serve as the Company’s Chief Executive Officer. Upon an event of default,

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the entire principal and interest may be declared immediately due and payable. As of December 31, 2015, the Company was in compliance with its covenants under the August 2015 Senior Secured Promissory Notes.

The Tremont Group, Inc.

Les Lyman, a member of the Company’s board of directors, is the chairman and significant indirect shareholder of The Tremont Group, Inc. During the years ended December 31, 2015, 2014 and 2013, revenue of $492,000, $821,000 and $418,000, respectively, was recognized on a sell-through basis relating to product purchased by The Tremont Group, Inc. that was resold by The Tremont Group, Inc. during the period. As of December 31, 2015 and 2014, the Company had no outstanding accounts receivable due from The Tremont Group, Inc. As of December 31, 2015 and 2014, the Company recorded deferred cost of product revenues of $79,000 and $333,000, respectively, and current deferred product revenues of $168,000 and $660,000, respectively, relating to product sold to The Tremont Group, Inc. where title has transferred but the criteria for revenue recognition have not been met. In January 2016, Les Lyman resigned from the Company’s board of directors effective January 4, 2016. Accordingly, revenue recognized for sales to The Tremont Group, Inc. subsequent to January 2016 will not be included in related party revenues.

Syngenta

The Company has a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of the Company’s common stock, Syngenta Ventures. In connection with the Company’s public offering in June 2014, Syngenta Ventures sold 600,000 shares of the Company’s common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. During the years ended December 31, 2014 and 2013, the Company recognized $333,000 and $247,000, respectively, of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake.

16. Reverse Stock Split

On August 1, 2013, the Company amended and restated its certificate of incorporation to effect the conversion of its outstanding convertible preferred stock into common stock on a 1-for-1 basis followed immediately by a reverse split of shares of its common stock (including the common stock issued upon conversion of the convertible preferred stock) at a 1-for-3.138458 ratio (“Reverse Stock Split”). The amendment also increased the number of shares of common stock authorized for issuance to 250,000,000 shares and the number of shares of preferred stock authorized for issuance to 20,000,000. The par value of the common stock and preferred stock was not adjusted as a result of the Reverse Stock Split.

All issued and outstanding common stock, preferred stock and warrants for common stock or preferred stock, and the related per share amounts contained in the consolidated financial statements, have been retroactively adjusted to give effect to this Reverse Stock Split for all periods presented.

17. Public Offerings

In August 2013, the Company closed its IPO of 5,462,500 shares of its common stock (inclusive of 712,500 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $12.00 per share. The total gross proceeds from the offering to the Company were $65,550,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled approximately $56,105,000. In connection with the IPO:

• all outstanding shares of convertible preferred stock were converted into 8,514,000 shares of common stock, including 10,000 shares issued upon the cash exercise of Series B convertible preferred stock warrants;

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• all outstanding principal and accrued interest of the convertible notes was converted into 3,741,000 shares of common stock;

• 47,000 shares of common stock were issued upon the net exercise of common stock warrants;

• 3,000 shares of common stock were issued upon the cash exercise of common stock warrants; and

• the Series A and Series C convertible preferred stock warrants were net exercised for 71,000 shares of common stock.

After the closing of the IPO, the Company had 19,133,000 shares of common stock and 151,000 warrants to purchase common stock outstanding and there were no shares of convertible preferred stock, preferred stock warrants or balances related to convertible notes outstanding.

In June 2014, the Company completed a public offering of 4,575,000 shares of its common stock (inclusive of 675,000 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $9.50 per share. The total gross proceeds from the offering to the Company were $43,463,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled $39,949,000.

18. Quarterly Financial Information (Unaudited)

Fiscal Year 2015:

	MARCH 31, 2015			JUNE 30, 2015			SEPTEMBER 30, 2015			DECEMBER 31, 2015
	(In thousands, except per share data)
Total revenues	$	2,056		$	3,357		$	2,475		$	1,913
Gross profit (loss)		58			363			135			(11	)
Net loss		(11,914	)		(10,985	)		(9,799	)		(11,030	)
Basic and diluted net loss per common share		(0.49	)		(0.45	)		(0.40	)		(0.45	)

Fiscal Year 2014:

	MARCH 31, 2014			JUNE 30, 2014			SEPTEMBER 30, 2014			DECEMBER 31, 2014
	(In thousands, except per share data)
Total revenues	$	2,704		$	3,134		$	2,200		$	1,098
Gross profit (loss)		911			423			(1,302	)		(334	)
Net loss		(10,315	)		(10,711	)		(14,400	)		(16,233	)
Basic and diluted net loss per common share		(0.53	)		(0.52	)		(0.59	)		(0.66	)

19. Subsequent Event

On January 19, 2016, the Company entered into an agreement with a sublessee to sublease approximately 3,800 square feet of vacant office space located in Davis, California pursuant to the terms of its lease agreement. The initial term of the sublease is for a period of approximately 43 months and commenced on February 1, 2016. The monthly base rent is approximately $5,000 per month for the first 12 months with a 5% increase each year thereafter.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of its management, including the Company’s Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures in ensuring that material information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act has been made known to them in a timely fashion. Based on this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2015.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. Our management assessed, with the oversight of the board of directors, the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2015.

Changes in Internal Control

Based on the Audit Committee’s independent investigation, management identified material weaknesses in internal control over financial reporting as of December 31, 2014 resulting in revenue transactions that were recognized prior to satisfaction of all required revenue recognition criteria. These include material weaknesses related to our process for recognizing revenue relating to certain former sales personnel who did not conduct their duties with the requisite level of integrity and control consciousness, leading to insufficient attention to their responsibilities and internal controls, without management having implemented mitigating controls to discourage, prevent or detect the override of internal control by those personnel. In addition, it was determined that our internal controls were not effectively designed to identify instances when sales personnel made unauthorized commitments with certain distributors.

Additionally, we determined that a deficiency existed in our governance practices related to ineffective controls over the timeliness and accuracy of documentation related to actions of our board of directors and compensation committee specific to approving stock option grants. While no financial statement accounts or disclosures were misstated in connection with our stock option grants, the potential impact of not accurately documenting board and committee approvals could have led to a material misstatement. Accordingly, management determined that these control deficiencies represented material weaknesses in our internal controls over financial reporting, and accordingly, our internal control was ineffective as of December 31, 2014.

128

During the year ended December 31, 2015, we completed the remediation of controls related to these material weaknesses, which focus on continued training for and communication with employees regarding our enhanced policies and procedures, and we have determined that these material weaknesses were remediated as of December 31, 2015.

Specifically relating to the material weaknesses identified over revenue recognition and the control environment:

• We have enhanced our Code of Conduct and associated training by supplementing materials with examples of improper conduct and resulting implications to individuals as well as the Company. This training will be ongoing.

• We have enhanced our whistleblower policy and associated training to ensure employees have the appropriate awareness of its purpose, how to access the whistleblower hotline, and the Company’s anti-retaliation policy. This training will be ongoing.

• We have enhanced our training provided to individuals in the sales organization, including those involved with executing sales transactions, on the Company’s revenue recognition policy, including illustrative examples of terms and conditions that that can have an impact on the timing of revenue recognition and the need for timely communication with the finance department. This training will be ongoing.

• We have expanded our formal internal certification process to additional individuals in the Company, including the supply chain organization, and incorporated a more comprehensive questionnaire of circumstances, including illustrative examples, which require timely communication with the finance department.

• We have identified customers where facts and circumstances exist that revenue recognition criteria are not satisfied at the time of title transfer and have implemented processes to determine customers’ channel inventory and have implemented internal controls related to our accounting for revenue transactions accounted for under a sell-through basis where applicable, including the performance of physical inventory observations at distributor locations and review and reconciliation of sales and inventory information provided by these customers.

• The personnel identified as responsible for accounting improprieties are no longer employed by the Company.

During the year ended December 31, 2015, we remediated the material weakness over stock options by conducting training with our legal department and those charged with governance to ensure that board and compensation committee minutes are prepared more timely and accurately and reviewed with sufficient rigor to ensure that the minutes of actions/approvals by the board and compensation committee fully and accurately reflect the actions related to stock option grants.

Except as disclosed above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Because of the inherent limitations in internal control over financial reporting, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can

129

also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 9B. OTHER INFORMATION

None.

130

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item will be contained in our definitive Proxy Statement for the Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item will be contained in our definitive Proxy Statement for the Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item will be contained in our definitive Proxy Statement for the Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item will be contained in our definitive Proxy Statement for the Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item will be contained in our definitive Proxy Statement for the Annual Meeting of Shareholders and is incorporated herein by reference.

131

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

We have filed the following documents as part of this Form 10-K:

1. Consolidated financial statements:

	Page
Report of Independent Registered Public Accounting Firm		88
Consolidated Balance Sheets as of December 31, 2015 and 2014		89
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013		90
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 2013		91
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2015, 2014 and 2013		92
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013		94
Notes to Consolidated Financial Statements		96

2. Financial Statement Schedules

All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included.

3. Exhibits

See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K, which is incorporated by reference here.

132

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Davis, State of California, on March 30, 2016.

MARRONE BIO INNOVATIONS, INC.

/s/ PAMELA G. MARRONE

Pamela G. Marrone

President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Pamela G. Marrone her or his true and lawful attorney-in-fact and agent, with full power of substitution and, for her or him and in her or his name, place and stead, in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as she or he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

SIGNATURE	TITLE	DATE
/s/ Pamela G. Marrone      Pamela G. Marrone	President and Chief Executive Officer (Principal Executive Officer)	March 30, 2016
/s/ James B. Boyd      James B. Boyd	Chief Financial Officer and Senior Vice President (Principal Financial Officer and Principal Accounting Officer)	March 30, 2016
/s/ Tim Fogarty      Tim Fogarty	Chair of the Board	March 30, 2016
/s/ Pamela Contag      Pamela Contag	Director	March 30, 2016
Kathleen A. Merrigan	Director
/s/ Elin Miller      Elin Miller	Director	March 30, 2016
/s/ George Kerckhove      George Kerckhove	Director	March 30, 2016

133

SIGNATURE	TITLE	DATE
/s/ Michael H. Benoff      Michael H. Benoff	Director	March 30, 2016
/s/ Richard Rominger      Richard Rominger	Director	March 30, 2016

134

INDEX TO EXHIBITS

		INCORPORATED BY REFERENCE				FILED HEREWITH
EXHIBIT NUMBER	EXHIBIT DESCRIPTION	FORM	FILE NO.	EXHIBIT NUMBER	FILING DATE
3.1	Fourth Amended and Restated Certificate of Incorporation of Marrone Bio Innovations, Inc.	10-K	001-36030	3.1	March 25, 2014
3.2	Amended and Restated Bylaws of Marrone Bio Innovations, Inc.	10-K	001-36030	3.2	March 25, 2014
4.1	Form of Marrone Bio Innovations, Inc.’s common stock certificate.	S-1/A	333-189753	10.4	July 22, 2013
4.2	Form of Senior Secured Promissory Notes issued by Marrone Bio Innovations, Inc. to Ivy Science & Technology Fund, Waddell & Reed Advisors Science & Technology Fund and Ivy Funds VIP Science & Technology dated August 20, 2015.	8-K	001-36030	4.1	August 25, 2015
4.3	Form of Warrants issued by Marrone Bio Innovations, Inc. to Ivy Science & Technology Fund, Waddell & Reed Advisors Science & Technology Fund and Ivy Funds VIP Science & Technology dated August 20, 2015.	8-K	001-36030	4.2	August 25, 2015
10.1†	Marrone Bio Innovations, Inc. Stock Option Plan and related documents.	S-1	333-189753	10.1	July 1, 2013
10.2†	Marrone Bio Innovations, Inc. 2011 Stock Plan and related documents.	S-1	333-189753	10.2	July 1, 2013
10.3†	Marrone Bio Innovations, Inc. 2013 Stock Incentive Plan and related documents.	S-1/A	333-189753	10.3	July 22, 2013
10.4†	Indemnification Agreement by and between Marrone Bio Innovations, Inc. and each of its directors and executive officers.	S-1/A	333-189753	10.4	July 22, 2013
10.5†	Offer letter, dated June 29, 2006, between Marrone Organic Innovations, Inc. and Dr. Pamela G. Marrone.	S-1	333-189753	10.5	July 1, 2013
10.6†	Offer letter, dated February 26, 2014, between Marrone Bio Innovations, Inc. and Linda V. Moore.	10-K	001-36030	10.6	November 10, 2015
10.7†	Letter Agreement, dated March 3, 2015, between Marrone Bio Innovations, Inc. and Linda V. Moore.	10-K	001-36030	10.7	November 10, 2015

135

		INCORPORATED BY REFERENCE				FILED HEREWITH
EXHIBIT NUMBER	EXHIBIT DESCRIPTION	FORM	FILE NO.	EXHIBIT NUMBER	FILING DATE
10.8†	Offer letter, dated February 10, 2014, between Marrone Bio Innovations, Inc. and James B. Boyd.	10-K	001-36030	10.8	March 25, 2014
10.9†	Letter Agreement, dated March 3, 2015, between Marrone Bio Innovations, Inc. and James B. Boyd.	10-K	001-36030	10.9	November 10, 2015
10.10	Office Lease, dated September 9, 2013, by and between Bio Innovations, Inc. and Six Davis, LLC.	10-Q	001-36030	10.1	September 13, 2013
10.11	First Amendment to Lease, dated April 30, 2014, by and between Marrone Bio Innovations, Inc. and Six Davis, LLC.	10-Q	001-36030	10.3	May 15, 2014
10.12	Office Lease, dated April 30, 2014, by and between Marrone Bio Innovations, Inc. and Seven Davis, LLC.	10-Q	001-36030	10.4	May 15, 2014
10.13	Business Loan Agreement, dated June 13, 2014, by and between Five Star Bank and jointly and severally Marrone Michigan Manufacturing LLC and Marrone Bio Innovations, Inc.	10-Q	001-36030	10.4	August 13, 2014
10.14	Convertible Note Purchase Agreement, dated March 15, 2012, by and among Marrone Bio Innovations, Inc. and the Investors party thereto, including form of convertible promissory note.	S-1	333-189753	10.15	July 1, 2013
10.15	Amendment and Consent, dated August 30, 2012, by and among Marrone Bio Innovations, Inc. and the Investors party thereto, including form of convertible promissory note.	S-1	333-189753	10.16	July 1, 2013
10.16	Loan Agreement, dated October 2, 2012, by and among Marrone Bio Innovations, Inc., the Investors party thereto and the administrative and collateral agent, including form of promissory note and warrant.	S-1	333-189753	10.17	July 1, 2013
10.17	Security Agreement, dated October 2, 2012, by and among Marrone Bio Innovations, Inc. and the administrative and collateral agent.	S-1	333-189753	10.18	July 1, 2013

136

		INCORPORATED BY REFERENCE				FILED HEREWITH
EXHIBIT NUMBER	EXHIBIT DESCRIPTION	FORM	FILE NO.	EXHIBIT NUMBER	FILING DATE
10.18	Loan Agreement, dated October 16, 2012, by and among Marrone Bio Innovations, Inc., the Investor party thereto and the administrative and collateral agent, including form of convertible promissory note.	S-1	333-189753	10.19	July 1, 2013
10.19	Security Agreement, dated October 16, 2012, by and among Marrone Bio Innovations, Inc. and the administrative and collateral agent.	S-1	333-189753	10.20	July 1, 2013
10.20	Note Purchase Agreement, dated December 6, 2012, by and between Marrone Bio Innovations, Inc. and Syngenta Ventures Pte. Ltd., including convertible promissory note.	S-1	333-189753	10.21	July 1, 2013
10.21	Intercreditor Agreement, dated December 6, 2012, by and among Marrone Bio Innovations, Inc., Syngenta Ventures Pte. Ltd. and the administrative agent and collateral agent.	S-1	333-189753	10.22	July 1, 2013
10.22	Amendment and Consent, dated April 10, 2013, by and among Marrone Bio Innovations, Inc. and the administrative agent party thereto.	S-1	333-189753	10.23	July 1, 2013
10.23	Amendment and Consent, dated April 10, 2013, by and among Marrone Bio Innovations, Inc. and the administrative agent party thereto.	S-1	333-189753	10.23	July 1, 2013
10.24	Credit Facility Agreement, dated June 14, 2013, by and among Marrone Bio Innovations, Inc. and the Investors party thereto, including form of promissory note and warrant.	S-1	333-189753	10.33	July 1, 2013
10.25††	License Agreement, dated May 22, 2007, between the KHH Biosci, Inc. and Marrone Organic Innovations, Inc.	S-1/A	333-189753	10.24	July 31, 2013
10.26††	License Agreement, dated November 13, 2007, between the U.S. Government, as represented by the U.S. Department of Agriculture, Agricultural Research Service, and Marrone Organic Innovations, Inc.	S-1	333-189753	10.25	July 1, 2013

137

		INCORPORATED BY REFERENCE				FILED HEREWITH
EXHIBIT NUMBER	EXHIBIT DESCRIPTION	FORM	FILE NO.	EXHIBIT NUMBER	FILING DATE
10.27††	License Agreement, dated December 28, 2009, between the University of the State of New York and Marrone Bio Innovations, Inc.	S-1/A	333-189753	10.26	July 31, 2013
10.28††	Commercial Agreement, dated February 1, 2011, between Syngenta Crop Protection AG and Marrone Bio Innovations, Inc.	S-1/A	333-189753	10.27	July 31, 2013
10.29††	Commercial Agreement, dated August 26, 2011, between FMC Corporation and Marrone Bio Innovations, Inc.	S-1/A	333-189753	10.28	July 31, 2013
10.30††	Technology Evaluation and Master Development Agreement, dated September 13, 2011, between The Scotts Company LLC and Marrone Bio Innovations, Inc.	S-1/A	333-189753	10.29	July 31, 2013
10.31	Asset Purchase Agreement, dated May 25, 2012, between Bankruptcy Trustee for Michigan BioDiesel, LLC and Marrone Bio Innovations, Inc.	S-1	333-189753	10.30	July 1, 2013
10.32†	Offer letter, dated January 2, 2015, by and between Marrone Bio Innovations, Inc. and James Iademarco.	10-Q	001-36030	10.1	November 10, 2015
10.33†	Separation Agreement, dated as of August 20, 2015, by and between Marrone Bio Innovations, Inc. and James Iademarco.	8-K	001-36030	10.3	August 25, 2015
10.34	Security Agreement, dated as of August 20, 2015, by and among Marrone Bio Innovations, Inc. and the counterparties thereto.	8-K	001-36030	10.1	August 25, 2015
10.35	Omnibus Amendment to Loan Agreement, dated as of August 19, 2015, by and between Marrone Bio Innovations, Inc. and Gordon Snyder, as agent.	8-K	001-36030	10.2	August 25, 2015
21.1	Subsidiary List of Marrone Bio Innovations, Inc.	S-1/A	333-189753	21.1	July 22, 2013
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.					X

138

		INCORPORATED BY REFERENCE				FILED HEREWITH
EXHIBIT NUMBER	EXHIBIT DESCRIPTION	FORM	FILE NO.	EXHIBIT NUMBER	FILING DATE
24.1	Power of Attorney (included on signature page).					X
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.					X
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.					X
32.1	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350					X
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 31, 2015 and 2014; (ii) Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 2013; (iv) Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2015, 2014 and 2013; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 and (vi) Notes to Consolidated Financial Statements					X

† Indicates a management contract or compensatory plan or arrangement.

†† Confidential portions of this document have been redacted and filed separately with the Securities and Exchange Commission.

139

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-191048) pertaining to the 2013 Stock Incentive Plan, the 2011 Stock Plan, and the Stock Option Plan, as amended, of Marrone Bio Innovations, Inc. of our report dated March 30, 2016, with respect to the consolidated financial statements of Marrone Bio Innovations, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2015, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Sacramento, California

March 30, 2016

EX-31.1

Exhibit 31.1

I, Pamela G. Marrone, certify that:

1. I have reviewed this Annual Report on Form 10-K of Marrone Bio Innovations, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2016

/s/ Pamela G. Marrone

Pamela G. Marrone

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, James B. Boyd, certify that:

1. I have reviewed this Annual Report on Form 10-K of Marrone Bio Innovations, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2016

/s/ James B. Boyd

James B. Boyd

Chief Financial Officer and Senior Vice President

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Pamela G. Marrone, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Marrone Bio Innovations, Inc. on Form 10-K for the fiscal year ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Marrone Bio Innovations, Inc.

Date: March 30, 2016

By:	/s/ Pamela G. Marrone
Name:	Pamela G. Marrone
Title:	President and Chief Executive Officer

I, James B. Boyd, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Marrone Bio Innovations, Inc. on Form 10-K for the fiscal year ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Marrone Bio Innovations, Inc.

Date: March 30, 2016

By:	/s/ James B. Boyd
Name:	James B. Boyd
Title:	Chief Financial Officer and Senior Vice President

This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2015	Mar. 23, 2016	Jun. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
Trading Symbol	MBII
Entity Registrant Name	MARRONE BIO INNOVATIONS INC
Entity Central Index Key	0001441693
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	No
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		24,583,831
Entity Public Float			$ 20,508,703

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 19,838	$ 35,324
Restricted cash for debt covenants, current portion	1,856	1,856
Accounts receivable	2,347	1,787
Inventories, net	9,064	12,644
Deferred cost of product revenues, including deferred cost of product revenues to related parties of $79 and $333 as of December 31, 2015 and 2014, respectively	1,596	1,797
Prepaid expenses and other current assets	1,315	1,315
Total current assets	36,016	54,723
Property, plant and equipment, net	18,445	20,166
Restricted cash for debt covenants, less current portion	16,560	1,560
Other assets	746	733
Total assets	71,767	77,182
Current liabilities:
Accounts payable	2,007	5,841
Accrued liabilities	5,689	6,321
Accrued interest due to related parties	1,175
Deferred revenue, current portion	2,919	2,861
Deferred revenue from related parties	168	660
Customer refund liabilities		1,044
Capital lease obligations, current portion	647	1,839
Debt, current portion	267	12,636
Total current liabilities	12,872	31,202
Deferred revenue, less current portion	2,021	2,050
Capital lease obligations, less current portion	18	185
Debt, less current portion	21,776	9,667
Debt due to related parties	35,788
Other liabilities	1,314	847
Total liabilities	$ 73,789	$ 43,951
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock: $0.00001 par value; 20,000 shares authorized and no shares issued or outstanding at December 31, 2015 and December 31, 2014
Common stock: $0.00001 par value; 250,000 shares authorized and 24,536 shares issued and outstanding at December 31, 2015; 250,000 shares authorized and 24,465 shares issued and outstanding at December 31, 2014	$ 0	$ 0
Additional paid in capital	201,554	193,079
Accumulated deficit	(203,576)	(159,848)
Total stockholders' equity (deficit)	(2,022)	33,231
Total liabilities and stockholders' equity	$ 71,767	$ 77,182

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Deferred cost of product revenues to related parties	$ 79	$ 333
Preferred stock, par value	$ 0.00001	$ 0.00001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	24,536,000	24,465,000
Common stock, shares outstanding	24,536,000	24,465,000

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Consolidated Statements of Operations - USD ($) shares in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Revenues:
Product	$ 8,976,000	$ 7,750,000	$ 7,588,000
License	333,000	232,000	193,000
Related party	492,000	1,154,000	665,000
Total revenues	9,801,000	9,136,000	8,446,000
Cost of product revenues, including cost of product revenues to related parties of $254, $561 and $374 for the years ended December 31, 2015, 2014 and 2013, respectively	9,256,000	9,438,000	7,243,000
Gross profit (loss)	545,000	(302,000)	1,203,000
Operating expenses:
Research, development and patent	13,500,000	19,281,000	17,905,000
Selling, general and administrative	26,502,000	28,950,000	15,017,000
Total operating expenses	40,002,000	48,231,000	32,922,000
Loss from operations	(39,457,000)	(48,533,000)	(31,719,000)
Other income (expense):
Interest income	51,000	59,000	49,000
Interest expense	(2,764,000)	(2,907,000)	(6,056,000)
Interest expense to related parties	(1,599,000)
Change in estimated fair value of financial instruments			6,717,000
Gain on extinguishment of debt			49,000
Other income (expense), net	41,000	(278,000)	(282,000)
Total other income (expense), net	(4,271,000)	(3,126,000)	477,000
Loss before income taxes	(43,728,000)	(51,659,000)	(31,242,000)
Income taxes	0	0	0
Net loss	(43,728,000)	(51,659,000)	(31,242,000)
Deemed dividend on convertible notes			(1,378,000)
Net loss attributable to common stockholders	$ (43,728,000)	$ (51,659,000)	$ (32,620,000)
Net loss per common share:
Basic	$ (1.79)	$ (2.32)	$ (3.74)
Diluted	$ (1.79)	$ (2.32)	$ (4.25)
Weighted-average shares outstanding used in computing net loss per common share:
Basic	24,469	22,314	8,731
Diluted	24,469	22,314	8,911

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Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Statement [Abstract]
Cost of product revenues to related parties	$ 254	$ 561	$ 374

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Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
Net loss	$ (43,728)	$ (51,659)	$ (31,242)
Other comprehensive loss	0	0	0
Comprehensive loss	$ (43,728)	$ (51,659)	$ (31,242)

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Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) - USD ($) shares in Thousands, $ in Thousands	Total	Convertible Preferred Stock [Member]	Convertible Preferred Stock [Member] Series A [Member]	Convertible Preferred Stock [Member] Series B [Member]	Convertible Preferred Stock [Member] Series C [Member]	Common Stock [Member]	Additional paid-in capital [Member]	Accumulated deficit [Member]
Beginning balance, shares at Dec. 31, 2012		8,504	1,484	2,242	4,778	1,267
Beginning balance at Dec. 31, 2012	$ (74,247)	$ 39,612	$ 3,747	$ 10,758	$ 25,107		$ 1,322	$ (75,569)
Net loss	(31,242)							(31,242)
Exercise of stock options, shares						217
Exercise of stock options	250						250
Share-based compensation	2,300						2,300
Deemed dividend on convertible notes	(1,378)							(1,378)
Cash exercise of preferred stock warrants, shares		10		10
Cash exercise of preferred stock warrants		$ 47		$ 47
Net exercise of preferred stock warrants, shares						71
Net exercise of preferred stock warrants	0	$ 0	$ 0	$ 0	$ 0	$ 0	0	0
Conversion of preferred stock into common stock, shares		(8,514)	(1,484)	(2,252)	(4,778)	8,514
Conversion of preferred stock into common stock	39,659	$ (39,659)	$ (3,747)	$ (10,805)	$ (25,107)		39,659
Convertible notes converted into common stock, shares						3,741
Convertible notes converted into common stock	44,890						44,890
Cash exercise of common stock warrants, shares						3
Cash exercise of common stock warrants	25						25
Net exercise of common stock warrants, shares						47
Net exercise of common stock warrants	0	0	0	0	0	$ 0	0	0
Reclassification of warrants from liability to equity	2,669						2,669
Issuance of common stock in follow-on offering, net of offering costs and underwriter commissions, shares						5,463
Issuance of common stock in follow-on offering, net of offering costs and underwriter commissions	56,105						56,105
Ending balance, shares at Dec. 31, 2013						19,323
Ending balance at Dec. 31, 2013	39,031						147,220	(108,189)
Net loss	(51,659)							(51,659)
Exercise of stock options, shares						561
Exercise of stock options	1,305						1,305
Share-based compensation	4,555						4,555
Cash exercise of common stock warrants, shares						6
Cash exercise of common stock warrants	50						50
Issuance of common stock in follow-on offering, net of offering costs and underwriter commissions, shares						4,575
Issuance of common stock in follow-on offering, net of offering costs and underwriter commissions	39,949						39,949
Ending balance, shares at Dec. 31, 2014						24,465
Ending balance at Dec. 31, 2014	33,231						193,079	(159,848)
Net loss	$ (43,728)							(43,728)
Exercise of stock options, shares	61					61
Exercise of stock options	$ 54						54
Share-based compensation	3,811						3,811
Issuance of common stock warrants	4,610						4,610
Conversion of restricted stock units, shares						10
Conversion of restricted stock units	0	$ 0	$ 0	$ 0	$ 0	$ 0	0	0
Ending balance, shares at Dec. 31, 2015						24,536
Ending balance at Dec. 31, 2015	$ (2,022)						$ 201,554	$ (203,576)

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Condensed Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net loss	$ (43,728,000)	$ (51,659,000)	$ (31,242,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,510,000	2,581,000	976,000
Loss (gain) on disposal of equipment	(39,000)	243,000	231,000
Share-based compensation	3,811,000	4,555,000	2,300,000
Non-cash interest expense	803,000	780,000	4,315,000
Change in estimated fair value of financial instruments			(6,717,000)
Gain on extinguishment of debt			(49,000)
Amortization of investment securities premiums/discounts, net		10,000	18,000
Net changes in operating assets and liabilities:
Accounts receivable	(560,000)	1,997,000	(950,000)
Accounts receivable from related parties		903,000	(767,000)
Inventories	3,580,000	73,000	(7,845,000)
Prepaid expenses and other assets	142,000	(309,000)	1,374,000
Deferred cost of product revenues	201,000	1,064,000	(2,861,000)
Accounts payable	(3,486,000)	1,667,000	1,682,000
Accrued and other liabilities	(76,000)	1,895,000	1,141,000
Accrued interest due to related parties	1,175,000
Deferred revenue	29,000	(108,000)	3,464,000
Deferred revenue from related parties	(492,000)	(671,000)	866,000
Customer refund liabilities	(1,044,000)	1,044,000
Net cash used in operating activities	(36,174,000)	(35,935,000)	(34,064,000)
Cash flows from investing activities
Purchases of property, plant and equipment	(1,653,000)	(13,002,000)	(3,966,000)
Proceeds from sale of equipment	7,000	6,000	41,000
Purchase of short-term investments		(49,000)	(17,477,000)
Maturities of short-term investments		13,716,000	3,782,000
Net cash provided by (used in) investing activities	(1,646,000)	671,000	(17,620,000)
Cash flows from financing activities
Proceeds from public offerings, net of offering costs and underwriter commissions	0	39,949,000	56,105,000
Proceeds from issuance of convertible notes payable			6,529,000
Proceeds from issuance of debt, net of financing costs		9,696,000	3,700,000
Proceeds from issuance of debt due to related parties, net of financing costs	39,698,000
Proceeds from line of credit		4,687,000
Repayment of line of credit		(4,687,000)
Repayment of debt	(435,000)	(378,000)	(9,433,000)
Repayment of capital leases	(1,983,000)	(1,073,000)	(229,000)
Proceeds from secured borrowing			2,880,000
Reductions in secured borrowing			(2,880,000)
Change in restricted cash	(15,000,000)	(3,416,000)	9,139,000
Proceeds from exercise of stock options	54,000	1,305,000	250,000
Proceeds from exercise of preferred stock warrants			47,000
Proceeds from exercise of common stock warrants		50,000	25,000
Net cash provided by financing activities	22,334,000	46,133,000	66,133,000
Net increase (decrease) in cash and cash equivalents	(15,486,000)	10,869,000	14,449,000
Cash and cash equivalents, beginning of year	35,324,000	24,455,000	10,006,000
Cash and cash equivalents, end of year	19,838,000	35,324,000	24,455,000
Supplemental disclosure of cash flow information
Cash paid for interest, net of capitalized interest of $4, $668 and $636 for the years ended December 31, 2015, 2014 and 2013, respectively	2,297,000	2,102,000	1,692,000
Supplemental disclosure of non-cash investing and financing activities
Property, plant and equipment included in accounts payable and accrued liabilities	499,000	204,000	1,009,000
Equipment acquired under capital leases	$ 787,000	834,000	2,106,000
Equipment acquired in association with operating lease		$ 285,000
Interest added to the principal of convertible notes			1,623,000
Reclassification of warrants from liabilities to equity			2,669,000
Conversion of convertible notes to common stock			44,890,000
Conversion of preferred stock to common stock			$ 39,659,000

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Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Cash Flows [Abstract]
Cash paid for interest, net of capitalized interest	$ 4	$ 668	$ 636

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Summary of Business, Basis of Presentation and Liquidity

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Summary of Business, Basis of Presentation and Liquidity

1. Summary of Business, Basis of Presentation and Liquidity

Marrone Bio Innovations, Inc. (“Company”), formerly Marrone Organic Innovations, Inc., was incorporated under the laws of the State of Delaware on June 15, 2006, and is located in Davis, California. In July 2012, the Company formed a wholly-owned subsidiary, Marrone Michigan Manufacturing LLC (“MMM LLC”), which holds the assets of a manufacturing plant the Company purchased in July 2012. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. The Company makes bio-based pest management and plant health products. The Company targets the major markets that use conventional chemical pesticides, including certain agricultural and water markets where its bio-based products are used as alternatives for, or mixed with, conventional chemical pesticides. The Company also targets new markets for which (i) there are no available conventional chemical pesticides or (ii) the use of conventional chemical pesticides may not be desirable or permissible either because of health and environmental concerns (including for organically certified crops) or because the development of pest resistance has reduced the efficacy of conventional chemical pesticides. The Company delivers EPA-approved and registered biopesticide products and other bio-based products that address the global demand for effective, safe and environmentally responsible products.

In August 2013, the Company closed its initial public offering of 5,462,500 shares of its common stock (inclusive of 712,500 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares) (“IPO”). The public offering price of the shares sold in the offering was $12.00 per share. The total gross proceeds from the offering to the Company were $65,550,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled approximately $56,105,000. Upon the closing of the IPO, all shares of the Company’s outstanding convertible preferred stock and convertible notes automatically converted into shares of common stock and outstanding warrants to purchase convertible preferred stock and certain warrants to purchase common stock were exercised for shares of common stock (see Note 17). In connection with the IPO, on August 1, 2013, the Company amended and restated its certificate of incorporation to effect a 1-for-3.138458 reverse stock split (see Note 16).

In June 2014, the Company completed a public offering of 4,575,000 shares of its common stock (inclusive of 675,000 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $9.50 per share. The total gross proceeds from the offering to the Company were $43,463,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled $39,949,000.

The Company is an early stage company with a limited operating history and has a limited number of commercialized products. As of December 31, 2015, the Company had an accumulated deficit of $203,576,000, has incurred significant losses since inception and expects to continue to incur losses for the foreseeable future. Until the completion of the IPO in August 2013, the Company had funded operations primarily with net proceeds from the private placements of convertible preferred stock, convertible notes, promissory notes and term loans, as well as with the proceeds from the sale of its products and payments under strategic collaboration and distribution agreements and government grants. The Company will need to generate significant revenue growth to achieve and maintain profitability. As of December 31, 2015, the Company had working capital of $23,144,000, including cash and cash equivalents of $19,838,000. In addition, as of December 31, 2015, the Company had debt and debt due to related parties of $22,043,000 and $35,788,000, respectively, for which the underlying debt agreements contain various financial and non-financial covenants, as well as certain material adverse change clauses. If the Company breaches any of the covenants contained within the debt agreements or if the material adverse change clauses are triggered, the entire unpaid principal and interest balances would be due and payable upon demand. In addition, as of December 31, 2015, the Company had a total of $18,416,000 of restricted cash relating to these debt agreements (see Notes 6 and 15).

The Company participates in a heavily regulated and highly competitive crop protection industry and believes that adverse changes in any of the following areas could have a material effect on the Company’s future financial position, results of operations or cash flows: inability to obtain regulatory approvals, increased competition in the pesticide market, market acceptance of the Company’s products, weather and other seasonal factors beyond the Company’s control, litigation or claims against the Company related to intellectual property, patents, products or governmental regulation, and the Company’s ability to support increased growth.

Although the Company recognizes that it will likely need to raise additional funds in the future, there can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of such financing will not be unfavorable. Any future equity financing may result in dilution to existing shareholders and any debt financing may include additional restrictive covenants. Any failure to obtain additional financing or to achieve the revenue growth necessary to fund the Company with cash flows from operations will have a material adverse effect upon the Company and will likely result in a substantial reduction in the scope of the Company’s operations and impact the Company’s ability to achieve its planned business objectives.

Management currently estimates that by the fourth quarter of 2016 without entering into strategic agreements that include significant cash payments upfront, significantly increasing revenues from sales or raising additional capital through the issuance of equity or debt, the Company will be below the $15,000,000 minimum cash balance requirement in the promissory notes with affiliates of Waddell & Reed. Further, although under a promissory note with Five Star Bank the Company’s requirement to remain below a maximum debt-to-worth ratio under this agreement has been waived through December 31, 2016, management expects that immediately after the waiver has expired, the Company will be in violation of this covenant as well. In addition, a violation of a covenant in one debt agreement will cause the Company to be in violation of certain covenants under each of its other debt agreements. Breach of covenants included in the Company’s debt agreements, which could result in the lenders demanding payment of the unpaid principal and interest balances, will have a material adverse effect upon the Company and would likely require the Company to seek to renegotiate these debt arrangements with the lenders. If such negotiations are unsuccessful, the Company may be required to seek protection from creditors through bankruptcy proceedings. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management is focused on efforts to increase liquidity in the near-term and plans to request relief of the minimum cash balance requirement and an extension of the waiver on the debt-to-worth ratio. Such strategic collaborations and relief under the debt agreements may not be available or may be on terms that are not favorable to the Company. The Company’s inability to maintain compliance with its debt covenants could have a negative impact on the Company’s financial condition and ability to continue as a going concern. If the Company becomes unable to continue as a going concern, the Company may have to liquidate its assets, and might realize significantly less than the values at which they are carried on its financial statements, and stockholders may lose all or part of their investment in the Company’s common stock.

The accompanying financial statements have been prepared under the assumption that the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents consists of cash on deposit, money market funds and certificates of deposit accounts with U.S. financial institutions. The Company is exposed to credit risk in the event of default by financial institutions to the extent that cash and cash equivalents balances with financial institutions are in excess of amounts that are insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses on these deposits.

Restricted Cash

The Company’s restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its June 2014 Secured Promissory Note and the terms of its August 2015 Senior Secured Promissory Notes. See Notes 6 and 15, respectively, for further discussion.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

ASC 820 requires that the valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three tier value hierarchy, which prioritizes inputs that may be used to measure fair value as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):

	DECEMBER 31, 2015
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	3,750	$	3,750	$	—	$	—
	DECEMBER 31, 2014
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	14,746	$	14,746	$	—	$	—

The Company’s money market funds are held at registered investment companies. As of December 31, 2015 and 2014, the money market funds were in active markets and, therefore, are measured based on the Level 1 valuation hierarchy.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and debt. The Company deposits its cash and cash equivalents with high credit quality domestic financial institutions with locations in the U.S. Such deposits may exceed federal deposit insurance limits. The Company believes the financial risks associated with these financial instruments are minimal.

The Company’s customer base is dispersed across many different geographic areas, and currently most customers are pest management distributors in the U.S. Generally, receivables are due up to 120 days from the invoice date and are considered past due after this date, although the Company may offer extended terms from time to time.

During the years ended December 31, 2015, 2014 and 2013, 9%, 12% and 16%, respectively, of the Company’s revenues were generated from international customers.

The Company’s principal sources of revenues are its Regalia and Grandevo product lines. These two product lines accounted for 89%, 91% and 95% of the Company’s total revenues during the years ended December 31, 2015, 2014 and 2013, respectively.

Customers to which 10% or more of the Company’s total revenues are attributable for any one of the periods presented consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C
Year ended December 31,
2015		28	%		10	%		8	%
2014		30	%		4	%		13	%
2013		20	%		9	%		8	%

Customers to which 10% or more of the Company’s outstanding accounts receivable are attributable as of either December 31, 2015 or 2014 consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C			CUSTOMER D
December 31, 2015		32	%		29	%		12	%		0	%
December 31, 2014		10	%		37	%		9	%		23	%

Concentrations of Supplier Dependence

The active ingredient in the Company’s Regalia product line is derived from the giant knotweed plant, which the Company obtains from China. The Company’s single supplier acquires raw knotweed from numerous regional sources and performs an extraction process on this plant, creating a dried extract that is shipped to the Company’s manufacturing plant. A disruption at this supplier’s manufacturing site or a disruption in trade between the U.S. and China could negatively impact sales of Regalia. The Company currently uses one supplier and does not have a long-term supply contract with this supplier. Although the Company has identified additional sources of raw knotweed, there can be no assurance that the Company will continue to be able to obtain dried extract from China at a competitive price.

Accounts Receivable

The carrying value of the Company’s receivables represents their estimated net realizable values. The Company generally does not require collateral and estimates any required allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the allowance is recorded accordingly. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. During the years ended December 31, 2015, 2014 and 2013, no receivable balances were written-off. As of December 31, 2015 and 2014, the Company had no allowance for doubtful accounts.

Inventories

Inventories are stated at the lower of cost or market value (net realizable value or replacement cost) and include the cost of material and external and internal labor and manufacturing costs. Cost is determined on the first-in, first-out basis. The Company provides for inventory reserves when conditions indicate that the selling price may be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Additionally, the Company provides reserves for excess and slow-moving inventory on hand that is not expected to be sold to reduce the carrying amount of excess and slow-moving inventory to its estimated net realizable value. The reserves are based upon estimates about future demand from the Company’s customers and distributors and market conditions.

During the year ended December 31, 2015, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves of $19,000 due to quantities on hand that may not be used or sold prior to expiration, and an adjustment of $2,545,000 as a result of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity.

During the year ended December 31, 2014, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves of $695,000 due to quantities on hand that may not be used prior to expiration as a result of lower production and sales forecasts; an $894,000 write-off of inventory primarily due to the identification of inventory that would not be suitable for sale in future periods either because the inventory did not pass quality inspection or the efficacy had declined; an adjustment of $890,000 as a result of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity; and a $270,000 write-down of the carrying value of inventory to net realizable value.

During the year ended December 31, 2013, the Company recorded, as a component of cost of product revenues, an inventory write-off of $205,000 primarily due to the identification of inventory that would not be suitable for sale and an adjustment of $194,000 to write-down its Zequanox inventory to net realizable value.

Inventories, net consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Raw materials	$	5,110	$	5,692
Work in progress		1,044		1,150
Finished goods		2,910		5,378
Finished goods held at customers		—		424
	$	9,064	$	12,644

As of December 31, 2015 and 2014, the Company had $24,000 and $668,000, respectively, in reserves against its inventories.

Deferred Cost of Product Revenues

Deferred cost of product revenues are stated at the lower of cost or net realizable value and include product sold where title has transferred but the criteria for revenue recognition have not been met. As of December 31, 2015 and 2014, the Company recorded deferred cost of product revenues of $1,596,000 and $1,797,000, respectively, including deferred cost of product revenues to related parties of $79,000 and $333,000, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The Company generally uses the following estimated useful lives for each asset category:

ASSET CATEGORY	ESTIMATED USEFUL LIFE
Building		30 years
Computer equipment		2-3 years
Machinery and equipment		3-20 years
Office equipment		3-5 years
Furniture		3-5 years
Leasehold improvements		Shorter of lease term or useful life
Software		3 years

Amortization of assets under capital leases is included in depreciation expense. Maintenance, repairs and minor renewals are expensed as incurred. Expenditures that substantially increase an asset’s useful life are capitalized.

Deferred Financing Costs

Deferred financing costs, net include fees and costs incurred to obtain long-term financing. The costs are being amortized over the terms of the respective loans on a basis that approximates level yield. Unamortized deferred financing costs are written-off when debt is retired before the maturity date. Upon the amendment or termination of a debt agreement, unamortized deferred financing costs are accounted for in accordance with ASC 470-50-40, Debt Modifications and Extinguishments (“ASC 470-50-40”). As of December 31, 2015, $104,000 and $452,000 of deferred financing costs were recorded as a component of current and non-current other assets, respectively, and are being amortized to interest expense. As of December 31, 2014, $172,000 and $269,000 of deferred financing costs were recorded as a component of current and non-current other assets, respectively, and are being amortized to interest expense.

Impairment of Long-Lived Assets

Impairment losses related to long-lived assets are recognized in the event the net carrying value of such assets is not recoverable and exceeds fair value. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). If the carrying amount of a long-lived asset (asset group) is considered is not recoverable, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. To date, the Company has not recognized any such impairment loss associated with its long-lived assets.

Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. If contractual obligations, acceptance provisions or other contingencies exist which indicate that the price is not fixed or determinable, revenue is recognized after such obligations or provisions are fulfilled or expire.

Product revenues consist of revenues generated from sales of the Company’s products to distributors and direct customers, net of rebates and cash discounts. For sales of products made to distributors, the Company recognizes revenue either on a sell-in or sell-through basis depending on the specific facts and circumstances of the transaction(s) with the distributor. Factors considered include, but are not limited to, whether the payment terms offered to the distributor are structured to correspond to when product is resold, the distributor history of adhering to the terms of its contractual arrangements with the Company, whether the Company has a pattern of granting concessions for the benefit of the distributor and whether there are other conditions that may indicate that the sale to the distributor is not substantive.

In some cases, the Company recognizes distributor revenue as title and risk of loss passes, provided all other revenue recognition criteria have been satisfied (the “sell-in” method). For certain sales to certain distributors, the revenue recognition criteria for distributor sales are not satisfied at the time title and risk of loss passes to the distributor; specifically, in instances where “inventory protection” arrangements were offered to distributors that permitted these distributors to return to the Company certain unsold products, the Company considers the arrangement not to be fixed or determinable, and accordingly, revenue is deferred until products are resold to customers of the distributor (the “sell-through” method). As of December 31, 2015 and 2014, the Company recorded current deferred product revenues of $2,760,000 and $3,190,000, respectively, including current deferred product revenues from related parties of $168,000 and $660,000, respectively. The cost of product revenues associated with such deferral are also deferred and classified as deferred cost of product revenues in the consolidated balance sheets. Cash received from customers related to delivered product that may not represent a true sale is classified as customer refund liabilities in the consolidated balance sheets and the related cost of inventory remains in inventory in the consolidated balance sheets until the product is returned or is resold to customers of the distributor and revenue is recognized. During the years ended December 31, 2015, 2014 and 2013, 47%, 53% and 23%, respectively, of total revenues were recognized on a sell-through basis.

From time to time, the Company offers certain product rebates to its distributors and growers, which are estimated and recorded as reductions to product revenues, and an accrued liability is recorded at the later of when the revenues are recorded or the rebate is being offered.

The Company recognizes license revenues pursuant to strategic collaboration and distribution agreements under which the Company receives payments for the achievement of certain testing validation, regulatory progress and commercialization events. As these activities and payments are associated with exclusive rights that the Company provides in connection with strategic collaboration and distribution agreements over the term of the agreements, revenues related to the payments received are deferred and recognized over the term of the exclusive distribution period of the respective agreement. During the year ended December 31, 2015, the Company received payments totaling $750,000 under these agreements, and as of December 31, 2015, an additional $300,000 was included in accounts receivable. During the year ended December 31, 2014, the Company received payments totaling $500,000 under these agreements, and as of December 31, 2014, an additional $750,000 was included in accounts receivable. No payments were received under these agreements during the year ended December 31, 2013. During the years ended December 31, 2015, 2014 and 2013, the Company recognized $333,000, $232,000 and $193,000, respectively, as license revenues, excluding related party revenues.

The Company has a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of the Company’s common stock, Syngenta Ventures Pte. LTD (“Syngenta Ventures”). In connection with the Company’s public offering in June 2014, Syngenta Ventures sold 600,000 shares of the Company’s common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. During the year ended December 31, 2014, the Company recognized $333,000 of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake. During the year ended December 31, 2013, the Company recognized $131,000 of related party revenues under this agreement.

As of December 31, 2015, the Company recorded current and non-current deferred revenues of $327,000 and $2,021,000, respectively, related to payments received under these agreements. As of December 31, 2014, the Company recorded current and non-current deferred revenues of $331,000 and $2,050,000, respectively, related to payments received under these agreements.

Research, Development and Patent Expenses

Research and development expenses include payroll-related expenses, field trial costs, toxicology costs, regulatory costs, consulting costs and lab costs. Patent expenses include legal costs relating to the patents and patent filing costs. These costs are expensed to operations as incurred. During the years ended December 31, 2015, 2014 and 2013, research and development expenses totaled $12,392,000, $18,110,000 and $16,918,000, respectively, and patent expenses totaled $1,108,000, $1,171,000 and $987,000, respectively.

Shipping and Handling Costs

Amounts billed for shipping and handling are included as a component of product revenues. Related costs for shipping and handling have been included as a component of cost of product revenues.

Advertising

The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2015, 2014 and 2013 were $456,000, $557,000 and $760,000, respectively.

Share-Based Compensation

The Company recognizes share-based compensation expense for all stock options and restricted stock units granted to employees and directors based on estimated fair values.

The Company estimates the fair value of restricted stock units based on the closing bid price of the Company’s common stock on the date of grant.

The Company estimates the fair value of stock options on the date of grant using an option-pricing model. The value of the portion of the stock options that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. Forfeitures are estimated on the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company uses the Black-Scholes-Merton option-pricing model to calculate the estimated fair value of stock options on the measurement date (generally, the date of grant). The required inputs in the option-pricing model include the expected life of the stock options, estimated volatility factor, risk-free interest rate and expected dividend yield. These inputs are subjective and generally require significant judgment. During the years ended December 31, 2015, 2014 and 2013, the Company calculated the fair value of stock options granted based on the following assumptions:

	YEAR ENDED DECEMBER 31,
	2015	2014	2013
Expected life (years)	6.08	5.46-6.08	5.29-7.71
Estimated volatility factor	46%-47%	49%-71%	70%-75%
Risk-free interest rate	1.86%-1.93%	1.63%-2.05%	1.27%-2.11%
Expected dividend yield	—	—	—

Expected Life. Expected life represents the period that share-based payment awards are expected to be outstanding. The Company uses the “simplified method” in accordance with Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment (“SAB No. 107”), and SAB No. 110, Simplified Method for Plain Vanilla Share Options (“SAB No. 110”), to calculate the expected term of stock options determined to be “plain vanilla.” Under this approach, the expected term is presumed to be the midpoint between the vesting date and the contractual end of the stock option grant. For stock options granted with an exercise price not equal to the determined fair market value, the Company estimates the expected life based on historical data and management’s expectations about exercises and post-vesting termination behavior. The Company will use the simplified method until it has sufficient historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107 and SAB No. 110.

Estimated Volatility Factor. As the Company’s common stock has a limited trading history, the Company calculates the estimated volatility factor based on the trading history and calculated volatility of the common stock of comparable agricultural biotechnology companies.

Risk-Free Interest Rate. The Company calculates the risk-free interest rate based on the implied yield currently available on U.S. Treasury constant-maturity securities with the same or substantially equivalent remaining term as the expected life of the stock options.

Expected Dividend Yield. The Company has not declared dividends nor does it expect to in the foreseeable future. Therefore, a zero value was assumed for the expected dividend yield.

Estimated Forfeitures. The Company considers voluntary and involuntary termination behavior and actual stock option forfeitures when estimating forfeitures.

If, in the future, the Company determines that other methods for calculating these assumptions are more reasonable, or if other methods are prescribed by authoritative guidance, the fair value calculated for the Company’s stock options could change significantly. Higher volatility factors and longer expected lives result in an increase to the share-based compensation expense determined at the date of grant. Share-based compensation expense is recorded in the Company’s research, development and patent expense and selling, general and administrative expense.

Other Income (Expense), Net

Other income (expense), net primarily included net losses resulting from transactions in foreign currencies of $8,000, $47,000 and $53,000 during the years ended December 31, 2015, 2014 and 2013, respectively, gains on disposal of fixed assets of $39,000 during the year ended December 31, 2015 and losses on disposal of fixed assets of $243,000 and $231,000 during the years ended December 31, 2014 and 2013, respectively.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent that deferred tax assets cannot be recognized under the preceding criteria, the Company establishes valuation allowances, as necessary, to reduce deferred tax assets to the amounts expected to be realized. As of December 31, 2015 and 2014, all deferred tax assets were fully offset by a valuation allowance. The realization of deferred tax assets is dependent upon future federal, state and foreign taxable income. The Company’s judgments regarding deferred tax assets may change due to future market conditions, as the Company expands into international jurisdictions, due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the Company’s deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period in which such determinations are made.

The Company recognizes liabilities for uncertain tax positions based upon a two-step process. To the extent that a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the consolidated financial statements. If a tax position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s policy is to analyze the Company’s tax positions taken with respect to all applicable income tax issues for all open tax years in each respective jurisdiction. As of December 31, 2015 and 2014, the Company concluded that no uncertain tax positions were required to be recognized in its consolidated financial statements.

The Company recognizes interest and penalties related to income tax matters in income tax expense. No amounts were recognized for interest and penalties during the years ended December 31, 2015, 2014 and 2013.

Comprehensive Loss

Comprehensive loss represents the net loss for the period adjusted for the results of certain changes to stockholders’ equity (deficit) that are not reflected in the consolidated statements of operations, if applicable. Net loss is the only component of the Company’s comprehensive loss for the periods presented.

Segment Information

The Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates resources to the business as a whole.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (Topic 842) Leases: Amendments to the FASB Accounting Standards Codifications (“ASU 2016-02”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Companies must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating ASU 2016-02 to determine the potential impact to its consolidated financial statements and related disclosures.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation and disclosure of financial instruments. Among other things, ASU 2016-01 (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (iv) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (v) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (vi) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vii) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, ASU 2016-01is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating ASU 2016-01 to determine the potential impact to its consolidated financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which amends the current requirement for organizations to present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet. Organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. ASU 2015-17 is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently evaluating ASU 2015-17 to determine the potential impact to its consolidated financial statements and related disclosures.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), which applies guidance on the subsequent measurement of inventory. ASU 2015-11 states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. The guidance excludes inventory measured using last-in, first-out or the retail inventory method. ASU 2015-11 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is not planning to early adopt ASU 2015-11 and is currently evaluating ASU 2015-11 to determine the potential impact to its consolidated financial statements and related disclosures.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. Upon adoption, the Company will reclassify debt issuance costs from prepaid expenses and other current assets and other assets as a reduction to debt and debt due to related parties in the consolidated balance sheets. The Company is not planning to early adopt ASU 2015-03 and does not anticipate that the adoption of ASU 2015-03 will materially impact its consolidated financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to evaluate for each annual and interim reporting period whether conditions or events give rise to substantial doubt that an entity has the ability to continue as a going concern within one year following issuance of the financial statements and requires specific disclosures regarding the conditions or events leading to substantial doubt. The new guidance is effective for annual and interim periods ending after December 15, 2016, with early adoption permitted. The Company is not planning to early adopt ASU 2014-15 and is currently evaluating ASU 2014-15 to determine the potential impact to its consolidated financial statements and related disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 provides new, globally applicable converged guidance concerning recognition and measurement of revenue. As a result, significant additional disclosures are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual and interim periods beginning on or after December 15, 2017, with early adoption permitted. Companies are allowed to transition using either the modified retrospective or full retrospective adoption method. If full retrospective adoption is chosen, three years of financial information must be presented in accordance with the new standard. The Company is not planning to early adopt ASU 2014-09 and is currently evaluating the alternative methods of adoption and the effect on its consolidated financial statements and related disclosures.

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Property, Plant and Equipment

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

3. Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

	DECEMBER 31,
	2015			2014
Land	$	1		$	1
Buildings		6,598			6,583
Computer equipment and software		522			522
Furniture, fixtures and office equipment		347			347
Machinery and equipment		15,964			15,519
Leasehold improvements		2,372			1,259
Construction in progress		3			1,023
		25,807			25,254
Less accumulated depreciation		(7,362	)		(5,088	)
	$	18,445		$	20,166

The Company has granted interests in certain property, plant and equipment to third parties in connection with certain financing arrangements (see Note 6).

The Company recognized depreciation and amortization expense during the years ended December 31, 2015, 2014 and 2013 of $3,510,000, $2,581,000 and $976,000, respectively, which included amortization expense related to capital leases during those periods (see Note 11).

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Net Loss per Share

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Net Loss per Share

4. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, restricted stock units, convertible notes, convertible preferred stock and warrants, result in the issuance of common stock which share in the losses of the Company. Certain potential shares of common stock have been excluded from the computation of diluted net loss per share for certain periods as their effect would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce the loss per share. The treasury stock method has been applied to determine the dilutive effect of warrants.

The following table sets forth the potential shares of common stock as of the end of each period presented that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive (in thousands):

	DECEMBER 31,
	2015		2014		2013
Stock options outstanding		2,116		2,831		2,608
Warrants to purchase common stock		4,027		145		151
Restricted stock units outstanding		107		—		—

	YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(In thousands, except per share data)
Numerator:
Net loss	$	(43,728	)	$	(51,659	)	$	(31,242	)
Deemed dividend on convertible notes		—			—			(1,378	)
Net loss attributable to common stockholders	$	(43,728	)	$	(51,659	)	$	(32,620	)
Effect of potentially dilutive securities:
Convertible notes		—			—			(4,392	)
Warrants to purchase preferred stock		—			—			(840	)
Net loss for diluted net loss per share	$	(43,728	)	$	(51,659	)	$	(37,852	)
Denominator
Weighted average shares used for basic net loss per share		24,469			22,314			8,731
Effect of potentially dilutive securities:
Convertible notes		—			—			127
Warrants to purchase preferred stock		—			—			53
Weighted average shares outstanding for diluted net loss per share		24,469			22,314			8,911
Basic net loss per share:	$	(1.79	)	$	(2.32	)	$	(3.74	)
Diluted net loss per share:	$	(1.79	)	$	(2.32	)	$	(4.25	)

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Accrued Liabilities

12 Months Ended

Dec. 31, 2015

Payables and Accruals [Abstract]

Accrued Liabilities

5. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Accrued compensation	$	999	$	1,348
Accrued severance		209		—
Accrued warranty costs		384		202
Accrued legal costs		915		301
Accrued SEC civil penalty (Note 12)		1,750		1,750
Accrued liabilities, other		1,432		2,720
	$	5,689	$	6,321

On January 14, 2015, James Iademarco was appointed as the Company’s President and Chief Operating Officer. On August 20, 2015, the Company entered into a separation agreement with Mr. Iademarco whereby he resigned effective August 31, 2015, but agreed to remain available to advise the Company in a consulting capacity for an additional period of up to 90 days to assist with the transition of various pending matters. Pursuant to the separation agreement, Mr. Iademarco is entitled to receive, among other things, an amount equal to one-twelfth of his prior base salary of $290,000 on or before the 15th day of each of the twelve months following August 31, 2015 and certain premium payments for health and vision insurance coverage, in partial consideration for Mr. Iademarco granting the Company a general release of liability and claims. During the year ended December 31, 2015, the Company recorded severance expenses in the amount of $313,000 to selling, general and administrative expenses based on the terms of Mr. Iademarco’s separation agreement, of which $209,000 was accrued as of December 31, 2015.

During the year ended December 31, 2015, the Company reduced overall headcount as part of its measures to streamline business operations, reduce operating expenses and conserve cash. During the year ended December 31, 2015, the Company recorded severance expenses in the amount of $180,000 to research, development and patent expenses and $115,000 to selling, general and administrative expenses based on the terms of the employees’ separation agreements, all of which had been paid as of December 31, 2015.

During the year ended December 31, 2014, the Company also reduced overall headcount as part of its measures to streamline business operations, reduce operating expenses and conserve cash, and recorded severance expenses in the amount of $258,000 to research, development and patent expenses and $147,000 to selling, general and administrative expenses based on the terms of the employees’ separation agreements, all of which had been paid as of December 31, 2014.

The Company warrants the specifications and/or performance of its products through implied product warranties and has extended product warranties to qualifying customers on a contractual basis. The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time product is shipped. The Company’s estimate is based on historical experience and estimates of future warranty costs as a result of increasing usage of the Company’s products. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. Changes in the Company’s accrued warranty costs during the period are as follows (in thousands):

Balance at December 31, 2014	$	202
Warranties issued during the period		234
Settlements made during the period		(52	)
Balance at December 31, 2015	$	384

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Debt

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Debt

6. Debt

Debt, including debt due to related parties, consists of the following (in thousands):

	DECEMBER 31,
	2015			2014
Term Loan (“Term Loan”) bearing interest at 7% per annum, payable monthly through April 2016, collateralized by all of the Company’s inventories, chattel paper, accounts receivable, equipment and general intangibles (excluding certain financed equipment and intellectual property). The Term Loan was repaid in August 2015.	$	—		$	183
Secured promissory notes (“October 2012 and April 2013 Secured Promissory Notes”) bearing interest at 18.00% per annum, payable monthly through October 2017, collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2015 and 2014 of $28 and $203, respectively		12,422			12,247
Secured promissory note (“June 2014 Secured Promissory Note”) bearing interest at prime plus 2% (5.25% as of December 31, 2015) per annum, payable monthly through June 2036, collateralized by certain of the Company’s deposit accounts and MMM LLC’s inventories, chattel paper, accounts, equipment and general intangibles		9,621			9,873
Senior secured promissory notes due to related parties (“August 2015 Senior Secured Promissory Notes”) bearing interest at 8% per annum, interest is payable biannually with principal payments due in increments at three, four and five years from the closing date, collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2015 of $4,212 (see Note 15)		35,788			—
Debt, including debt due to related parties		57,831			22,303
Less debt due to related parties		(35,788	)		—
Less current portion		(267	)		(12,636	)
	$	21,776		$	9,667

As of December 31, 2015, aggregate contractual future principal payments on the Company’s debt, including debt due to related parties, are due as follows (in thousands):

Year Ended December 31,
2016	$	267
2017		12,732
2018		10,297
2019		10,313
2020		20,329
Thereafter		8,133
Total future principal payments		62,071

The fair value of the Company’s outstanding debt obligations as of December 31, 2015 and 2014 was $23,457,000 and $22,587,000, respectively, which was estimated based on a discounted cash flow model using an estimated market rate of interest of 11.25% for the fixed rate debt and 5.25% for the variable rate debt, and is classified as Level 3 within the fair value hierarchy.

Term Loan

In March 2009, October 2010 and October 2011, the Company and Five Star Bank agreed to modify the terms of its existing revolving line of credit (“Revolver”). Under the modified terms of the Revolver, the Company’s borrowings under the Revolver were limited to 75% of qualifying accounts receivable with a maximum borrowing limit of $500,000. In March 2012, the Company entered into a change in terms agreement with the bank under which the existing Revolver was replaced by the Term Loan in the amount of $500,000 bearing interest at a rate of 7% per annum, maturing April 1, 2016. The Company’s inventories, chattel paper, accounts receivable, equipment and general intangibles (excluding certain financed equipment and intellectual property) have been pledged as collateral under the Term Loan. The Term Loan was fully paid off in August 2015.

Secured Promissory Notes

On October 2, 2012, the Company borrowed $7,500,000 pursuant to senior notes (“October 2012 Secured Promissory Notes”) with a group of lenders. The October 2012 Secured Promissory Notes have an initial term of three years and can be extended for an additional two years in one year increments at the option of the Company. During the initial three-year term, the October 2012 Secured Promissory Notes bear interest at 12% per annum. If the term of the October 2012 Secured Promissory Notes is extended an additional year, the interest rate is 13% during the fourth year. If the term of the October 2012 Secured Promissory Notes is extended for an additional two years, the interest rate is 14% during the fifth year. Interest on the October 2012 Secured Promissory Notes is payable monthly through the initial maturity date of the loan, which is October 2, 2015, or through any extension period. The principal and all unpaid interest are due on the maturity date, as may be extended. In August 2015, the terms of the October 2012 Secured Promissory Notes were amended, resulting in an increase in the interest rate to 18% effective September 1, 2015 for the remaining term of the notes. The Company also provided a written notice in September 2015 to extend the maturity date to October 2, 2017. The amendments were accounted for as a modification of the loan agreement with the effective interest rate adjusted prospectively from the amendment date.

As part of the terms of the October 2012 Secured Promissory Notes, the Company is required to pay a fee of 5% of the funded principal amount to the agent that facilitated the borrowing and provides management of the relationship with the group of lenders (“Agent Fee”). This Agent Fee is payable within 30 days after all interest and principal have been paid. For each year the Company extends the maturity date of the October 2012 Secured Promissory Notes beyond the initial term, the agent will receive an additional 1% fee based on the funded principal amount. The present value of the unpaid Agent Fee, based on 5% of the funded principal amount, or $261,000, as of the closing date of the October 2012 Secured Promissory Notes was recorded as both deferred financing costs as a component of current and non-current other assets and non-current other liabilities. As the maturity date was extended two years in September 2015, the agent fee was increased to 7% of the funded principal amount. The amortization of the deferred financing costs and the accretion of the Agent Fee are recorded to interest expense over the term of the arrangement. As of December 31, 2015, $653,000 of the Agent Fee, including the amounts relating to the additional funds received from the issuance of the April 2013 Secured Promissory Notes discussed below, was recorded under non-current other liabilities. In addition, the Company incurred an additional $66,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets and are being amortized to interest expense over the term of the arrangement.

The October 2012 Secured Promissory Notes are secured by the Company’s ownership interest in MMM LLC, a security interest in the assets of the Company’s manufacturing plant and all of the Company’s other assets, subject to certain permitted liens. This security interest was subordinate to the security interest held by the holder of a previously outstanding promissory note issued in April 2012 and repaid in January 2013 (“April 2012 Note”), which also had a security interest in MMM LLC.

The Company also issued warrants (“Common Stock Warrants”) to the group of lenders to purchase a number of shares of common stock equal to 15% of the funded principal amount of the October 2012 Secured Promissory Notes divided by 70% of the value of common stock in a sale of the Company or a Qualified IPO, with such Common Stock Warrants having an exercise price of 70% of the value of common stock in a sale of the Company or a Qualified IPO. The Common Stock Warrants would be automatically exercised immediately prior to expiration on the earlier to occur of a Qualified IPO or a sale of the Company or the maturity of the October 2012 Secured Promissory Notes. The October 2012 Secured Promissory Notes could be prepaid six months after the initial funding date or earlier if a Qualified IPO or a sale of the Company occurs. As the predominant settlement feature of the Common Stock Warrants is to settle a fixed monetary amount in a variable number of shares, the Common Stock Warrants were accounted for under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). Accordingly, the Common Stock Warrants were recorded at estimated fair value on their issuance date and were adjusted to their estimated fair value as of each reporting date with the change in estimated fair value recorded as a component of change in estimated fair value of financial instruments in the Company’s consolidated statements of operations. The fair value of the Common Stock Warrants at the date of issuance of $282,000 was recorded as a discount to the October 2012 Secured Promissory Notes and is being amortized to interest expense over the term of the arrangement. Until the effective date of the IPO, the Company estimated the fair value of the Common Stock Warrants using a Probability-Weighted Expected Return Method (“PWERM”) valuation based on unobservable inputs, and, therefore, the Common Stock Warrants were classified as Level 3 liabilities in the fair value hierarchy. Upon closing of the IPO, the exercise price of the Common Stock Warrants was determined to be $8.40 per share and the number of shares to be issued upon exercise of the warrants was no longer variable. As a result of the IPO, the Common Stock Warrants were considered to be indexed to the Company’s stock, and accordingly, the common stock warrants liability was reclassified and included in stockholders’ equity (deficit) during the year ended December 31, 2013.

The October 2012 Secured Promissory Notes contain certain covenant requirements, which include a requirement to maintain a minimum cash balance of the lesser of the April 2012 Note indebtedness or $5,000,000. As the April 2012 Note was fully paid off in January 2013, the Company no longer has a minimum cash balance requirement under the October 2012 Secured Promissory Notes. The Company is also precluded from adding additional debt without lender approval but allowance is made if such debt is subordinated to the October 2012 Secured Promissory Notes or if such additional debt is not more than $2,000,000 in the aggregate. In the event of default on the October 2012 Secured Promissory Notes, the lenders may declare the entire unpaid principal and interest immediately due and payable.

On April 10, 2013 (“Conversion Date”), the Company entered into an amendment to increase, by up to $5,000,000, the amount available under the terms of the loan agreement with respect to the October 2012 Secured Promissory Notes. Under this amendment, an additional $4,950,000 was issued in partial consideration for $3,700,000 in cash received and in partial conversion for the cancellation of $1,250,000 of the total principal balance of the October 2012 Subordinated Convertible Note described below (collectively, “April 2013 Secured Promissory Notes”). The total amount borrowed under the amended loan agreement for the October 2012 Secured Promissory Notes and the April 2013 Secured Promissory Notes increased from $7,500,000 to $12,450,000 as of the Conversion Date. The accrued interest of $74,000 for the partially converted October 2012 Subordinated Convertible Note as of the Conversion Date shall be repaid or converted on the applicable maturity date of the October 2012 Subordinated Convertible Note.

In connection with the issuance of the April 2013 Secured Promissory Notes, the Company issued additional warrants (“Additional Common Stock Warrants”) to purchase a number of shares of common stock equal to 20% of the funded principal amount of the April 2013 Secured Promissory Notes divided by 70% of the value of common stock in a sale of the Company or a Qualified IPO, with such Additional Common Stock Warrants to have an exercise price of 70% of the value of common stock in a sale of the Company or a Qualified IPO. As the predominant settlement feature of the Additional Common Stock Warrants was to settle a fixed monetary amount in a variable number of shares, the Additional Common Stock Warrants were accounted for under ASC 480. Accordingly, the Additional Common Stock Warrants were recorded at estimated fair value on their issuance date and were adjusted to their estimated fair value as of each reporting date with the change in estimated fair value recorded as a component of change in estimated fair value of financial instruments in the Company’s consolidated statements of operations. The fair value of the Additional Common Stock Warrants at the date of issuance was estimated to be $465,000. The Company estimated the fair value of the Additional Common Stock Warrants using a PWERM valuation based on unobservable inputs and, therefore, the Additional Common Stock Warrants were classified as Level 3 liabilities in the fair value hierarchy. Upon closing of the IPO, the exercise price of the Additional Common Stock Warrants was determined to be $8.40 per share and the number of shares to be issued upon exercise of the warrants was no longer variable. As a result of the IPO, the Additional Common Stock Warrants were considered to be indexed to the Company’s stock, and accordingly, the common stock warrants liability was reclassified and included in stockholders’ equity (deficit) during the year ended December 31, 2013.

The debt holder who converted $1,250,000 principal balance of the October 2012 Subordinated Convertible Note (with a fair value of $1,360,000 on the date of conversion) also loaned an additional $2,500,000 in cash as part of the April 2013 Secured Promissory Notes (collectively, the “$3,750,000 Notes”). The Company accounted for the conversion as an extinguishment of debt in accordance with ASC 470-50-40, Modifications and Extinguishments. The $1,360,000 fair value of the partially converted October 2012 Subordinated Convertible Note on the Conversion Date was derecognized and the fair value of the $3,750,000 Notes with the portion of the fair value of the Additional Common Stock Warrants issued to this debt holder on the date of issuance was recorded. The Company recorded the $49,000 excess of the total fair value of the $3,750,000 Notes and the related Additional Common Stock Warrants on the issuance date over total consideration received as a gain on extinguishment of debt in the consolidated statements of operations for the year ended December 31, 2013.

The following table shows the consideration received, fair values of the notes and common stock warrants issued and calculation of the gain on extinguishment of debt for the $3,750,000 Notes (in thousands):

Consideration received
Fair value of October 2012 Subordinated Convertible Note	$	1,360
Cash		2,500
Total consideration received (a)	$	3,860
Notes and warrants issued
Principal balance of notes issued	$	3,750
Debt discount (1)		(291	)
Fair value of notes issued		3,459
Fair value of Additional Common Stock Warrants issued		352
Total fair value of notes and warrants issued (b)	$	3,811
Gain on extinguishment of debt (a—b)	$	49

⁽¹⁾  The amortization of this account is being recorded in interest expense in the consolidated statements of operations over the term of the arrangement.

The remaining fair value of the Additional Common Stock Warrants of $113,000, net of the fair value of the Additional Common Stock Warrants issued of $352,000 related to the $3,750,000 Notes discussed above, was recorded as a debt discount to the April 2013 Secured Promissory Notes and is being amortized to interest expense over the term of the arrangement.

As a result of the amendment described above, the Company is also required to pay the Agent Fee, 5% of the $3,700,000 in cash received from the April 2013 Secured Promissory Notes, under the same terms as the October 2012 Secured Promissory Notes. In addition, the portion of the Agent Fee relating to the converted October 2012 Subordinated Convertible Note that would be due under the terms of the October 2012 Subordinated Convertible Note will be paid under the terms of the October 2012 and April 2013 Secured Promissory Notes. The present value of the unpaid Agent Fee of $172,000, based on 5% of the funded principal amount of $4,950,000, as of the closing date of the April 2013 Secured Promissory Notes was recorded as both deferred financing costs as a component of current and non-current other assets and non-current other liabilities. The amortization of the deferred financing costs and the accretion of the Agent Fee are being amortized to interest expense over the term of the arrangement. In addition, the Company incurred an additional $24,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets and are being amortized to interest expense over the term of the arrangement.

The amendment to the loan agreement also amended the interest provision applicable to the October 2012 and April 2013 Secured Promissory Notes to allow any holder of the October 2012 and April 2013 Secured Promissory Notes to request the Company to defer all interest due monthly to the applicable maturity date and the optional prepayment provision applicable to the October 2012 and April 2013 Secured Promissory Notes to allow the Company to repay the outstanding amount of the October 2012 and April 2013 Secured Promissory Notes either with the written consent of the lender or the agent on such lenders’ behalf or without such consent provided that the Company pays the interest that would have been due from the prepayment date to the initial maturity date.

Activity related to the October 2012 and April 2013 Secured Promissory Notes from December 31, 2014 through December 31, 2015 consisted of the following (in thousands):

	DECEMBER 31, 2014			ADDITIONS		AMORTIZATION OF DEBT DISCOUNT		PRINCIPAL PAYMENTS		DECEMBER 31, 2015
Principal	$	12,450		$	—	$	—	$	—	$	12,450
Debt discount related to the issuance of common stock warrants (1)		(106	)		—		94		—		(12	)
Discount related to the $3,750,000 Notes (1)		(97	)		—		81		—		(16	)
	$	12,247		$	—	$	175	$	—	$	12,422

⁽¹⁾  The amortization of this account is included in interest expense in the consolidated statements of operations and as non-cash interest expense in the consolidated statements of cash flows.

As of December 31, 2014, the Company was in breach of its covenants under the October 2012 and April 2013 Secured Promissory Notes as a result of its failure to provide annual financial statements in a timely manner and as the Company was in breach of certain of its covenants under its June 2014 Secured Promissory Note as described below. However, in November 2015, the Company received an extension from the lending agent with respect to compliance with the requirements to deliver annual financial statements to the earlier of (i) November 15, 2015 or (ii) such time such financial statements are filed with the SEC. The covenant breach was cured in November 2015 as a result of delivering annual financial statements within the timeline prescribed in the extension and the waiver of certain of the Company’s covenants with respect to the June 2014 Secured Promissory Note as described below.

Credit Facility

On June 14, 2013, the Company entered into a credit facility agreement (“June 2013 Credit Facility”) with a group of lenders that are, or that are affiliated with, existing investors in the Company. Under the June 2013 Credit Facility, the lenders have committed to permit the Company to draw an aggregate amount of up to $5,000,000, and, subject to the Company’s obtaining additional commitments from lenders, such amount may be increased to up to $7,000,000. The June 2013 Credit Facility expired on June 30, 2014 without having been drawn upon.

During the term of the June 2013 Credit Facility, the Company could request from the lenders up to four advances, with each advance equal to one-quarter of each lender’s aggregate commitment amount. The Company would issue a promissory note in the principal amount of each such advance that would accrue interest at a rate of 10% per annum. The principal and all unpaid interest under the promissory notes would be due on the maturity date, and the Company could not prepay the promissory notes prior to the maturity date without consent of at least a majority in interest of the aggregate principal amount of the promissory notes then outstanding under the June 2013 Credit Facility.

In connection with the June 2013 Credit Facility, the Company agreed to pay a fee of 2% of the total commitment amount to the lenders. In addition, the Company incurred an additional $10,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current other assets and were fully amortized to interest expense as of December 31, 2014.

In connection with the June 2013 Credit Facility, the Company issued warrants (“June 2013 Warrants”) to purchase a number of shares of common stock equal to 10% of the total committed amount of the June 2013 Credit Facility divided by 70% of the value of common stock in a sale of the Company or a Qualified IPO, with such June 2013 Warrants to have an exercise price of 70% of the value of common stock in a sale of the Company or a Qualified IPO. The June 2013 Warrants expire upon the earlier of June 14, 2023 or the sale of the Company. As the predominant settlement feature of the June 2013 Warrants was to settle a fixed monetary amount in a variable number of shares, the June 2013 Warrants were accounted for under ASC 480. Accordingly, the June 2013 Warrants were recorded at estimated fair value on their issuance date and were adjusted to their estimated fair value as of each reporting date with the change in estimated fair value recorded as a component of change in estimated fair value of financial instruments in the Company’s consolidated statements of operations. The fair value of the June 2013 Warrants at the date of issuance of $435,000 was recorded as a deferred financing cost as a current other asset and was being amortized to interest expense over the term of the arrangement. Until the effective date of the IPO, the Company estimated the fair value of the June 2013 Warrants using a PWERM valuation based on unobservable inputs and, therefore, the June 2013 Warrants were classified as Level 3 liabilities in the fair value hierarchy. Upon closing of the IPO, the exercise price of the June 2013 Warrants was determined to be $8.40 per share and the number of shares to be issued upon exercise of the warrants was no longer variable. As a result of the IPO, the June 2013 Warrants were considered to be indexed to the Company’s stock, and accordingly, the common stock warrants liability was reclassified and included in stockholders’ equity (deficit) during the year ended December 31, 2013.

Secured Promissory Note

On April 11, 2014, the Company entered into a $3,000,000 promissory note with Five Star Bank. On April 14, 2014, the Company entered into an agreement with the bank to modify the terms of the promissory note from a single payment loan to a revolving line of credit, which allowed the Company to borrow up to $3,000,000. On April 28, 2014, the Company entered into an agreement to modify the terms of the revolving line of credit to increase the borrowing limit up to $5,000,000. In June 2014, the $4,687,000 balance on the revolving line of credit was paid off and the line was closed when the Company borrowed $10,000,000 pursuant to a business loan agreement and promissory note (“June 2014 Secured Promissory Note”) with the bank (“Lender”) which bears interest at prime rate (3.5% as of December 31, 2015) plus 2.00% per annum. The interest rate is subject to change from time to time to reflect changes in the prime rate; however, the interest rate shall not be less than 5.25% or more than the maximum rate allowed by applicable law. If the interest rate increases, the Lender, may, at its option, increase the amount of each monthly payment to ensure that the note would be paid in full by the maturity date, increase the amount of each monthly payment to reflect the change in interest rate, increase the number of monthly payments or keep the monthly payments the same and increase the final payment amount.

The June 2014 Secured Promissory Note is repayable in monthly payments of $64,390 commencing in July 2014, with the final payment due in June 2036. Certain of the Company’s deposit accounts and MMM, LLC’s inventories, chattel paper, accounts, equipment and general intangibles have been pledged as collateral for the promissory note. The Company is required to maintain a deposit balance with the Lender of $1,560,000, which is recorded as restricted cash included in non-current assets. In addition, until the Company provides documentation that the proceeds were used for construction of the Company’s manufacturing plant, proceeds from the loan will be maintained in a restricted deposit account with the Lender. As of December 31, 2015, the Company had $1,856,000 remaining in this restricted deposit account, which is recorded as restricted cash included in current assets.

In addition, the Company incurred an additional $304,000 in financing-related costs, including USDA guarantee fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets on the date of issuance and are being amortized to interest expense over the term of the arrangement.

The Company may prepay 20% of the outstanding principal loan balance each year without penalty. A prepayment fee of 10% will be charged if prepayments exceed 20% in the first year, and the prepayment fee will decrease by 1% each year for the first ten years of the loan.

The Company is required to maintain a current ratio of not less than 1.25-to-1.0, a debt-to-worth ratio of no greater than 4.0-to-1.0 and a loan-to-value ratio of no greater than 70% as determined by the Lender. The Company is also required to comply with certain affirmative and negative covenants under the loan agreement discussed above. In the event of default on the debt, the Lender may declare the entire unpaid principal and interest immediately due and payable. As of December 31, 2014, the Company was in breach of certain of its covenants under the loan agreement as a result of its annual and quarterly reports not being filed within the prescribed time period and its being in breach of covenants on the October 2012 and April 2013 Secured Promissory Notes described above. In addition, effective September 30, 2015, the Company’s debt-to-worth ratio was greater than 4.0-to-1.0 as a result of the issuance of $40,000,000 in promissory notes in August 2015 as described in Note 15, which increased the Company’s debt while the Company continued to incur net losses, which decreased stockholders’ equity. However, in November 2015, the Company received a waiver from the Lender with respect to compliance with the requirements to (i) deliver annual financial statements (extended to November 15, 2015), (ii) maintain a current ratio greater than 1.25-to-1.0 (extended to December 31, 2015) and (iii) maintain a debt-to-worth ratio less than 4.0-to-1.0 (extended to December 31, 2016). The receipt of this waiver and the delivery of annual financial statements within the timeline prescribed in the waiver and the extension under the October 2012 and April 2013 Secured Promissory Notes cured the Company of being in breach of the covenants under the loan agreement.

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Preferred Stock

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Preferred Stock

7. Preferred Stock

The Company sold 1,484,000 shares of its Series A convertible preferred stock in private placements in April 2007 for $2.608 per share, including conversion of certain convertible notes payable, 2,242,000 shares of its Series B convertible preferred stock in August 2008 for $4.849 per share, including conversion of convertible notes payable, and 4,778,000 shares of its Series C convertible preferred stock from March 2010 to June 2011 for $5.317 per share, including conversion of $514,000 of convertible notes payable plus accrued interest of $5,000. The Company recorded the issuance of its Series A, Series B and Series C convertible preferred stock net of issuance costs.

In May 2012, in connection with the issuance of the Series C warrants, the Company amended its certificate of incorporation to increase the number of shares of common stock the Company is authorized to issue from 12,745,000 shares to 12,936,000 shares and to increase the number of shares of convertible preferred stock the Company is authorized to issue from 8,632,000 shares to 8,823,000 shares, of which, 1,489,000 shares were designated as Series A convertible preferred stock, 2,252,000 shares were designated as Series B convertible preferred stock and 5,082,000 shares were designated as Series C convertible preferred stock.

Upon closing of the IPO, all shares of the Company’s outstanding convertible preferred stock automatically converted into shares of common stock. Further, in August 2013, the Company amended and restated its certificate of incorporation to effect the conversion of its outstanding convertible preferred stock into common stock on a 1-for-1 basis. The amendment also increased the number of shares of preferred stock authorized for issuance to 20,000,000.

Investors in the Company’s Series C convertible preferred stock were entitled to receive non-cumulative dividends, before and in preference to any amounts paid to Series A and Series B convertible preferred stockholders and common stockholders, and investors in the Company’s Series A and Series B convertible preferred stock were entitled to receive non-cumulative dividends on a pari passu basis, before and in preference to any amounts paid to common stockholders. Dividends would be paid only when and if declared by the board of directors. In addition, these investors were entitled to voting rights equal to the number of shares of the Company’s common stock into which the Series A, Series B and Series C convertible preferred stock were convertible as of the close of business on the record date fixed for each stockholder’s meeting. No dividends were declared on the Series A, Series B or Series C convertible preferred stock.

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Warrants

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Warrants

8. Warrants

The following table summarizes information about the Company’s common stock warrants outstanding as of December 31, 2015 (in thousands, except exercise price data):

DESCRIPTION	ISSUE DATE	EXPIRATION DATE	NUMBER OF SHARES SUBJECT TO WARRANTS ISSUED		EXERCISE PRICE
In connection with June 2013 Credit Facility (June 2013 Warrants)	June 2013	June 2023(1)		27	$	8.40
In connection with August 2015 Senior Secured Promissory Notes (August 2015 Warrants)	August 2015	August 2023		4,000	$	1.91
				4,027

⁽¹⁾  The June 2013 Warrants expire upon the earlier to occur of (i) the date listed above; (ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any transfer of more than 50% of the voting power of the Company, reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (iii) a sale of all or substantially all of the assets of the Company unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise), hold at least fifty percent (50%) of the voting power of the surviving or acquiring entity.

The June 2013 Warrants became exercisable on the date of the IPO. The August 2015 Warrants were immediately exercisable and remain exercisable subject to certain exceptions.

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Common Stock

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Common Stock

9. Common Stock

In August 2013, the Company amended and restated its certificate of incorporation to increase the number of shares of common stock authorized for issuance to 250,000,000 shares with a par value of $0.00001. As of December 31, 2015, the Company had reserved shares of common stock for future issuances as follows (in thousands):

	SHARES
Shares available for future grant under stock incentive plans		2,478
Stock options outstanding		2,116
Warrants to purchase common stock		4,027
Restricted stock units		107
		8,728

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Stock Option Plans

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Option Plans

10. Stock Option Plans

In July 2006, the Company authorized the 2006 Equity Incentive Plan, as amended, (“2006 Plan”). The 2006 Plan provided for the issuance of up to 1,434,000 shares of common stock underlying awards. The 2006 Plan was terminated in December 2011 and no new stock awards may be granted under the 2006 Plan.

The 2006 Plan allowed holders to exercise stock options prior to their vesting. The common stock received by the employee is restricted and follows the same vesting schedule as the underlying option. In the event the employee voluntarily or involuntarily terminates employment from the Company, the Company retains a right to repurchase the unvested common stock at the original option exercise price. As of December 31, 2015 and 2014, no options had been exercised that would be subject to repurchase.

As of December 31, 2015, options to purchase 285,000 shares of the Company’s common stock at a weighted-average exercise price of $1.01 per share were outstanding under the 2006 Plan, of which 285,000 were vested. During the year ended December 31, 2015, 50,000 and 28,000 options were exercised and cancelled, respectively, under the 2006 Plan.

In July 2011, and as amended in September 2012, the Company authorized the 2011 Stock Plan (“2011 Plan”). The 2011 Plan provided for the issuance of up to 1,167,000 shares of common stock underlying awards, plus any shares of common stock underlying awards previously issued under the 2006 Plan that terminate or expire after the date of authorization of the 2011 Plan, subject to certain adjustments. In addition, the 2011 Plan provided that the Company not deliver more than 2,446,000 shares upon the exercise of incentive stock options issued under both the 2006 Plan and 2011 Plan. The 2011 Plan was terminated in August 2013 and no new stock awards may be granted under the 2011 Plan.

As of December 31, 2015, options to purchase 361,000 shares of the Company’s common stock at a weighted-average exercise price of $7.47 per share were outstanding under the 2011 Plan, of which 302,000 were vested. During the year ended December 31, 2015, 11,000 and 261,000 options were exercised and cancelled, respectively, under the 2011 Plan.

In August 2013, the Company’s board of directors adopted the 2013 Stock Incentive Plan (“2013 Plan”) covering officers, employees, and directors of, and consultants to, the Company. Under the 2013 Plan, the Company may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and dividend equivalent rights. At the time the 2013 Plan was established, the maximum aggregate number of shares of the Company’s common stock that could be issued pursuant to the 2013 Plan was 1,600,000, plus the number of shares of common stock that were reserved for issuance pursuant to future grants under the 2011 Plan at that time. The number of shares authorized for issuance pursuant to the 2013 Plan automatically increases by any additional shares that would have otherwise returned to the 2011 Plan as a result of the forfeiture, termination or expiration of awards previously granted under the 2011 Plan. In addition, the number of shares authorized for issuance pursuant to the 2013 Plan will increase by a number equal to the lesser of (i) 3.5% of the number of shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year or (ii) a lesser number of shares determined by the administrator.

As of December 31, 2015, options to purchase 1,470,000 shares of the Company’s common stock at a weighted-average exercise price of $10.78 per share were outstanding under the 2013 Plan, of which 768,000 were vested. During the year ended December 31, 2015, 510,000 options were cancelled and no options were exercised under the 2013 Plan.

Generally, options vest 25% on the first anniversary from the date of grant and 1/48 per month thereafter; however, options may be granted with different vesting terms as determined by the Company’s board of directors.

During the year ended December 31, 2015, the Company granted restricted stock units under the 2013 Plan. On the date of grant, 7/12 of the restricted stock units vested immediately with 5/12 vesting equally over the five monthly anniversaries following the date of issuance of the award. One share of common stock is issuable for each vested restricted stock unit upon the earlier of the grantee’s separation of service or a change in control. As of December 31, 2015, there were 107,000 restricted stock units outstanding under the 2013 Plan.

The following table summarizes the activity under the Company’s stock option plans for the year ended December 31, 2015 (in thousands, except exercise price and remaining contractual life data):

	SHARES OUTSTANDING			WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL LIFE (IN YEARS)		AGGREGATE INTRINSIC VALUE
Balances at December 31, 2014		2,831		$	9.39		7.4	$	1,595
Options granted		145		$	1.61
Options exercised		(61	)	$	0.91
Options cancelled		(799	)	$	9.93
Balances at December 31, 2015		2,116		$	8.90		7.3	$	45
Vested and expected to vest at December 31, 2015		1,888		$	8.73		7.2	$	45
Exercisable at December 31, 2015		1,355		$	8.09		6.8	$	45

The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $35,000, $6,302,000 and $2,801,000, respectively.

The estimated fair value of options vested during the years ended December 31, 2015, 2014 and 2013 was $4,950,000, $3,863,000 and $1,314,000 respectively. The weighted-average estimated fair value of options granted during the years ended December 31, 2015, 2014 and 2013 was $0.75 per share, $6.10 per share and $10.35 per share, respectively.

During the years ended December 31, 2015, 2014 and 2013, the Company recorded share-based compensation expense related to stock options of $3,715,000, $4,555,000 and $2,300,000, respectively. During the years ended December 31, 2015, 2014 and 2013, the Company did not realize any tax benefit associated with its share-based compensation expense as certain of the option grants were incentive stock options for which share-based compensation expense is not deductible and as a result of the full valuation allowance on the Company’s deferred tax assets (see Note 13).

As of December 31, 2015, the total share-based compensation expense related to unvested options granted to employees under the Company’s stock option plans but not yet recognized was $3,273,000. This expense will be recognized on a straight-line basis over a weighted-average remaining term of 1.9 years.

On November 7, 2013, the Company announced that its Chief Financial Officer, Donald J. Glidewell, had decided to retire, and the Company entered into a transition agreement with Mr. Glidewell which provided, among other things, for the vesting of his outstanding equity awards through the transition date. During the years ended December 31, 2014 and 2013, the Company recorded share-based compensation expense of $444,000 and $266,000, respectively, relating to the acceleration of vesting of Mr. Glidewell’s equity awards. No share-based compensation expense was recognized relating to the acceleration of vesting of Mr. Glidewell’s equity awards during the year ended December 31, 2015, and as of December 31, 2015, there was no share-based compensation expense related to unvested options granted to Mr. Glidewell under the Company’s stock option plans not yet recognized.

The following table summarizes shares available for grant under the Company’s stock incentive plans for the year ended December 31, 2015 (in thousands):

	SHARES AVAILABLE FOR GRANT
Balances at December 31, 2014		1,086
Shares authorized		856
Options granted		(145	)
Options cancelled		799
Restricted stock units granted		(125	)
Restricted stock units forfeited		7
Balances at December 31, 2015		2,478

The following table summarizes the activity of restricted stock units for the year ended December 31, 2015 (in thousands, except weighted average grant date fair value):

	SHARES OUTSTANDING			WEIGHTED AVERAGE GRANT DATE FAIR VALUE
Nonvested at December 31, 2014		—		$	—
Granted		125		$	1.23
Vested		(73	)	$	1.23
Forfeited		(7	)	$	1.23
Nonvested at December 31, 2015		45		$	1.23

The fair value of restricted stock units is determined based on the closing bid price of the Company’s common stock on the date of grant. During the year ended December 31, 2015, the Company recognized $96,000 of share-based compensation expense related to restricted stock units. Total share-based compensation expense related to restricted stock units not yet recognized as of December 31, 2015 was $50,000, which is expected to be recognized over a weighted average period of 0.4 years.

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Capital Leases

12 Months Ended

Dec. 31, 2015

Leases [Abstract]

Capital Leases

11. Capital Leases

The Company accounts for certain equipment acquired under financing arrangements as capital leases. This equipment is included in property, plant and equipment, and amortization of assets under capital leases is included in depreciation expense. As of December 31, 2015 and 2014, the cost of this equipment was $2,991,000 and $3,063,000, respectively, and accumulated amortization was $2,457,000 and $1,627,000, respectively.

Amortization of capital leases during the years ended December 31, 2015, 2014 and 2013 totaled $1,567,000, $1,496,000 and $470,000, respectively.

As of December 31, 2015, the Company’s aggregate contractual future minimum lease payments on the capital leases are due as follows (in thousands):

	CAPITAL LEASES
Year Ended December 31,
2016		667
2017		19
Total minimum payments required		686
Less amount representing interest		(21	)
Present value of future payments		665
Less current portion		(647	)
	$	18

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Operating Leases

The Company has a non-cancelable lease for an aggregate of approximately 24,500 square feet of non-contiguous office space in an office complex in Davis, California under which a portion of the covered space terminated beginning in February 2014. The remaining portion of the space will terminate by October 2016. The lease includes negotiated annual increases in the monthly rental payments.

In September 2013 and then amended in April 2014, the Company entered into a lease agreement for approximately 27,300 square feet of office and laboratory space located in Davis, California. The initial term of the lease is for a period of 60 months and commenced in August 2014. The monthly base rent is $44,000 per month for the first 12 months with a 3% increase each year thereafter. Concurrent with this amendment, in April 2014, the Company entered into a lease agreement with an affiliate of the landlord to lease approximately 17,400 square feet of office and laboratory space in the same building complex in Davis, California. The initial term of the lease is for a period of 60 months and commenced in August 2014. The monthly base rent is $28,000 with a 3% increase each year thereafter.

The Company recognizes expense under its operating leases on a straight-line basis over the terms of the leases. As of December 31, 2015, the Company’s aggregate contractual future minimum lease payments under non-cancelable lease agreements is as follows (in thousands):

	OPERATING LEASES
Year Ended December 31,
2016	$	1,029
2017		941
2018		949
2019		615
2020 and beyond		—
Total minimum payments required	$	3,534

The Company incurred rent expense of $1,102,000, $1,134,000 and $691,000 during the years ended December 31, 2015, 2014 and 2013, respectively.

Litigation

On September 5, 2014, September 8, 2014, September 11, 2014, September 15, 2014 and November 3, 2014, the Company, along with certain of its current and former officers and directors and others were named as defendants in putative securities class action lawsuits filed in the U.S. District Court for the Eastern District of California. On February 13, 2015, these actions were consolidated as Special Situations Fund III QP, L.P. et al v. Marrone Bio Innovations, Inc. et al, Case No 2:14-cv-02571-MCE-KJN. On September 2, 2015, an initial consolidated complaint was filed on behalf of (i) all persons who purchased or otherwise acquired the Company’s publicly traded common stock directly in or traceable to the Company’s August 1, 2013 initial public offering; (ii) all persons who purchased or otherwise acquired the Company’s publicly traded common stock directly in the Company’s June 6, 2014 secondary offering; and (iii) all persons who purchased or otherwise acquired the Company’s publicly traded common stock on the open market between March 7, 2014 and September 2, 2014 (the “Class Action”). In addition to the Company, the initial consolidated complaint names certain of the Company’s current and former officers and directors and the Company’s independent registered public accounting firm as defendants. The initial consolidated complaint alleges violations of the Securities Act of 1933, the Securities Exchange Act of 1934 and SEC Rule 10b-5, arising out of the issuance of allegedly false and misleading statements about the Company’s business and prospects, including its financial statements, product revenues and system of internal controls. Plaintiffs contend that such statements caused the Company’s stock price to be artificially inflated. The action includes claims for damages, fees and expenses, including an award of attorneys’ and experts’ fees to the putative class. An amended consolidated complaint was filed on January 11, 2016. On February 4, 2016, the Court approved a stipulation between the parties deferring action pending the outcome of a mediation proceeding, and ordered the parties to provide a status update on May 4, 2016. The outcome of this matter is not presently determinable.

On September 9, 2014 and November 25, 2014, shareholder derivative actions were filed in the Superior Court of California, County of Yolo (Case No. CV14-1481) and the U.S. District Court for the Eastern District of California (Case No. 1:14-cv-02779-JAM-CKD), purportedly on the Company’s behalf, against certain current and former officers and members of its board of directors (the “2014 Derivative Actions”). The plaintiffs in the 2014 Derivative Actions allege that the defendants breached their fiduciary duties, committed waste, were unjustly enriched and aided and abetted breaches of fiduciary duty by causing the Company to issue allegedly false and misleading statements. The issues in the 2014 Derivative Actions overlap substantially with those at issue in the Class Action described above. The plaintiffs in the 2014 Derivative Actions seek, purportedly on behalf of the Company, an unspecified award of damages including, but not limited to, various corporate governance reforms, an award of restitution, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Courts may deem just and proper. The Courts have granted the parties’ stipulations to defer litigation activity, subject to certain conditions and pending certain developments in the Class Action.

On October 14, 2015, a shareholder derivative action was filed in the Superior Court of California, County of Yolo (Case No. CV15-1423), purportedly on the Company’s behalf, against certain current and former officers and members of the Company’s board of directors and the Company’s independent registered public accounting firm (the “2015 Derivative Action,” and with the 2014 Derivative Actions, the “Derivative Actions”). The plaintiff in the 2015 Derivative Action alleges that the director and officer defendants breached their fiduciary duties, committed waste and were unjustly enriched by causing the Company to issue allegedly false and misleading statements. The plaintiff in the 2015 Derivative Action also alleges that the Company’s independent registered public accounting firm committed professional negligence and malpractice. The issues in the 2015 Derivative Action overlap substantially with those at issue in the 2014 Derivative Actions and the Class Action described above. On February 5, 2016, the Court approved a stipulation between the parties deferring action pending the outcome of a mediation proceeding, and ordered the parties to provide a status update on May 5, 2016. Given the preliminary nature of the Derivative Actions, the Company is not in a position to express any opinion regarding the outcome in these matters.

The Company is currently unable to estimate a range of reasonably possible loss for the litigation as these matters involve significant uncertainties. Those uncertainties include the legal theory or the nature of the claims, the complexity of the facts, the results of any investigation or litigation and the timing of resolution of the investigations or litigation. Although the Company cannot estimate a range of reasonably possible loss based on currently available information, the resolution of these matters could have a material adverse effect on its financial position, results of operations and cash flows.

SEC Investigation

In September 2014, the Company advised the staff of the Division of Enforcement of the SEC that the Audit Committee of the Company’s board of directors had commenced an internal investigation. The SEC commenced a formal investigation of these matters, and in February 2016, the Company entered into a settlement agreement with the SEC. In agreeing to the settlement, the Company neither admits nor denies the SEC’s allegations that the Company violated certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Under the terms of the settlement agreement, the Company paid a $1,750,000 civil penalty in March 2016 and consented to an injunction against future violations of such laws. The Company had previously recorded expenses of $1,750,000 in its consolidated statements of operations for the year ended December 31, 2014 for an accrual of its estimate of the penalties arising from such enforcement action.

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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

As of December 31, 2015, the Company had net operating loss carryforwards for federal income tax reporting purposes of $166,379,000, which begin to expire in 2026, and California and various other state net operating loss carryforwards of $107,329,000 and $39,050,000, respectively, which begin to expire in 2016. California net operating loss carryforwards of $257,000 and $1,744,000 will expire in 2016 and 2017, respectively. California and various other state net operating loss carryforwards of $105,328,000 and $39,050,000, respectively, will expire from 2028 through 2035. In addition, as of December 31, 2015, the Company had federal research and development tax credit carryforwards of $1,889,000, which begin to expire in 2026, and state research and development tax credit carryforwards of $2,027,000, which have no expiration date.

The Company’s ability to utilize its federal and state net operating loss carryforwards and federal and state tax credit carryforwards to reduce future taxable income and future taxes, respectively, may be subject to restrictions attributable to equity transactions that may have resulted in a change in ownership as defined by Internal Revenue Code (“IRC”) Section 382. In the event that the Company has such a change in ownership, the Company’s utilization of these carryforwards could be severely restricted and could result in the expiration of a significant amount of these carryforwards prior to the Company recognizing their benefit. The Company completed a Section 382 analysis as of December 31, 2013 and concluded that $493,000 in federal net operating loss carryforwards and $151,000 in federal research and development tax credit carryforwards are expected to expire prior to utilization as a result of the Company’s previous ownership changes and corresponding annual limitations. The Company has not, however, conducted a Section 382 study for any periods subsequent to December 31, 2013, and as such, the Company cannot provide any assurance that a change in ownership within the meaning of the IRC has not occurred since that date.

As of December 31, 2015, deferred tax assets of $68,969,000, arising primarily as a result of the Company’s net operating loss carryforwards, tax credits and certain costs capitalized for tax purposes, were fully offset by a valuation allowance. The valuation allowance increased by $15,241,000, $18,459,000 and $12,869,000 during the years ended December 31, 2015, 2014 and 2013, respectively. The deferred tax asset balances as of December 31, 2015 and 2014 excluded excess tax benefits from stock option exercises of $2,096,000 and $2,092,000, respectively.

The temporary timing differences that give rise to the deferred tax assets are as follows (in thousands):

	DECEMBER 31,
	2015			2014
Components of deferred taxes:
Net operating loss carryforwards	$	62,255		$	47,723
Research and development tax credits		2,418			2,106
Other, net		4,296			3,899
Net deferred tax assets		68,969			53,728
Less valuation allowance		(68,969	)		(53,728	)
Net deferred tax assets	$	—		$	—

The Company had no deferred tax liabilities as of December 31, 2015 and 2014.

The Company recognized no income tax expense and received no benefit from income taxes during the years ended December 31, 2015, 2014 and 2013. The provision for income taxes is different than the amount computed using the applicable statutory federal income tax rate with the difference for each year summarized below:

	DECEMBER 31,
	2015			2014
Federal tax benefit at statutory rate		34	%		34	%
State tax benefit, net of federal benefit		4			5
Interest expense		(1	)		(1	)
Share-based compensation expense		(1	)		(2	)
Other		(1	)		—
Adjustment due to change in valuation allowance		(35	)		(36	)
Provision for income taxes		—	%		—	%

As of December 31, 2015, the Company had unrecognized tax benefits of $982,000. The unrecognized tax benefits, if recognized, would not impact the Company’s effective tax rate as the recognition of these tax benefits would be offset by changes in the Company’s valuation allowance. The Company does not believe there will be any material changes in its unrecognized tax position during the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2015		2014
Balance at January 1	$	853	$	660
Increase related to prior year tax positions		—		—
Increase related to current year tax positions		129		193
Balance at December 31	$	982	$	853

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal and state income tax examination for 2006 through 2014 due to unutilized net operating loss carryforwards and research and development tax credit carryforwards.

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Employee Benefit Plan

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plan

14. Employee Benefit Plan

The Company offers a defined contribution plan to all eligible employees, which is qualified under Section 401(k) of the IRC. The Company currently provides a matching contribution based on a formula which provides for a dollar-for-dollar matching contribution of the employee’s 401(k) contribution up to 3% of eligible pay plus a 50% matching contribution on the employee’s 401(k) contribution between 3% and 5% of eligible pay. Each participant is 100% vested in elective contributions and the Company’s matching contribution. The Company provided 401(k) matching contributions during the years ended December 31, 2015, 2014 and 2013 of $330,000, $370,000 and $294,000, respectively.

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Related Party Transactions

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions

15. Related Party Transactions

August 2015 Senior Secured Promissory Notes

On August 20, 2015, the Company entered into a purchase agreement with Ivy Science & Technology Fund, Waddell & Reed Advisors Science & Technology Fund and Ivy Funds VIP Science and Technology, each an affiliate of Waddell & Reed, which is a beneficial owner of more than 5% of the Company’s common stock. Pursuant to such purchase agreement, the Company sold to such affiliates senior secured promissory notes (“August 2015 Senior Secured Promissory Notes”) in the aggregate principal amount of $40,000,000. The August 2015 Senior Secured Promissory Notes bear interest at a rate of 8% per annum payable semi-annually on June 30 or December 31 of each year, commencing on December 31, 2015, with $10,000,000 payable three years from the closing, $10,000,000 payable four years from the closing and $20,000,000 payable five years from the closing. Debt due to related parties as of December 31, 2015 was $35,788,000, net of unamortized debt discount of $4,212,000. The fair value of the Company’s debt due to related parties was $34,923,000 as of December 31, 2015, which was estimated based on a discounted cash flow model using an estimated market rate of interest of 11.25%, and is classified as Level 3 within the fair value hierarchy. Accrued interest due to related parties as of December 31, 2015 was $1,175,000.

The August 2015 Senior Secured Promissory Notes contain customary covenants, in addition to the contractual obligation to maintain cash and cash equivalents of at least $15,000,000, which is recorded as restricted cash included in non-current assets. The $15,000,000 that the Company is required to maintain is not required to be segregated from the Company’s operational cash.

In addition, the Company incurred an additional $302,000 in financing-related costs, primarily legal fees. These costs were recorded as deferred financing costs as a component of current and non-current other assets and are being amortized to interest expense over the term of the arrangement.

The August 2015 Senior Secured Promissory Notes are secured by substantially all the Company’s personal property assets. The agent, acting on behalf of the lenders, shall be entitled to have a first priority lien on the Company’s intellectual property assets, pursuant to intercreditor arrangements with certain of the Company’s existing lenders.

In connection with the August 2015 Senior Secured Promissory Notes, the Company issued warrants (“August 2015 Warrants”) to purchase 4,000,000 shares of common stock of the Company. The August 2015 Warrants are immediately exercisable at an exercise price of $1.91 per share and may be exercised at a holder’s option at any time on or before August 20, 2023 (subject to certain exceptions). The fair value of the August 2015 Warrants at the date of issuance of $4,610,000 was recorded as a discount to the August 2015 Senior Secured Promissory Notes as a component of non-current other liabilities and is being amortized to interest expense to related parties over the term of the arrangement.

The August 2015 Senior Secured Promissory Notes provide for various events of default, including, among others, default in payment of principal or interest, breach of any representation or warranty by the Company or any subsidiary under any agreement or document delivered in connection with the notes, a continued breach of any other condition or obligation under any loan document, certain bankruptcy, liquidation, reorganization or change of control events, the acquisition by any person or persons acting as group, other than the lenders, of beneficial ownership of 40% or more of the outstanding voting stock of the Company and certain events in which Pamela G. Marrone, Ph.D. ceases to serve as the Company’s Chief Executive Officer. Upon an event of default, the entire principal and interest may be declared immediately due and payable. As of December 31, 2015, the Company was in compliance with its covenants under the August 2015 Senior Secured Promissory Notes.

The Tremont Group, Inc.

Les Lyman, a member of the Company’s board of directors, is the chairman and significant indirect shareholder of The Tremont Group, Inc. During the years ended December 31, 2015, 2014 and 2013, revenue of $492,000, $821,000 and $418,000, respectively, was recognized on a sell-through basis relating to product purchased by The Tremont Group, Inc. that was resold by The Tremont Group, Inc. during the period. As of December 31, 2015 and 2014, the Company had no outstanding accounts receivable due from The Tremont Group, Inc. As of December 31, 2015 and 2014, the Company recorded deferred cost of product revenues of $79,000 and $333,000, respectively, and current deferred product revenues of $168,000 and $660,000, respectively, relating to product sold to The Tremont Group, Inc. where title has transferred but the criteria for revenue recognition have not been met. In January 2016, Les Lyman resigned from the Company’s board of directors effective January 4, 2016. Accordingly, revenue recognized for sales to The Tremont Group, Inc. subsequent to January 2016 will not be included in related party revenues.

Syngenta

The Company has a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of the Company’s common stock, Syngenta Ventures. In connection with the Company’s public offering in June 2014, Syngenta Ventures sold 600,000 shares of the Company’s common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. During the years ended December 31, 2014 and 2013, the Company recognized $333,000 and $247,000, respectively, of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake.

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Reverse Stock Split

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Reverse Stock Split

16. Reverse Stock Split

On August 1, 2013, the Company amended and restated its certificate of incorporation to effect the conversion of its outstanding convertible preferred stock into common stock on a 1-for-1 basis followed immediately by a reverse split of shares of its common stock (including the common stock issued upon conversion of the convertible preferred stock) at a 1-for-3.138458 ratio (“Reverse Stock Split”). The amendment also increased the number of shares of common stock authorized for issuance to 250,000,000 shares and the number of shares of preferred stock authorized for issuance to 20,000,000. The par value of the common stock and preferred stock was not adjusted as a result of the Reverse Stock Split.

All issued and outstanding common stock, preferred stock and warrants for common stock or preferred stock, and the related per share amounts contained in the consolidated financial statements, have been retroactively adjusted to give effect to this Reverse Stock Split for all periods presented.

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Public Offerings

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Public Offerings

17. Public Offerings

In August 2013, the Company closed its IPO of 5,462,500 shares of its common stock (inclusive of 712,500 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $12.00 per share. The total gross proceeds from the offering to the Company were $65,550,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled approximately $56,105,000. In connection with the IPO:

• all outstanding shares of convertible preferred stock were converted into 8,514,000 shares of common stock, including 10,000 shares issued upon the cash exercise of Series B convertible preferred stock warrants;

• all outstanding principal and accrued interest of the convertible notes was converted into 3,741,000 shares of common stock;

• 47,000 shares of common stock were issued upon the net exercise of common stock warrants;

• 3,000 shares of common stock were issued upon the cash exercise of common stock warrants; and

• the Series A and Series C convertible preferred stock warrants were net exercised for 71,000 shares of common stock.

After the closing of the IPO, the Company had 19,133,000 shares of common stock and 151,000 warrants to purchase common stock outstanding and there were no shares of convertible preferred stock, preferred stock warrants or balances related to convertible notes outstanding.

In June 2014, the Company completed a public offering of 4,575,000 shares of its common stock (inclusive of 675,000 shares of common stock sold upon the exercise of the underwriters’ option to purchase additional shares). The public offering price of the shares sold in the offering was $9.50 per share. The total gross proceeds from the offering to the Company were $43,463,000, and after deducting underwriting discounts and commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled $39,949,000.

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Quarterly Financial Information

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information

18. Quarterly Financial Information (Unaudited)

Fiscal Year 2015:

	MARCH 31, 2015			JUNE 30, 2015			SEPTEMBER 30, 2015			DECEMBER 31, 2015
	(In thousands, except per share data)
Total revenues	$	2,056		$	3,357		$	2,475		$	1,913
Gross profit (loss)		58			363			135			(11	)
Net loss		(11,914	)		(10,985	)		(9,799	)		(11,030	)
Basic and diluted net loss per common share		(0.49	)		(0.45	)		(0.40	)		(0.45	)

Fiscal Year 2014:

	MARCH 31, 2014			JUNE 30, 2014			SEPTEMBER 30, 2014			DECEMBER 31, 2014
	(In thousands, except per share data)
Total revenues	$	2,704		$	3,134		$	2,200		$	1,098
Gross profit (loss)		911			423			(1,302	)		(334	)
Net loss		(10,315	)		(10,711	)		(14,400	)		(16,233	)
Basic and diluted net loss per common share		(0.53	)		(0.52	)		(0.59	)		(0.66	)

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Subsequent Event

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Event

19. Subsequent Event

On January 19, 2016, the Company entered into an agreement with a sublessee to sublease approximately 3,800 square feet of vacant office space located in Davis, California pursuant to the terms of its lease agreement. The initial term of the sublease is for a period of approximately 43 months and commenced on February 1, 2016. The monthly base rent is approximately $5,000 per month for the first 12 months with a 5% increase each year thereafter.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents consists of cash on deposit, money market funds and certificates of deposit accounts with U.S. financial institutions. The Company is exposed to credit risk in the event of default by financial institutions to the extent that cash and cash equivalents balances with financial institutions are in excess of amounts that are insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses on these deposits.

Restricted Cash

Restricted Cash

The Company’s restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its June 2014 Secured Promissory Note and the terms of its August 2015 Senior Secured Promissory Notes. See Notes 6 and 15, respectively, for further discussion.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

ASC 820 requires that the valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three tier value hierarchy, which prioritizes inputs that may be used to measure fair value as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):

	DECEMBER 31, 2015
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	3,750	$	3,750	$	—	$	—
	DECEMBER 31, 2014
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	14,746	$	14,746	$	—	$	—

The Company’s money market funds are held at registered investment companies. As of December 31, 2015 and 2014, the money market funds were in active markets and, therefore, are measured based on the Level 1 valuation hierarchy.

Concentration of Credit Risk

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and debt. The Company deposits its cash and cash equivalents with high credit quality domestic financial institutions with locations in the U.S. Such deposits may exceed federal deposit insurance limits. The Company believes the financial risks associated with these financial instruments are minimal.

The Company’s customer base is dispersed across many different geographic areas, and currently most customers are pest management distributors in the U.S. Generally, receivables are due up to 120 days from the invoice date and are considered past due after this date, although the Company may offer extended terms from time to time.

During the years ended December 31, 2015, 2014 and 2013, 9%, 12% and 16%, respectively, of the Company’s revenues were generated from international customers.

The Company’s principal sources of revenues are its Regalia and Grandevo product lines. These two product lines accounted for 89%, 91% and 95% of the Company’s total revenues during the years ended December 31, 2015, 2014 and 2013, respectively.

Customers to which 10% or more of the Company’s total revenues are attributable for any one of the periods presented consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C
Year ended December 31,
2015		28	%		10	%		8	%
2014		30	%		4	%		13	%
2013		20	%		9	%		8	%

Customers to which 10% or more of the Company’s outstanding accounts receivable are attributable as of either December 31, 2015 or 2014 consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C			CUSTOMER D
December 31, 2015		32	%		29	%		12	%		0	%
December 31, 2014		10	%		37	%		9	%		23	%

Concentrations of Supplier Dependence

Concentrations of Supplier Dependence

The active ingredient in the Company’s Regalia product line is derived from the giant knotweed plant, which the Company obtains from China. The Company’s single supplier acquires raw knotweed from numerous regional sources and performs an extraction process on this plant, creating a dried extract that is shipped to the Company’s manufacturing plant. A disruption at this supplier’s manufacturing site or a disruption in trade between the U.S. and China could negatively impact sales of Regalia. The Company currently uses one supplier and does not have a long-term supply contract with this supplier. Although the Company has identified additional sources of raw knotweed, there can be no assurance that the Company will continue to be able to obtain dried extract from China at a competitive price.

Accounts Receivable

Accounts Receivable

The carrying value of the Company’s receivables represents their estimated net realizable values. The Company generally does not require collateral and estimates any required allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the allowance is recorded accordingly. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. During the years ended December 31, 2015, 2014 and 2013, no receivable balances were written-off. As of December 31, 2015 and 2014, the Company had no allowance for doubtful accounts.

Inventories

Inventories

Inventories are stated at the lower of cost or market value (net realizable value or replacement cost) and include the cost of material and external and internal labor and manufacturing costs. Cost is determined on the first-in, first-out basis. The Company provides for inventory reserves when conditions indicate that the selling price may be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Additionally, the Company provides reserves for excess and slow-moving inventory on hand that is not expected to be sold to reduce the carrying amount of excess and slow-moving inventory to its estimated net realizable value. The reserves are based upon estimates about future demand from the Company’s customers and distributors and market conditions.

During the year ended December 31, 2015, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves of $19,000 due to quantities on hand that may not be used or sold prior to expiration, and an adjustment of $2,545,000 as a result of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity.

During the year ended December 31, 2014, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves of $695,000 due to quantities on hand that may not be used prior to expiration as a result of lower production and sales forecasts; an $894,000 write-off of inventory primarily due to the identification of inventory that would not be suitable for sale in future periods either because the inventory did not pass quality inspection or the efficacy had declined; an adjustment of $890,000 as a result of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity; and a $270,000 write-down of the carrying value of inventory to net realizable value.

During the year ended December 31, 2013, the Company recorded, as a component of cost of product revenues, an inventory write-off of $205,000 primarily due to the identification of inventory that would not be suitable for sale and an adjustment of $194,000 to write-down its Zequanox inventory to net realizable value.

Inventories, net consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Raw materials	$	5,110	$	5,692
Work in progress		1,044		1,150
Finished goods		2,910		5,378
Finished goods held at customers		—		424
	$	9,064	$	12,644

As of December 31, 2015 and 2014, the Company had $24,000 and $668,000, respectively, in reserves against its inventories.

Deferred Cost of Product Revenues

Deferred Cost of Product Revenues

Deferred cost of product revenues are stated at the lower of cost or net realizable value and include product sold where title has transferred but the criteria for revenue recognition have not been met. As of December 31, 2015 and 2014, the Company recorded deferred cost of product revenues of $1,596,000 and $1,797,000, respectively, including deferred cost of product revenues to related parties of $79,000 and $333,000, respectively.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The Company generally uses the following estimated useful lives for each asset category:

ASSET CATEGORY	ESTIMATED USEFUL LIFE
Building		30 years
Computer equipment		2-3 years
Machinery and equipment		3-20 years
Office equipment		3-5 years
Furniture		3-5 years
Leasehold improvements		Shorter of lease term or useful life
Software		3 years

Amortization of assets under capital leases is included in depreciation expense. Maintenance, repairs and minor renewals are expensed as incurred. Expenditures that substantially increase an asset’s useful life are capitalized.

Deferred Financing Costs

Deferred Financing Costs

Deferred financing costs, net include fees and costs incurred to obtain long-term financing. The costs are being amortized over the terms of the respective loans on a basis that approximates level yield. Unamortized deferred financing costs are written-off when debt is retired before the maturity date. Upon the amendment or termination of a debt agreement, unamortized deferred financing costs are accounted for in accordance with ASC 470-50-40, Debt Modifications and Extinguishments (“ASC 470-50-40”). As of December 31, 2015, $104,000 and $452,000 of deferred financing costs were recorded as a component of current and non-current other assets, respectively, and are being amortized to interest expense. As of December 31, 2014, $172,000 and $269,000 of deferred financing costs were recorded as a component of current and non-current other assets, respectively, and are being amortized to interest expense.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Impairment losses related to long-lived assets are recognized in the event the net carrying value of such assets is not recoverable and exceeds fair value. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). If the carrying amount of a long-lived asset (asset group) is considered is not recoverable, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. To date, the Company has not recognized any such impairment loss associated with its long-lived assets.

Revenue Recognition

Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. If contractual obligations, acceptance provisions or other contingencies exist which indicate that the price is not fixed or determinable, revenue is recognized after such obligations or provisions are fulfilled or expire.

Product revenues consist of revenues generated from sales of the Company’s products to distributors and direct customers, net of rebates and cash discounts. For sales of products made to distributors, the Company recognizes revenue either on a sell-in or sell-through basis depending on the specific facts and circumstances of the transaction(s) with the distributor. Factors considered include, but are not limited to, whether the payment terms offered to the distributor are structured to correspond to when product is resold, the distributor history of adhering to the terms of its contractual arrangements with the Company, whether the Company has a pattern of granting concessions for the benefit of the distributor and whether there are other conditions that may indicate that the sale to the distributor is not substantive.

In some cases, the Company recognizes distributor revenue as title and risk of loss passes, provided all other revenue recognition criteria have been satisfied (the “sell-in” method). For certain sales to certain distributors, the revenue recognition criteria for distributor sales are not satisfied at the time title and risk of loss passes to the distributor; specifically, in instances where “inventory protection” arrangements were offered to distributors that permitted these distributors to return to the Company certain unsold products, the Company considers the arrangement not to be fixed or determinable, and accordingly, revenue is deferred until products are resold to customers of the distributor (the “sell-through” method). As of December 31, 2015 and 2014, the Company recorded current deferred product revenues of $2,760,000 and $3,190,000, respectively, including current deferred product revenues from related parties of $168,000 and $660,000, respectively. The cost of product revenues associated with such deferral are also deferred and classified as deferred cost of product revenues in the consolidated balance sheets. Cash received from customers related to delivered product that may not represent a true sale is classified as customer refund liabilities in the consolidated balance sheets and the related cost of inventory remains in inventory in the consolidated balance sheets until the product is returned or is resold to customers of the distributor and revenue is recognized. During the years ended December 31, 2015, 2014 and 2013, 47%, 53% and 23%, respectively, of total revenues were recognized on a sell-through basis.

From time to time, the Company offers certain product rebates to its distributors and growers, which are estimated and recorded as reductions to product revenues, and an accrued liability is recorded at the later of when the revenues are recorded or the rebate is being offered.

The Company recognizes license revenues pursuant to strategic collaboration and distribution agreements under which the Company receives payments for the achievement of certain testing validation, regulatory progress and commercialization events. As these activities and payments are associated with exclusive rights that the Company provides in connection with strategic collaboration and distribution agreements over the term of the agreements, revenues related to the payments received are deferred and recognized over the term of the exclusive distribution period of the respective agreement. During the year ended December 31, 2015, the Company received payments totaling $750,000 under these agreements, and as of December 31, 2015, an additional $300,000 was included in accounts receivable. During the year ended December 31, 2014, the Company received payments totaling $500,000 under these agreements, and as of December 31, 2014, an additional $750,000 was included in accounts receivable. No payments were received under these agreements during the year ended December 31, 2013. During the years ended December 31, 2015, 2014 and 2013, the Company recognized $333,000, $232,000 and $193,000, respectively, as license revenues, excluding related party revenues.

The Company has a strategic collaboration and distribution agreement with Syngenta, an affiliate of a former beneficial owner of more than 5% of the Company’s common stock, Syngenta Ventures Pte. LTD (“Syngenta Ventures”). In connection with the Company’s public offering in June 2014, Syngenta Ventures sold 600,000 shares of the Company’s common stock, reducing its ownership percentage below 5%. Accordingly, revenue recognized under this agreement subsequent to June 2014 has not been included in related party revenues. During the year ended December 31, 2014, the Company recognized $333,000 of related party revenues under this agreement prior to Syngenta Ventures reducing its ownership stake. During the year ended December 31, 2013, the Company recognized $131,000 of related party revenues under this agreement.

As of December 31, 2015, the Company recorded current and non-current deferred revenues of $327,000 and $2,021,000, respectively, related to payments received under these agreements. As of December 31, 2014, the Company recorded current and non-current deferred revenues of $331,000 and $2,050,000, respectively, related to payments received under these agreements.

Research, Development and Patent Expenses

Research, Development and Patent Expenses

Research and development expenses include payroll-related expenses, field trial costs, toxicology costs, regulatory costs, consulting costs and lab costs. Patent expenses include legal costs relating to the patents and patent filing costs. These costs are expensed to operations as incurred. During the years ended December 31, 2015, 2014 and 2013, research and development expenses totaled $12,392,000, $18,110,000 and $16,918,000, respectively, and patent expenses totaled $1,108,000, $1,171,000 and $987,000, respectively.

Shipping and Handling Costs

Shipping and Handling Costs

Amounts billed for shipping and handling are included as a component of product revenues. Related costs for shipping and handling have been included as a component of cost of product revenues.

Advertising

Advertising

The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2015, 2014 and 2013 were $456,000, $557,000 and $760,000, respectively.

Share-Based Compensation

Share-Based Compensation

The Company recognizes share-based compensation expense for all stock options and restricted stock units granted to employees and directors based on estimated fair values.

The Company estimates the fair value of restricted stock units based on the closing bid price of the Company’s common stock on the date of grant.

The Company estimates the fair value of stock options on the date of grant using an option-pricing model. The value of the portion of the stock options that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. Forfeitures are estimated on the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company uses the Black-Scholes-Merton option-pricing model to calculate the estimated fair value of stock options on the measurement date (generally, the date of grant). The required inputs in the option-pricing model include the expected life of the stock options, estimated volatility factor, risk-free interest rate and expected dividend yield. These inputs are subjective and generally require significant judgment. During the years ended December 31, 2015, 2014 and 2013, the Company calculated the fair value of stock options granted based on the following assumptions:

	YEAR ENDED DECEMBER 31,
	2015	2014	2013
Expected life (years)	6.08	5.46-6.08	5.29-7.71
Estimated volatility factor	46%-47%	49%-71%	70%-75%
Risk-free interest rate	1.86%-1.93%	1.63%-2.05%	1.27%-2.11%
Expected dividend yield	—	—	—

Expected Life. Expected life represents the period that share-based payment awards are expected to be outstanding. The Company uses the “simplified method” in accordance with Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment (“SAB No. 107”), and SAB No. 110, Simplified Method for Plain Vanilla Share Options (“SAB No. 110”), to calculate the expected term of stock options determined to be “plain vanilla.” Under this approach, the expected term is presumed to be the midpoint between the vesting date and the contractual end of the stock option grant. For stock options granted with an exercise price not equal to the determined fair market value, the Company estimates the expected life based on historical data and management’s expectations about exercises and post-vesting termination behavior. The Company will use the simplified method until it has sufficient historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107 and SAB No. 110.

Estimated Volatility Factor. As the Company’s common stock has a limited trading history, the Company calculates the estimated volatility factor based on the trading history and calculated volatility of the common stock of comparable agricultural biotechnology companies.

Risk-Free Interest Rate. The Company calculates the risk-free interest rate based on the implied yield currently available on U.S. Treasury constant-maturity securities with the same or substantially equivalent remaining term as the expected life of the stock options.

Expected Dividend Yield. The Company has not declared dividends nor does it expect to in the foreseeable future. Therefore, a zero value was assumed for the expected dividend yield.

Estimated Forfeitures. The Company considers voluntary and involuntary termination behavior and actual stock option forfeitures when estimating forfeitures.

If, in the future, the Company determines that other methods for calculating these assumptions are more reasonable, or if other methods are prescribed by authoritative guidance, the fair value calculated for the Company’s stock options could change significantly. Higher volatility factors and longer expected lives result in an increase to the share-based compensation expense determined at the date of grant. Share-based compensation expense is recorded in the Company’s research, development and patent expense and selling, general and administrative expense.

Other Income (Expense), Net

Other Income (Expense), Net

Other income (expense), net primarily included net losses resulting from transactions in foreign currencies of $8,000, $47,000 and $53,000 during the years ended December 31, 2015, 2014 and 2013, respectively, gains on disposal of fixed assets of $39,000 during the year ended December 31, 2015 and losses on disposal of fixed assets of $243,000 and $231,000 during the years ended December 31, 2014 and 2013, respectively.

Income Taxes

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent that deferred tax assets cannot be recognized under the preceding criteria, the Company establishes valuation allowances, as necessary, to reduce deferred tax assets to the amounts expected to be realized. As of December 31, 2015 and 2014, all deferred tax assets were fully offset by a valuation allowance. The realization of deferred tax assets is dependent upon future federal, state and foreign taxable income. The Company’s judgments regarding deferred tax assets may change due to future market conditions, as the Company expands into international jurisdictions, due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the Company’s deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period in which such determinations are made.

The Company recognizes liabilities for uncertain tax positions based upon a two-step process. To the extent that a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the consolidated financial statements. If a tax position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s policy is to analyze the Company’s tax positions taken with respect to all applicable income tax issues for all open tax years in each respective jurisdiction. As of December 31, 2015 and 2014, the Company concluded that no uncertain tax positions were required to be recognized in its consolidated financial statements.

The Company recognizes interest and penalties related to income tax matters in income tax expense. No amounts were recognized for interest and penalties during the years ended December 31, 2015, 2014 and 2013.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss represents the net loss for the period adjusted for the results of certain changes to stockholders’ equity (deficit) that are not reflected in the consolidated statements of operations, if applicable. Net loss is the only component of the Company’s comprehensive loss for the periods presented.

Segment Information

Segment Information

The Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates resources to the business as a whole.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (Topic 842) Leases: Amendments to the FASB Accounting Standards Codifications (“ASU 2016-02”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Companies must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating ASU 2016-02 to determine the potential impact to its consolidated financial statements and related disclosures.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation and disclosure of financial instruments. Among other things, ASU 2016-01 (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (iv) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (v) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (vi) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vii) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, ASU 2016-01is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating ASU 2016-01 to determine the potential impact to its consolidated financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which amends the current requirement for organizations to present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet. Organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. ASU 2015-17 is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently evaluating ASU 2015-17 to determine the potential impact to its consolidated financial statements and related disclosures.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), which applies guidance on the subsequent measurement of inventory. ASU 2015-11 states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. The guidance excludes inventory measured using last-in, first-out or the retail inventory method. ASU 2015-11 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is not planning to early adopt ASU 2015-11 and is currently evaluating ASU 2015-11 to determine the potential impact to its consolidated financial statements and related disclosures.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. Upon adoption, the Company will reclassify debt issuance costs from prepaid expenses and other current assets and other assets as a reduction to debt and debt due to related parties in the consolidated balance sheets. The Company is not planning to early adopt ASU 2015-03 and does not anticipate that the adoption of ASU 2015-03 will materially impact its consolidated financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to evaluate for each annual and interim reporting period whether conditions or events give rise to substantial doubt that an entity has the ability to continue as a going concern within one year following issuance of the financial statements and requires specific disclosures regarding the conditions or events leading to substantial doubt. The new guidance is effective for annual and interim periods ending after December 15, 2016, with early adoption permitted. The Company is not planning to early adopt ASU 2014-15 and is currently evaluating ASU 2014-15 to determine the potential impact to its consolidated financial statements and related disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 provides new, globally applicable converged guidance concerning recognition and measurement of revenue. As a result, significant additional disclosures are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual and interim periods beginning on or after December 15, 2017, with early adoption permitted. Companies are allowed to transition using either the modified retrospective or full retrospective adoption method. If full retrospective adoption is chosen, three years of financial information must be presented in accordance with the new standard. The Company is not planning to early adopt ASU 2014-09 and is currently evaluating the alternative methods of adoption and the effect on its consolidated financial statements and related disclosures.

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Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Assets Measured at Fair Value on Recurring Basis

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):

	DECEMBER 31, 2015
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	3,750	$	3,750	$	—	$	—
	DECEMBER 31, 2014
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Assets
Money market funds	$	14,746	$	14,746	$	—	$	—

Schedule of Concentration of Credit Risk Percentage

Customers to which 10% or more of the Company’s total revenues are attributable for any one of the periods presented consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C
Year ended December 31,
2015		28	%		10	%		8	%
2014		30	%		4	%		13	%
2013		20	%		9	%		8	%

Customers to which 10% or more of the Company’s outstanding accounts receivable are attributable as of either December 31, 2015 or 2014 consist of the following:

	CUSTOMER A			CUSTOMER B			CUSTOMER C			CUSTOMER D
December 31, 2015		32	%		29	%		12	%		0	%
December 31, 2014		10	%		37	%		9	%		23	%

Schedule of Inventories, Net

Inventories, net consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Raw materials	$	5,110	$	5,692
Work in progress		1,044		1,150
Finished goods		2,910		5,378
Finished goods held at customers		—		424
	$	9,064	$	12,644

Summary of Property, Plant and Equipment Estimated Useful Lives

The Company generally uses the following estimated useful lives for each asset category:

ASSET CATEGORY	ESTIMATED USEFUL LIFE
Building		30 years
Computer equipment		2-3 years
Machinery and equipment		3-20 years
Office equipment		3-5 years
Furniture		3-5 years
Leasehold improvements		Shorter of lease term or useful life
Software		3 years

Fair Value Assumptions of Stock Options Granted

During the years ended December 31, 2015, 2014 and 2013, the Company calculated the fair value of stock options granted based on the following assumptions:

	YEAR ENDED DECEMBER 31,
	2015	2014	2013
Expected life (years)	6.08	5.46-6.08	5.29-7.71
Estimated volatility factor	46%-47%	49%-71%	70%-75%
Risk-free interest rate	1.86%-1.93%	1.63%-2.05%	1.27%-2.11%
Expected dividend yield	—	—	—

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Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

	DECEMBER 31,
	2015			2014
Land	$	1		$	1
Buildings		6,598			6,583
Computer equipment and software		522			522
Furniture, fixtures and office equipment		347			347
Machinery and equipment		15,964			15,519
Leasehold improvements		2,372			1,259
Construction in progress		3			1,023
		25,807			25,254
Less accumulated depreciation		(7,362	)		(5,088	)
	$	18,445		$	20,166

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Net Loss per Share (Tables)

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Schedule of Anti-dilutive Securities Excluded from Computation of Diluted Net Loss Per Share

The following table sets forth the potential shares of common stock as of the end of each period presented that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive (in thousands):

	DECEMBER 31,
	2015		2014		2013
Stock options outstanding		2,116		2,831		2,608
Warrants to purchase common stock		4,027		145		151
Restricted stock units outstanding		107		—		—

Computation of Common Shares Upon Exercise of Warrants and Basic and Diluted Net Loss Per Share

YEAR ENDED DECEMBER 31,
	2015			2014			2013
	(In thousands, except per share data)
Numerator:
Net loss	$	(43,728	)	$	(51,659	)	$	(31,242	)
Deemed dividend on convertible notes		—			—			(1,378	)
Net loss attributable to common stockholders	$	(43,728	)	$	(51,659	)	$	(32,620	)
Effect of potentially dilutive securities:
Convertible notes		—			—			(4,392	)
Warrants to purchase preferred stock		—			—			(840	)
Net loss for diluted net loss per share	$	(43,728	)	$	(51,659	)	$	(37,852	)
Denominator
Weighted average shares used for basic net loss per share		24,469			22,314			8,731
Effect of potentially dilutive securities:
Convertible notes		—			—			127
Warrants to purchase preferred stock		—			—			53
Weighted average shares outstanding for diluted net loss per share		24,469			22,314			8,911
Basic net loss per share:	$	(1.79	)	$	(2.32	)	$	(3.74	)
Diluted net loss per share:	$	(1.79	)	$	(2.32	)	$	(4.25	)

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Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2015

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	DECEMBER 31,
	2015		2014
Accrued compensation	$	999	$	1,348
Accrued severance		209		—
Accrued warranty costs		384		202
Accrued legal costs		915		301
Accrued SEC civil penalty (Note 12)		1,750		1,750
Accrued liabilities, other		1,432		2,720
	$	5,689	$	6,321

Schedule of Changes in Accrued Warranty Costs

Changes in the Company’s accrued warranty costs during the period are as follows (in thousands):

Balance at December 31, 2014	$	202
Warranties issued during the period		234
Settlements made during the period		(52	)
Balance at December 31, 2015	$	384

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Debt (Tables)

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Schedule of Debt Including Debt to Related Parties

Debt, including debt due to related parties, consists of the following (in thousands):

	DECEMBER 31,
	2015			2014
Term Loan (“Term Loan”) bearing interest at 7% per annum, payable monthly through April 2016, collateralized by all of the Company’s inventories, chattel paper, accounts receivable, equipment and general intangibles (excluding certain financed equipment and intellectual property). The Term Loan was repaid in August 2015.	$	—		$	183
Secured promissory notes (“October 2012 and April 2013 Secured Promissory Notes”) bearing interest at 18.00% per annum, payable monthly through October 2017, collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2015 and 2014 of $28 and $203, respectively		12,422			12,247
Secured promissory note (“June 2014 Secured Promissory Note”) bearing interest at prime plus 2% (5.25% as of December 31, 2015) per annum, payable monthly through June 2036, collateralized by certain of the Company’s deposit accounts and MMM LLC’s inventories, chattel paper, accounts, equipment and general intangibles		9,621			9,873
Senior secured promissory notes due to related parties (“August 2015 Senior Secured Promissory Notes”) bearing interest at 8% per annum, interest is payable biannually with principal payments due in increments at three, four and five years from the closing date, collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2015 of $4,212 (see Note 15)		35,788			—
Debt, including debt due to related parties		57,831			22,303
Less debt due to related parties		(35,788	)		—
Less current portion		(267	)		(12,636	)
	$	21,776		$	9,667

Schedule of Aggregate Contractual Future Principal Payments Due on Company's Debt Including Debt to Related Parties

As of December 31, 2015, aggregate contractual future principal payments on the Company’s debt, including debt due to related parties, are due as follows (in thousands):

Year Ended December 31,
2016	$	267
2017		12,732
2018		10,297
2019		10,313
2020		20,329
Thereafter		8,133
Total future principal payments		62,071

Consideration Received, Fair Values of Notes, Common Stock Warrants Issued and Calculation of the Gain on Extinguishment of Debt

The following table shows the consideration received, fair values of the notes and common stock warrants issued and calculation of the gain on extinguishment of debt for the $3,750,000 Notes (in thousands):

Consideration received
Fair value of October 2012 Subordinated Convertible Note	$	1,360
Cash		2,500
Total consideration received (a)	$	3,860
Notes and warrants issued
Principal balance of notes issued	$	3,750
Debt discount (1)		(291	)
Fair value of notes issued		3,459
Fair value of Additional Common Stock Warrants issued		352
Total fair value of notes and warrants issued (b)	$	3,811
Gain on extinguishment of debt (a—b)	$	49

⁽¹⁾  The amortization of this account is being recorded in interest expense in the consolidated statements of operations over the term of the arrangement.

Activity Related to Secured Promissory Note

Activity related to the October 2012 and April 2013 Secured Promissory Notes from December 31, 2014 through December 31, 2015 consisted of the following (in thousands):

	DECEMBER 31, 2014			ADDITIONS		AMORTIZATION OF DEBT DISCOUNT		PRINCIPAL PAYMENTS		DECEMBER 31, 2015
Principal	$	12,450		$	—	$	—	$	—	$	12,450
Debt discount related to the issuance of common stock warrants (1)		(106	)		—		94		—		(12	)
Discount related to the $3,750,000 Notes (1)		(97	)		—		81		—		(16	)
	$	12,247		$	—	$	175	$	—	$	12,422

⁽¹⁾  The amortization of this account is included in interest expense in the consolidated statements of operations and as non-cash interest expense in the consolidated statements of cash flows.

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Warrants (Tables)

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Summary of Information about Common Stock Warrants Outstanding

The following table summarizes information about the Company’s common stock warrants outstanding as of December 31, 2015 (in thousands, except exercise price data):

DESCRIPTION	ISSUE DATE	EXPIRATION DATE	NUMBER OF SHARES SUBJECT TO WARRANTS ISSUED		EXERCISE PRICE
In connection with June 2013 Credit Facility (June 2013 Warrants)	June 2013	June 2023(1)		27	$	8.40
In connection with August 2015 Senior Secured Promissory Notes (August 2015 Warrants)	August 2015	August 2023		4,000	$	1.91
				4,027

⁽¹⁾  The June 2013 Warrants expire upon the earlier to occur of (i) the date listed above; (ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any transfer of more than 50% of the voting power of the Company, reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (iii) a sale of all or substantially all of the assets of the Company unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise), hold at least fifty percent (50%) of the voting power of the surviving or acquiring entity.

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Common Stock (Tables)

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Reserved Shares of Common Stock for Future Issuances

As of December 31, 2015, the Company had reserved shares of common stock for future issuances as follows (in thousands):

	SHARES
Shares available for future grant under stock incentive plans		2,478
Stock options outstanding		2,116
Warrants to purchase common stock		4,027
Restricted stock units		107
		8,728

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Stock Option Plans (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Activity under Company's Stock Option Plans and Shares Available for Grant under Company's Stock Incentive Plans

The following table summarizes the activity under the Company’s stock option plans for the year ended December 31, 2015 (in thousands, except exercise price and remaining contractual life data):

	SHARES OUTSTANDING			WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL LIFE (IN YEARS)		AGGREGATE INTRINSIC VALUE
Balances at December 31, 2014		2,831		$	9.39		7.4	$	1,595
Options granted		145		$	1.61
Options exercised		(61	)	$	0.91
Options cancelled		(799	)	$	9.93
Balances at December 31, 2015		2,116		$	8.90		7.3	$	45
Vested and expected to vest at December 31, 2015		1,888		$	8.73		7.2	$	45
Exercisable at December 31, 2015		1,355		$	8.09		6.8	$	45

Stock Incentive Plan [Member]

Summary of Activity under Company's Stock Option Plans and Shares Available for Grant under Company's Stock Incentive Plans

The following table summarizes shares available for grant under the Company’s stock incentive plans for the year ended December 31, 2015 (in thousands):

	SHARES AVAILABLE FOR GRANT
Balances at December 31, 2014		1,086
Shares authorized		856
Options granted		(145	)
Options cancelled		799
Restricted stock units granted		(125	)
Restricted stock units forfeited		7
Balances at December 31, 2015		2,478

Restricted Stock Units (RSUs) [Member]

Summary of Restricted Stock Units Activity

The following table summarizes the activity of restricted stock units for the year ended December 31, 2015 (in thousands, except weighted average grant date fair value):

	SHARES OUTSTANDING			WEIGHTED AVERAGE GRANT DATE FAIR VALUE
Nonvested at December 31, 2014		—		$	—
Granted		125		$	1.23
Vested		(73	)	$	1.23
Forfeited		(7	)	$	1.23
Nonvested at December 31, 2015		45		$	1.23

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Capital Leases (Tables)

12 Months Ended

Dec. 31, 2015

Leases [Abstract]

Aggregate Contractual Future Minimum Lease Payments

As of December 31, 2015, the Company’s aggregate contractual future minimum lease payments on the capital leases are due as follows (in thousands):

	CAPITAL LEASES
Year Ended December 31,
2016		667
2017		19
Total minimum payments required		686
Less amount representing interest		(21	)
Present value of future payments		665
Less current portion		(647	)
	$	18

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Schedule of Non-Cancelable Lease Agreements

As of December 31, 2015, the Company’s aggregate contractual future minimum lease payments under non-cancelable lease agreements is as follows (in thousands):

	OPERATING LEASES
Year Ended December 31,
2016	$	1,029
2017		941
2018		949
2019		615
2020 and beyond		—
Total minimum payments required	$	3,534

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Schedule of Deferred Tax Assets

The temporary timing differences that give rise to the deferred tax assets are as follows (in thousands):

	DECEMBER 31,
	2015			2014
Components of deferred taxes:
Net operating loss carryforwards	$	62,255		$	47,723
Research and development tax credits		2,418			2,106
Other, net		4,296			3,899
Net deferred tax assets		68,969			53,728
Less valuation allowance		(68,969	)		(53,728	)
Net deferred tax assets	$	—		$	—

Reconciliation of Effective Income Tax Rate to US Federal Income Tax Statutory Rate

The provision for income taxes is different than the amount computed using the applicable statutory federal income tax rate with the difference for each year summarized below:

	DECEMBER 31,
	2015			2014
Federal tax benefit at statutory rate		34	%		34	%
State tax benefit, net of federal benefit		4			5
Interest expense		(1	)		(1	)
Share-based compensation expense		(1	)		(2	)
Other		(1	)		—
Adjustment due to change in valuation allowance		(35	)		(36	)
Provision for income taxes		—	%		—	%

Reconciliation of Beginning and Ending Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2015		2014
Balance at January 1	$	853	$	660
Increase related to prior year tax positions		—		—
Increase related to current year tax positions		129		193
Balance at December 31	$	982	$	853

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Quarterly Financial Information (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Summary of Quarterly Financial Information

Fiscal Year 2015:

	MARCH 31, 2015			JUNE 30, 2015			SEPTEMBER 30, 2015			DECEMBER 31, 2015
	(In thousands, except per share data)
Total revenues	$	2,056		$	3,357		$	2,475		$	1,913
Gross profit (loss)		58			363			135			(11	)
Net loss		(11,914	)		(10,985	)		(9,799	)		(11,030	)
Basic and diluted net loss per common share		(0.49	)		(0.45	)		(0.40	)		(0.45	)

Fiscal Year 2014:

	MARCH 31, 2014			JUNE 30, 2014			SEPTEMBER 30, 2014			DECEMBER 31, 2014
	(In thousands, except per share data)
Total revenues	$	2,704		$	3,134		$	2,200		$	1,098
Gross profit (loss)		911			423			(1,302	)		(334	)
Net loss		(10,315	)		(10,711	)		(14,400	)		(16,233	)
Basic and diluted net loss per common share		(0.53	)		(0.52	)		(0.59	)		(0.66	)

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Summary of Business, Basis of Presentation and Liquidity - Additional Information (Detail) - USD ($)		1 Months Ended		12 Months Ended
	Aug. 01, 2013	Jun. 30, 2014	Aug. 31, 2013	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Schedule Of Description Of Business [Line Items]
Date of incorporation				Jun. 15, 2006
Public offering, shares issued		4,575,000	5,462,500
Issuance of common stock under IPO to underwriters by selling stockholders			712,500
Public offering price of the shares sold in the offering		$ 9.50	$ 12.00
Total gross proceeds from IPO			$ 65,550,000
Aggregate net proceeds received			$ 56,105,000
Reverse stock split				1-for-3.138458
Reverse stock split, ratio	313.8458%
Total gross proceeds from issuance of common stock		$ 43,463,000
Proceeds from public offering, net of offering costs and underwriting commissions		$ 39,949,000		$ 0	$ 39,949,000	$ 56,105,000
Accumulated deficit				(203,576,000)	(159,848,000)
Working capital				23,144,000
Cash and cash equivalents				19,838,000	35,324,000	$ 24,455,000	$ 10,006,000
Debt excluding related parties				22,043,000
Debt due to related parties				35,788,000
Restricted cash				$ 1,856,000	$ 1,856,000
Debt agreements financial and non-financial covenants				As of December 31, 2015, the Company had working capital of $23,144,000, including cash and cash equivalents of $19,838,000. In addition, as of December 31, 2015, the Company had debt and debt due to related parties of $22,043,000 and $35,788,000, respectively, for which the underlying debt agreements contain various financial and non-financial covenants, as well as certain material adverse change clauses. If the Company breaches any of the covenants contained within the debt agreements or if the material adverse change clauses are triggered, the entire unpaid principal and interest balances would be due and payable upon demand. In addition, as of December 31, 2015, the Company had a total of $18,416,000 of restricted cash relating to these debt agreements (see Notes 6 and 15).The Company believes that its currently available resources will be sufficient to fund the Company’s cash requirements through at least December 31, 2015.
Cash balance requirement in promissory note				$ 15,000,000
IPO [Member]
Schedule Of Description Of Business [Line Items]
Public offering, shares issued			5,462,500
Additional Public Offering [Member]
Schedule Of Description Of Business [Line Items]
Public offering, shares issued		4,575,000
Over Allotment Option [Member]
Schedule Of Description Of Business [Line Items]
Public offering, shares issued		675,000

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Significant Accounting Policies - Assets Measured at Fair Value on Recurring Basis (Detail) - Money market funds [Member] - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Assets
Assets at fair value	$ 3,750	$ 14,746
Level 1 [Member]
Assets
Assets at fair value	$ 3,750	$ 14,746

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Significant Accounting Policies - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014
Significant Accounting Policies [Line Items]
Concentration risk, supplier	The active ingredient in the Company’s Regalia product line is derived from the giant knotweed plant, which the Company obtains from China. The Company’s single supplier acquires raw knotweed from numerous regional sources and performs an extraction process on this plant, creating a dried extract that is shipped to the Company’s manufacturing plant. A disruption at this supplier’s manufacturing site or a disruption in trade between the U.S. and China could negatively impact sales of Regalia. The Company currently uses one supplier and does not have a long-term supply contract with this supplier. Although the Company has identified additional sources of knotweed, there can be no assurance that the Company will continue to be able to obtain dried extract from China at a competitive price.
Receivables, written-off	$ 0	$ 0	$ 0
Allowance for doubtful accounts	0	0
Adjustment to inventory reserves	19,000
Adjustment of actual utilization of manufacturing plant	2,545,000
Adjustments to inventory reserve	695,000
Inventory write-off	0	894,000	205,000
Adjustment amount on actual utilization of the plant with normal capacity	0	890,000
Inventory write-down to net realizable value	0	270,000	$ 194,000
Reserves against inventories	24,000	668,000
Deferred cost of product revenues	1,596,000	1,797,000
Deferred cost of product revenues to related parties	79,000	333,000
Deferred financing cost current	104,000	172,000
Deferred financing cost non-current other assets	452,000	269,000
Current deferred product revenues	2,919,000	2,861,000
Current deferred product revenues from related parties	$ 168,000	$ 660,000
Percentage of total revenue recognized on sell-through basis	47.00%	53.00%	23.00%
Deferred payments received	$ 750,000	$ 500,000	$ 0
Received payments, included in accounts receivable	300,000	750,000
Recognized license revenues	333,000	232,000	193,000
Non-current deferred revenues	2,021,000	2,050,000
Research and development expenses	12,392,000	18,110,000	16,918,000
Patent expenses	1,108,000	1,171,000	987,000
Advertising costs	$ 456,000	$ 557,000	$ 760,000
Expected dividend yield	0.00%	0.00%	0.00%
Loss (gain) on disposal of fixed assets	$ (39,000)	$ 243,000	$ 231,000
Percentage of recognized uncertain tax position upon ultimate settlement	50.00%
Uncertain tax positions	$ 0	0
Interest and penalties related to income tax	0	0	0
Other Income (Expense), Net [Member]
Significant Accounting Policies [Line Items]
Losses from foreign currency transactions	8,000	47,000	53,000
Loss (gain) on disposal of fixed assets	(39,000)	243,000	$ 231,000
Strategic collaboration and distribution agreements [Member]
Significant Accounting Policies [Line Items]
Current deferred product revenues	327,000	331,000
Non-current deferred revenues	$ 2,021,000	$ 2,050,000
Sales revenue, net [Member] | Customer concentration risk [Member] | International [Member]
Significant Accounting Policies [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	9.00%	12.00%	16.00%
Sales revenue, net [Member] | Product concentration risk [Member]
Significant Accounting Policies [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	89.00%	91.00%	95.00%
Revenue Recognition [Member]
Significant Accounting Policies [Line Items]
Current deferred product revenues	$ 2,760,000	$ 3,190,000
Current deferred product revenues from related parties	168,000	660,000
Related Party Revenues [Member]
Significant Accounting Policies [Line Items]
Deferred payments received	$ 0	333,000	$ 131,000
Syngenta Ventures [Member]
Significant Accounting Policies [Line Items]
Recognized license revenues		$ 333,000	$ 247,000
Affiliate revenues percent				5.00%
Number of common shares sold				600,000
Maximum [Member]
Significant Accounting Policies [Line Items]
Receivables due period	120 days
Minimum [Member] | Syngenta Ventures [Member]
Significant Accounting Policies [Line Items]
Affiliate revenues percent				5.00%

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Significant Accounting Policies - Schedule of Concentration of Credit Risk Percentage (Detail) - Customer concentration risk [Member]	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Customer A [Member] | Sales revenue, net [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	28.00%	30.00%	20.00%
Customer A [Member] | Accounts receivable [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	32.00%	10.00%
Customer B [Member] | Sales revenue, net [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	10.00%	4.00%	9.00%
Customer B [Member] | Accounts receivable [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	29.00%	37.00%
Customer C [Member] | Sales revenue, net [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	8.00%	13.00%	8.00%
Customer C [Member] | Accounts receivable [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	12.00%	9.00%
Customer D [Member] | Accounts receivable [Member]
Concentration Risk [Line Items]
Customers accounted for percentage of company's total revenues and accounts receivable	0.00%	23.00%

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Significant Accounting Policies - Schedule of Inventories, Net (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Inventory [Line Items]
Raw materials	$ 5,110	$ 5,692
Work in progress	1,044	1,150
Finished goods	2,910	5,378
Inventories, total	$ 9,064	12,644
Customers [Member]
Inventory [Line Items]
Finished goods		$ 424

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Significant Accounting Policies - Summary of Property, Plant and Equipment Estimated Useful Lives (Detail)	12 Months Ended
	Dec. 31, 2015
Buildings [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	30 years
Leasehold Improvements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life, description	Shorter of lease term or useful life
Software [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	3 years
Minimum [Member] | Computer Equipment and Software [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	2 years
Minimum [Member] | Machinery and Equipment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	3 years
Minimum [Member] | Office Equipment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	3 years
Minimum [Member] | Furniture, Fixtures and Office Equipment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	3 years
Maximum [Member] | Computer Equipment and Software [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	3 years
Maximum [Member] | Machinery and Equipment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	20 years
Maximum [Member] | Office Equipment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	5 years
Maximum [Member] | Furniture, Fixtures and Office Equipment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, plant and equipment, estimated useful life	5 years

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Significant Accounting Policies - Fair Value Assumptions of Stock Options Granted (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Expected dividend yield	0.00%	0.00%	0.00%
Expected life (years)	6 years 29 days
Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Expected life (years)		5 years 5 months 16 days	5 years 3 months 15 days
Estimated volatility factor	46.00%	49.00%	70.00%
Risk-free interest rate	1.86%	1.63%	1.27%
Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Expected life (years)		6 years 29 days	7 years 8 months 16 days
Estimated volatility factor	47.00%	71.00%	75.00%
Risk-free interest rate	1.93%	2.05%	2.11%

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Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 25,807	$ 25,254
Less accumulated depreciation	(7,362)	(5,088)
Property, plant and equipment, net	18,445	20,166
Land [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1	1
Buildings [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	6,598	6,583
Computer Equipment and Software [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	522	522
Furniture, Fixtures and Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	347	347
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	15,964	15,519
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	2,372	1,259
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 3	$ 1,023

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Property, Plant and Equipment - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 3,510,000	$ 2,581,000	$ 976,000

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Net Loss Per Share - Schedule of Anti-dilutive Securities Excluded from Computation of Diluted Net Loss Per Share (Detail) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earning per share	107	0	0
Stock options outstanding [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earning per share	2,116	2,831	2,608
Warrants to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earning per share	4,027	145	151

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Net Loss Per Share - Computation of Common Shares Upon Exercise of Warrants and Basic and Diluted Net Loss Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Numerator:
Net loss	$ (11,030)	$ (9,799)	$ (10,985)	$ (11,914)	$ (16,233)	$ (14,400)	$ (10,711)	$ (10,315)	$ (43,728)	$ (51,659)	$ (31,242)
Deemed dividend on convertible notes											(1,378)
Net loss attributable to common stockholders									(43,728)	(51,659)	(32,620)
Effect of potentially dilutive securities:
Net loss for diluted net loss per share									$ (43,728)	$ (51,659)	$ (37,852)
Denominator
Weighted average shares used for basic net loss per share									24,469	22,314	8,731
Effect of potentially dilutive securities:
Convertible notes											127
Warrants to purchase preferred stock											53
Weighted average shares outstanding for diluted net loss per share									24,469	22,314	8,911
Basic net loss per share:									$ (1.79)	$ (2.32)	$ (3.74)
Diluted net loss per share:									$ (1.79)	$ (2.32)	$ (4.25)
Convertible Notes [Member]
Effect of potentially dilutive securities:
Effect of potentially dilutive securities											$ (4,392)
Warrants to Purchase Preferred Stock [Member]
Effect of potentially dilutive securities:
Effect of potentially dilutive securities											$ (840)

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Accrued Liabilities - Schedule of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Payables and Accruals [Abstract]
Accrued compensation	$ 999	$ 1,348
Accrued severance	209	0
Accrued warranty costs	384	202
Accrued legal costs	915	301
Accrued SEC civil penalty (Note 12)	1,750	1,750
Accrued liabilities, other	1,432	2,720
Accrued liabilities, total	$ 5,689	$ 6,321

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Accrued Liabilities - Additional Information (Detail) - USD ($)	1 Months Ended	12 Months Ended
	Aug. 31, 2015	Dec. 31, 2015	Dec. 31, 2014
Schedule Of Accrued Liabilities [Line Items]
Accrued severance expenses		$ 209,000	$ 0
James Iademarco [Member]
Schedule Of Accrued Liabilities [Line Items]
One-twelfth of prior base salary	$ 290,000
Salary rate entitlement	8.3333%
Employees' Separation Agreements [Member] | Research, Development and Patent [Member]
Schedule Of Accrued Liabilities [Line Items]
Severance expenses		180,000	258,000
Employees' Separation Agreements [Member] | Selling, General and Administrative [Member]
Schedule Of Accrued Liabilities [Line Items]
Severance expenses		115,000	$ 147,000
Mr. Iademarco Separation Agreement [Member]
Schedule Of Accrued Liabilities [Line Items]
Accrued severance expenses		209,000
Mr. Iademarco Separation Agreement [Member] | Selling, General and Administrative [Member]
Schedule Of Accrued Liabilities [Line Items]
Severance expenses		$ 313,000

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Accrued Liabilities - Schedule of Changes in Accrued Warranty Costs (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($)
Payables and Accruals [Abstract]
Beginning Balance	$ 202
Warranties issued during the period	234
Settlements made during the period	(52)
Ending Balance	$ 384

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Debt - Schedule of Debt Including Debt Due to Related Parties (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Debt	$ 57,831	$ 22,303
Debt due to related parties	35,788
Less current portion	(267)	(12,636)
Debt, less current portion	21,776	9,667
Debt	57,831	22,303
Secured Debt [Member] | April 2016 Term loan bearing interest at 7% [Member]
Debt Instrument [Line Items]
Debt	0	183
Debt	0	183
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt	12,422	12,247
Debt	12,422	12,247
Secured Debt [Member] | June 2014 Secured Promissory Note [Member]
Debt Instrument [Line Items]
Debt	9,621	9,873
Debt	9,621	$ 9,873
Secured Debt [Member] | August 2015 Senior Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt due to related parties	$ 35,788

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Debt - Schedule of Debt Including Debt Due to Related Parties (Parenthetical) (Detail) - Secured Debt [Member] - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2015	Aug. 31, 2015	Dec. 31, 2014
April 2016 Term loan bearing interest at 7% [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate		7.00%		7.00%
Debt instrument, payment terms		Payable monthly through April 2016
Debt instrument, repayment date		2015-08
October 2012 and April 2013 Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate		18.00%	18.00%	18.00%
Debt instrument, payment terms		Payable monthly through October 2017
Unamortized debt discount		$ 28		$ 203
June 2014 Secured Promissory Note [Member]
Debt Instrument [Line Items]
Debt instrument, prime rate	2.00%	2.00%
Debt instrument, interest rate		5.25%
Debt instrument, payment terms		Payable monthly through June 2036
August 2015 Senior Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate		8.00%
Debt instrument, payment terms		Payable biannually with principal payments due in increments at three, four and five years from the closing date
Unamortized debt discount		$ 4,212

XML

Debt - Schedule of Aggregate Contractual Future Principal Payments Due on Company's Debt Including Debt to Related Parties (Detail) $ in Thousands	Dec. 31, 2015 USD ($)
Debt Disclosure [Abstract]
2016	$ 267
2017	12,732
2018	10,297
2019	10,313
2020	20,329
Thereafter	8,133
Total future principal payments	$ 62,071

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Debt - Additional Information (Detail) - USD ($)				1 Months Ended					12 Months Ended
	Jun. 14, 2013	Apr. 10, 2013	Oct. 02, 2012	Sep. 30, 2015	Jun. 30, 2015	Jun. 30, 2014	Apr. 30, 2013	Oct. 31, 2011	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Aug. 31, 2015	Apr. 28, 2014	Apr. 14, 2014	Mar. 31, 2012	Jun. 30, 2011
Debt Instrument [Line Items]
Debt instrument borrowing amount											$ 6,529,000
Agent fee percentage									5.00%
Additional credit facility financing-related costs and primarily legal fees		$ 24,000							$ 304,000
Exercise price of the Common Stock Warrants									$ 8.40
Accrued interest on promissory notes		74,000
Warrants exercise price percentage									70.00%
Exercise price of warrants as percentage of common stock									70.00%
Common stock warrants issued to purchase common stock percentage									20.00%
Fair value of common stock warrants on issuance		465,000
Convertible debt instrument, face value																$ 514,000
Gain on extinguishment of debt							$ 49,000				$ 49,000
Funds borrowed									$ 3,700,000
Fair value of the Warrants at the date of issuance as deferred financing cost	$ 435,000
Repayment of line of credit						$ 4,687,000				$ 4,687,000
Required deposit balance									$ 1,856,000	1,856,000
Prepay percentage of outstanding principal loan									20.00%
Prepayment fee percentage									10.00%
Exceed percentage of principal payment									20.00%
Decrease percentage of prepayment fee									1.00%
Loan term for repayment									10 years
Current ratio									125.00%
Debt to worth ratio									400.00%
Percentage of loan to value ratio					70.00%
Level 3 [Member]
Debt Instrument [Line Items]
Fair value of debt									$ 23,457,000	$ 22,587,000
Level 3 [Member] | Fixed rate debt [Member]
Debt Instrument [Line Items]
Estimated market rate of interest									11.25%	11.25%
Level 3 [Member] | Variable rate debt [Member]
Debt Instrument [Line Items]
Estimated market rate of interest									5.25%	5.25%
June 2013 credit facility [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing limit									$ 7,000,000
Additional credit facility financing-related costs and primarily legal fees									$ 10,000
Credit facility expiry date									Jun. 30, 2014
Credit facility accrued interest									10.00%
Credit facility fee paid									2.00%
Revolving line of credit [Member]
Debt Instrument [Line Items]
Percentage of borrowings limited to qualifying accounts receivable								75.00%
Line of credit facility maximum borrowing limit								$ 500,000					$ 5,000,000	$ 3,000,000
Maximum [Member] | June 2013 credit facility [Member]
Debt Instrument [Line Items]
Amount permit to draw									$ 5,000,000
Common stock warrants [Member]
Debt Instrument [Line Items]
Debt discount		113,000
June 2013 warrants [Member]
Debt Instrument [Line Items]
Value of common stock in a sale of the Company or a qualified initial public offering									70.00%
Exercise price of the Common Stock Warrants									$ 8.40
Warrants expire date									Jun. 14, 2023
June 2013 warrants [Member] | Common stock warrants [Member]
Debt Instrument [Line Items]
Common stock warrants issued to purchase common stock percentage									10.00%
Term Loan Bearing Interest at 7.00% [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing limit															$ 500,000
Debt instrument, interest rate															7.00%
Debt instrument maturity date									Apr. 01, 2016
August 2015 Senior Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument, covenant compliance									As of December 31, 2014, the Company was in breach of certain of its covenants under the loan agreement as a result of its annual and quarterly reports not being filed within the prescribed time period and its being in breach of covenants on the October 2012 and April 2013 Secured Promissory Notes described above. In addition, effective September 30, 2015, the Company’s debt-to-worth ratio was greater than 4.0-to-1.0 as a result of the issuance of $40,000,000 in promissory notes in August 2015 as described in Note 15, which increased the Company’s debt while the Company continued to incur net losses, which decreased stockholders’ equity. However, in November 2015, the Company received a waiver from the Lender with respect to compliance with the requirements to (i) deliver annual financial statements (extended to November 15, 2015), (ii) maintain a current ratio greater than 1.25-to-1.0 (extended to December 31, 2015) and (iii) maintain a debt-to-worth ratio less than 4.0-to-1.0 (extended to December 31, 2016). The receipt of this waiver and the delivery of annual financial statements within the timeline prescribed in the waiver and the extension under the October 2012 and April 2013 Secured Promissory Notes cured the Company of being in breach of the covenants under the loan agreement.
Debt instrument issued, principal amount												$ 40,000,000
Secured Debt [Member]
Debt Instrument [Line Items]
Debt issued in partial consideration, cash		3,700,000
Secured Debt [Member] | October 2012 Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument borrowing amount			$ 7,500,000
Debt instrument borrowing terms									The October 2012 Secured Promissory Notes have an initial term of three years and can be extended for an additional two years in one year increments at the option of the Company. During the initial three-year term, the October 2012 Secured Promissory Notes bear interest at 12% per annum. If the term of the October 2012 Secured Promissory Notes is extended an additional year, the interest rate increases to 13% during the fourth year. If the term of the October 2012 Secured Promissory Notes is extended for an additional two years, the interest rate is 14% during the fifth year. Interest on the October 2012 Secured Promissory Notes is payable monthly through the initial maturity date of the loan which is October 2, 2015 or through any extension period. The principal and all unpaid interest are due on the maturity date, as may be extended.
Agent fee percentage				7.00%					5.00%
Additional fee percentage									1.00%
Unpaid Agent Fee									$ 261,000
Warrants issued to purchase common stock funded principal percentage									15.00%
Value of common stock in a sale of the Company or a qualified initial public offering									70.00%
Fair value of Common Stock Warrants									$ 282,000
Exercise price of the Common Stock Warrants									$ 8.40
Secured Debt [Member] | October 2012 Secured Promissory Notes [Member] | Minimum [Member]
Debt Instrument [Line Items]
Covenant requirements minimum cash balance									$ 5,000,000
Amount borrowed under amended loan agreement		7,500,000
Secured Debt [Member] | October 2012 Secured Promissory Notes [Member] | Maximum [Member]
Debt Instrument [Line Items]
Additional debt cash balance									$ 2,000,000
Increase in amount available under loan agreement		5,000,000
Secured Debt [Member] | October 2012 Secured Promissory Notes [Member] | Debt instrument maturity period year three [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate									0.00%
Secured Debt [Member] | October 2012 Secured Promissory Notes [Member] | Extended fourth year [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate									0.00%
Secured Debt [Member] | October 2012 Secured Promissory Notes [Member] | Extended fifth year [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate									0.00%
Secured Debt [Member] | April 2013 secured promissory note [Member]
Debt Instrument [Line Items]
Unpaid Agent Fee									$ 172,000
Fees amount									653,000
Additional credit facility financing-related costs and primarily legal fees									66,000
Additional debt issued under amendment		4,950,000
Debt issued in cash consideration and in partial conversion for cancellation of principal balance		1,250,000
Convertible debt, fair value							3,459,000
Debt instrument, additional borrowings		2,500,000
Promissory notes issued		3,750,000
Fair value of Additional Common Stock Warrants issued		352,000					352,000
Funds borrowed									$ 4,950,000
Secured Debt [Member] | April 2013 secured promissory note [Member] | Maximum [Member]
Debt Instrument [Line Items]
Amount borrowed under amended loan agreement		12,450,000
Secured Debt [Member] | October 2012 subordinated convertible note [Member]
Debt Instrument [Line Items]
Convertible debt instrument, face value		1,250,000
Convertible debt, fair value		$ 1,360,000					$ 1,360,000
Secured Debt [Member] | June 2014 Secured Promissory Note [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate									5.25%
Debt instrument maturity date									Jun. 30, 2036
Debt instrument borrowing amount						$ 10,000,000
Prime rate									3.50%
Debt instrument, prime rate						2.00%			2.00%
Debt instrument description									Promissory note ("June 2014 Secured Promissory Note") with the bank ("Lender") which bears interest at prime rate (3.5% as of December 31, 2015) plus 2.00% per annum
Maximum rate of interest						5.25%
Interest rate at end of period									0.00%
Debt instrument monthly payment									$ 64,390
Debt instrument date of payment									Jul. 31, 2014
Required deposit balance									$ 1,560,000
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate									18.00%	18.00%		18.00%
Debt instrument maturity date									Oct. 02, 2017
Secured Debt [Member] | August 2015 Senior Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate									8.00%
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Promissory notes issued									$ 0
Debt instrument, covenant compliance									As of December 31, 2014, the Company was in breach of its covenants under the October 2012 and April 2013 Secured Promissory Notes as a result of its failure to provide annual financial statements in a timely manner and as the Company was in breach of certain of its covenants under its June 2014 Secured Promissory Note as described below. However, in November 2015, the Company received an extension from the lending agent with respect to compliance with the requirements to deliver annual financial statements to the earlier of (i) November 15, 2015 or (ii) such time such financial statements are filed with the SEC. The covenant breach was cured in November 2015 as a result of delivering annual financial statements within the timeline prescribed in the extension and the waiver of certain of the Company’s covenants with respect to the June 2014 Secured Promissory Note

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Debt - Consideration Received, Fair Values of Notes, Common Stock Warrants Issued and Calculation of the Gain on Extinguishment of Debt (Detail) - USD ($)		1 Months Ended	12 Months Ended
	Apr. 10, 2013	Apr. 30, 2013	Dec. 31, 2013
Consideration received
Total consideration received		$ 3,860,000
Notes and warrants issued
Total fair value of notes and warrants issued		3,811,000
Gain on extinguishment of debt		49,000	$ 49,000
Secured Debt [Member] | October 2012 subordinated convertible note [Member]
Consideration received
Fair value of notes	$ 1,360,000	1,360,000
Notes and warrants issued
Fair value of notes	1,360,000	1,360,000
Secured Debt [Member] | April 2013 secured promissory note [Member]
Consideration received
Fair value of notes		3,459,000
Cash		2,500,000
Notes and warrants issued
Principal balance of notes issued		3,750,000
Debt discount		(291,000)
Fair value of notes		3,459,000
Fair value of Additional Common Stock Warrants issued	$ 352,000	$ 352,000

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Debt - Activity Related to Secured Promissory Note (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Debt, beginning balance	$ 22,303
Debt, ending balance	57,831
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Debt, beginning balance	12,247
Additions	0
Amortization of debt discount	175
Debt, ending balance	12,422
Principal payments	0
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member] | Principal [Member]
Debt Instrument [Line Items]
Debt, beginning balance	12,450
Additions	0
Amortization of debt discount	0
Debt, ending balance	12,450
Principal payments	0
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member] | Discount Related To Issuance Of Common Stock Warrants [Member]
Debt Instrument [Line Items]
Debt, beginning balance	(106)
Additions	0
Amortization of debt discount	94
Debt, ending balance	(12)
Principal payments	0
Secured Debt [Member] | October 2012 and April 2013 Secured Promissory Notes [Member] | Discount Related to the $3,750,000 Notes [Member]
Debt Instrument [Line Items]
Debt, beginning balance	(97)
Additions	0
Amortization of debt discount	81
Debt, ending balance	(16)
Principal payments	$ 0

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Debt - Activity Related to Secured Promissory Note (Parenthetical) (Detail)	Dec. 31, 2015 USD ($)
October 2012 and April 2013 Secured Promissory Notes [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Promissory notes issued	$ 0

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Preferred Stock - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Aug. 31, 2013	May. 31, 2012	Jun. 30, 2011	Aug. 31, 2008	Apr. 30, 2007
Class of Stock [Line Items]
Preferred stock, shares issued	0	0
Preferred stock, par value	$ 0.00001	$ 0.00001
Convertible notes payable					$ 514,000
Accrued interest					$ 5,000
Common stock, shares authorized	250,000,000	250,000,000	250,000,000
Preferred stock, shares authorized	20,000,000	20,000,000
Basis conversion of outstanding convertible preferred stock into common stock	1-for-1 basis
IPO [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized			20,000,000
Pre Amendment [Member]
Class of Stock [Line Items]
Common stock, shares authorized				12,745,000
Preferred stock, shares authorized				8,632,000
Post Amendment [Member]
Class of Stock [Line Items]
Common stock, shares authorized				12,936,000
Preferred stock, shares authorized				8,823,000
Series A Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares issued							1,484,000
Preferred stock, par value							$ 2.608
Preferred stock, shares authorized				1,489,000
Dividends declared	$ 0
Series B Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares issued						2,242,000
Preferred stock, par value						$ 4.849
Preferred stock, shares authorized				2,252,000
Dividends declared	0
Series C Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares issued					4,778,000
Preferred stock, par value					$ 5.317
Preferred stock, shares authorized				5,082,000
Dividends declared	$ 0

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Warrants - Summary of Information about Common Stock Warrants Outstanding (Detail) shares in Thousands	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Class of Warrant or Right [Line Items]
Number of shares subject to warrant issued | shares	4,027
Exercise price | $ / shares	$ 8.40
June 2013 warrants [Member]
Class of Warrant or Right [Line Items]
Issue date	2013-06
Expiration date	2023-06
Number of shares subject to warrant issued | shares	27
Exercise price | $ / shares	$ 8.40
August 2015 Warrants [Member]
Class of Warrant or Right [Line Items]
Issue date	2015-08
Expiration date	2023-08
Number of shares subject to warrant issued | shares	4,000
Exercise price | $ / shares	$ 1.91

XML

Warrants - Summary of Information about Common Stock Warrants Outstanding (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2013
Other Liabilities Disclosure [Abstract]
Voting power percentage	50.00%

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Common Stock - Additional Information (Detail) - $ / shares	Dec. 31, 2015	Dec. 31, 2014	Aug. 31, 2013
Equity [Abstract]
Common stock, shares authorized	250,000,000	250,000,000	250,000,000
Common stock, par value	$ 0.00001	$ 0.00001	$ 0.00001

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Common Stock - Reserved Shares of Common Stock for Future Issuances (Detail)	Dec. 31, 2015 shares
Class of Stock [Line Items]
Reserved shares of common stock for future issuances	8,728
Stock Incentive Plan [Member]
Class of Stock [Line Items]
Reserved shares of common stock for future issuances	2,478
Stock options outstanding [Member]
Class of Stock [Line Items]
Reserved shares of common stock for future issuances	2,116
Warrants to purchase common stock [Member]
Class of Stock [Line Items]
Reserved shares of common stock for future issuances	4,027
Restricted Stock Units (RSUs) [Member]
Class of Stock [Line Items]
Reserved shares of common stock for future issuances	107

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Stock Option Plans - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2015 USD ($) Installments $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares	Dec. 31, 2013 USD ($) $ / shares shares	Jul. 31, 2011 shares	Jul. 31, 2006 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options outstanding	2,116,000	2,831,000
Number of options weighted-average exercise price | $ / shares	$ 8.90	$ 9.39
Number of options exercised	61,000
Number of options canceled	799,000
Total intrinsic value of options exercised | $	$ 35,000	$ 6,302,000	$ 2,801,000
Estimated fair value of options vested | $	$ 4,950,000	$ 3,863,000	$ 1,314,000
Weighted-average estimated fair value of options granted | $ / shares	$ 0.75	$ 6.10	$ 10.35
Share based compensation expense recognized | $	$ 3,811,000	$ 4,555,000	$ 2,300,000
Unvested options granted to employees stock option plans | $	$ 3,273,000
2006 Equity incentive plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares authorized					1,434,000
Number of stock options exercised, subject to repurchase	0	0
Number of options outstanding	285,000
Number of options weighted-average exercise price | $ / shares	$ 1.01
Number of options vested	285,000
Number of options exercised	50,000
Number of options canceled	28,000
Stock incentive plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares authorized			1,600,000
Number of options outstanding	1,470,000
Number of options weighted-average exercise price | $ / shares	$ 10.78
Number of options vested	768,000
Number of options exercised	0
Number of options canceled	510,000
Percentage increase by number of shares of common stock outstanding			3.50%
Number of equal annual installments in which restricted stock units vest | Installments	5
2011 Stock plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares authorized				1,167,000
Number of options outstanding	361,000
Number of options weighted-average exercise price | $ / shares	$ 7.47
Number of options vested	302,000
Number of options exercised	11,000
Number of options canceled	261,000
Exercise of incentive stock options				2,446,000
Donald Glidewell [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested options granted to employees stock option plans | $	$ 0
Share-based Compensation Award, Tranche One [Member] | Stock incentive plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vesting percentage	25.00%
Restricted stock units granted vesting period description	Generally, options vest 25% on the first anniversary from the date of grant and 1/48 per month thereafter.
Stock options outstanding [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense recognized | $	$ 3,715,000	$ 4,555,000	$ 2,300,000
Tax benefit not realized | $	$ 0	0	0
Weighted average period of share based compensation expense recognized	1 year 10 months 24 days
Stock options outstanding [Member] | Donald Glidewell [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense recognized | $	$ 0	$ 266,000	$ 444,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense recognized | $	$ 96,000
Weighted average period of share based compensation expense recognized	4 months 24 days
Unrecognized share-based payment expense related to nonvested stock options | $	$ 50,000
Restricted Stock Units (RSUs) [Member] | Stock incentive plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock units granted vesting period description	On the date of grant, 7/12 of the restricted stock units vested immediately with 5/12 vesting equally over the five monthly anniversaries following the date of issuance of the award
Number of restricted stock units outstanding	107,000

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Stock Option Plans - Summary of Activity under Company's Stock Option Plans and Shares Available for Grant under Company's Stock Incentive Plans (Detail) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Outstanding, Beginning balance	2,831,000
Shares Outstanding, Options granted	145,000
Shares Outstanding, Options exercised	(61,000)
Shares Outstanding, Options canceled	(799,000)
Shares Outstanding, Ending balance	2,116,000	2,831,000
Shares Outstanding, Vested and expected to vest	1,888,000
Shares Outstanding, Exercisable	1,355,000
Weighted Average Exercise Price, Beginning balance	$ 9.39
Weighted Average Exercise Price, Options granted	1.61
Weighted Average Exercise Price, Options exercised	0.91
Weighted Average Exercise Price, Options canceled	9.93
Weighted Average Exercise Price, Ending balance	8.90	$ 9.39
Weighted Average Exercise Price, Vested and expected to vest	8.73
Weighted Average Exercise Price, Exercisable	$ 8.09
Weighted-Average Remaining Contractual Life	7 years 3 months 18 days	7 years 4 months 24 days
Weighted-Average Remaining Contractual Life, Vested and expected to vest	7 years 2 months 12 days
Weighted-Average Remaining Contractual Life, Exercisable	6 years 9 months 18 days
Aggregate Intrinsic Value	$ 45	$ 1,595
Aggregate Intrinsic Value, Vested and expected to vest	45
Aggregate Intrinsic Value, Exercisable	$ 45
Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Available for Grant, Beginning balance	1,086,000
Shares Available for Grant ,Shares authorized	856,000
Shares Available for Grant, Options granted	(145,000)
Shares Available for Grant, Options canceled	799,000
Shares Available for Grant, Restricted stock units granted	(125,000)
Shares Available for Grant, Restricted stock units forfeited	7,000
Shares Available for Grant, Ending balance	2,478,000	1,086,000

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Stock Option Plans - Summary of Restricted Stock Units Activity (Detail) - Restricted Stock Units (RSUs) [Member] shares in Thousands	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Schedule Of Activity Related To Restricted Shares And Restricted Share [Line Items]
Shares outstanding, Granted | shares	125
Shares outstanding, Vested | shares	(73)
Shares outstanding, Forfeited | shares	(7)
Shares outstanding, Ending balance | shares	45
Weighted average grant date fair value, Granted | $ / shares	$ 1.23
Weighted average grant date fair value, Vested | $ / shares	1.23
Weighted average grant date fair value, Forfeited | $ / shares	1.23
Weighted average grant date fair value, Ending balance | $ / shares	$ 1.23

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Capital Leases - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Capital Leased Assets [Line Items]
Amortization of capital leases	$ 1,567,000	$ 1,496,000	$ 470,000
Equipment [Member]
Capital Leased Assets [Line Items]
Property plant and equipment under capital leases	2,991,000	3,063,000
Property plant and equipment, accumulated amortization under capital leases	$ 2,457,000	$ 1,627,000

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Capital Leases - Aggregate Contractual Future Minimum Lease Payments (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Leases [Abstract]
2016	$ 667
2017	19
Total minimum payments required	686
Less amount representing interest	(21)
Present value of future payments	665
Less current portion	(647)	$ (1,839)
Capital lease obligations, less current portion	18	$ 185
Present value of future payments	$ 665

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Commitments and Contingencies - Additional Information (Detail)	1 Months Ended		12 Months Ended
	Apr. 30, 2014 USD ($) ft²	Sep. 30, 2013 USD ($) ft²	Dec. 31, 2015 USD ($) ft²	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Mar. 31, 2016 USD ($)
Commitments and Contingencies [Line Items]
Rental expense			$ 1,102,000	$ 1,134,000	$ 691,000
Commitment and contingencies civil penalty amount				$ 1,750,000
Subsequent Event [Member]
Commitments and Contingencies [Line Items]
Commitment and contingencies civil penalty amount						$ 1,750,000
Non-contiguous office space [Member]
Commitments and Contingencies [Line Items]
Office facility lease agreement | ft²			24,500
Non-contiguous office space [Member] | Minimum [Member]
Commitments and Contingencies [Line Items]
Leased office facilities expiration period			Feb. 28, 2014
Non-contiguous office space [Member] | Maximum [Member]
Commitments and Contingencies [Line Items]
Leased office facilities expiration period			Oct. 31, 2016
Office and laboratory space one [Member]
Commitments and Contingencies [Line Items]
Office facility lease agreement | ft²		27,300
Lease agreement period		60 months
Monthly base rent		$ 44,000
Initial base rent term		12 months
Percentage of annual increase in base rent		3.00%
Lease start date			Sep. 30, 2013
Lease commenced date			Aug. 31, 2014
Office and laboratory space two [Member]
Commitments and Contingencies [Line Items]
Office facility lease agreement | ft²	17,400
Monthly base rent	$ 28,000
Initial base rent term	60 months
Percentage of annual increase in base rent	3.00%

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Commitments and Contingencies - Schedule of Non-Cancelable Lease Agreements (Detail) $ in Thousands	Dec. 31, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2016	$ 1,029
2017	941
2018	949
2019	615
2020 and beyond	0
Total minimum payments required	$ 3,534

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Income Taxes - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Contingency [Line Items]
Federal research and development tax credit carryforwards			$ 151,000
Net deferred tax assets	$ 68,969,000	$ 53,728,000
Change in valuation allowance	15,241,000	18,459,000	12,869,000
Deferred tax asset excluded excess tax benefits from stock option exercises	2,096,000	2,092,000
Unrecognized tax benefits	$ 982,000	$ 853,000	660,000
Minimum [Member]
Income Tax Contingency [Line Items]
Income tax examination year	2006
Maximum [Member]
Income Tax Contingency [Line Items]
federal net operating loss carryforwards			$ 493,000
Income tax examination year	2014
California [Member] | Expire in 2016 [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 257,000
Net operating loss carryforwards, expiry period	2016
California [Member] | Expire in 2017 [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 1,744,000
Net operating loss carryforwards, expiry period	2017
Federal Income Tax [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 166,379,000
Net operating loss carryforwards, expiry period	2026
Research and development tax credit carryforwards	$ 1,889,000
Tax credit carryforwards, expiry period	2026
State [Member]
Income Tax Contingency [Line Items]
Research and development tax credit carryforwards	$ 2,027,000
State [Member] | California [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 107,329,000
Net operating loss carryforwards, expiry period	2016
State [Member] | California [Member] | Expire from 2028 through 2035 [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 105,328,000
State [Member] | California [Member] | Expire from 2028 through 2035 [Member] | Minimum [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards, expiry period	2028
State [Member] | California [Member] | Expire from 2028 through 2035 [Member] | Maximum [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards, expiry period	2035
Various Other States [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 39,050,000
Net operating loss carryforwards, expiry period	2016
Various Other States [Member] | Expire from 2028 through 2035 [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards	$ 39,050,000
Various Other States [Member] | Expire from 2028 through 2035 [Member] | Minimum [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards, expiry period	2028
Various Other States [Member] | Expire from 2028 through 2035 [Member] | Maximum [Member]
Income Tax Contingency [Line Items]
Net operating loss carryforwards, expiry period	2035

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Income Taxes - Schedule of Deferred Tax Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Components of deferred taxes:
Net operating loss carryforwards	$ 62,255	$ 47,723
Research and development tax credits	2,418	2,106
Other, net	4,296	3,899
Net deferred tax assets	68,969	53,728
Less valuation allowance	(68,969)	(53,728)
Net deferred tax assets	$ 0	$ 0

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Income Taxes - Reconciliation of Effective Income Tax Rate to US Federal Income Tax Statutory Rate (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Federal tax benefit at statutory rate	34.00%	34.00%
State tax benefit, net of federal benefit	4.00%	5.00%
Interest expense	(1.00%)	(1.00%)
Share-based compensation expense	(1.00%)	(2.00%)
Other	(1.00%)
Adjustment due to change in valuation allowance	(35.00%)	(36.00%)
Provision for income taxes	0.00%	0.00%

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Income Taxes - Reconciliation of Beginning and Ending Unrecognized Tax Benefits (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Beginning balance	$ 853,000	$ 660,000
Increase related to prior year tax positions	0	0
Increase related to current year tax positions	129,000	193,000
Ending balance	$ 982,000	$ 853,000

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Employee Benefit Plan - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, maximum employers contribution	3.00%
Defined contribution plan, additional matching contribution	50.00%
Defined contribution plan, vesting percentage	100.00%
Defined contribution plan, matching contribution amount	$ 330,000	$ 370,000	$ 294,000
Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, additional matching contribution percentage	3.00%
Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan, additional matching contribution percentage	5.00%

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Related Party Transactions - Additional Information (Detail) - USD ($)		6 Months Ended	12 Months Ended
	Aug. 20, 2015	Jun. 30, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Apr. 10, 2013
Related Party Transaction [Line Items]
Debt instrument principal amount, payable three years			$ 10,297,000
Debt instrument principal amount, payable four years			10,313,000
Debt instrument principal amount, payable five years			20,329,000
Debt due to related parties			35,788,000
Accrued interest due to related parties			1,175,000
Restricted cash and cash equivalents under covenants			16,560,000	$ 1,560,000
Additional credit facility financing-related costs and primarily legal fees			$ 304,000			$ 24,000
Number of common shares to be purchased from warrants			4,027,000
Warrants exercise price			$ 8.40
Revenue recognized on sell-through basis relating to product purchased			$ 492,000	1,154,000	$ 665,000
Deferred cost of product revenues to related parties			79,000	333,000
Current deferred product revenues from related parties			168,000	660,000
Recognized license revenues			$ 333,000	232,000	193,000
August 2015 Senior Secured Promissory Notes [Member] | Secured Debt [Member]
Related Party Transaction [Line Items]
Debt instrument, interest rate			8.00%
Debt due to related parties			$ 35,788,000
Unamortized debt discount			4,212,000
Tremont Group, Inc. [Member]
Related Party Transaction [Line Items]
Revenue recognized on sell-through basis relating to product purchased			492,000	821,000	418,000
Outstanding accounts receivable due			0	0
Deferred cost of product revenues to related parties			79,000	333,000
Current deferred product revenues from related parties			$ 168,000	660,000
Syngenta Ventures [Member]
Related Party Transaction [Line Items]
Affiliate revenues percent		5.00%
Common shares sold		600,000
Recognized license revenues				$ 333,000	$ 247,000
Syngenta Ventures [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Affiliate revenues percent		5.00%
Entities Affiliated with Waddell & Reed Financial, Inc. [Member]
Related Party Transaction [Line Items]
Affiliate revenues percent	5.00%
Warrants exercise price	$ 1.91
Warrants exercisable date	Aug. 20, 2023
Entities Affiliated with Waddell & Reed Financial, Inc. [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Number of common shares to be purchased from warrants	4,000,000
Entities Affiliated with Waddell & Reed Financial, Inc. [Member] | August 2015 Senior Secured Promissory Notes [Member]
Related Party Transaction [Line Items]
Debt instrument to be issued, principal amount	$ 40,000,000
Debt instrument, interest rate	8.00%
Debt instrument, frequency of periodic payment of interest			Semi-annually
Debt instrument principal amount, payable three years	$ 10,000,000
Debt instrument principal amount, payable four years	10,000,000
Debt instrument principal amount, payable five years	20,000,000
Debt due to related parties			$ 35,788,000
Unamortized debt discount			4,212,000
Debt due to related parties, fair value			34,923,000
Accrued interest due to related parties			$ 1,175,000
Additional credit facility financing-related costs and primarily legal fees	$ 302,000
Minimum percentage of acquisition of beneficial ownership considered as event of default	40.00%
Entities Affiliated with Waddell & Reed Financial, Inc. [Member] | August 2015 Senior Secured Promissory Notes [Member] | Secured Debt [Member]
Related Party Transaction [Line Items]
Fair value of Common Stock Warrants	$ 4,610,000
Entities Affiliated with Waddell & Reed Financial, Inc. [Member] | August 2015 Senior Secured Promissory Notes [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Restricted cash and cash equivalents under covenants	$ 15,000,000
Entities Affiliated with Waddell & Reed Financial, Inc. [Member] | August 2015 Senior Secured Promissory Notes [Member] | Level 3 [Member]
Related Party Transaction [Line Items]
Estimated market rate of interest			11.25%

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Reverse Stock Split - Additional Information (Detail)		12 Months Ended
	Aug. 01, 2013 shares	Dec. 31, 2015
Equity [Abstract]
Conversion of convertible preferred stock ratio	1
Reverse stock split		1-for-3.138458
Reverse stock split, ratio	313.8458%
Increased number of shares of common stock authorized for issuance	250,000,000
Increased number of shares of preferred stock authorized for issuance	20,000,000

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Public Offerings - Additional Information (Detail) - USD ($)	1 Months Ended		12 Months Ended
	Jun. 30, 2014	Aug. 31, 2013	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Subsidiary, Sale of Stock [Line Items]
Public offering, shares issued	4,575,000	5,462,500
Issuance of common stock under IPO to underwriters by selling stockholders		712,500
Public offering price of the shares sold in the offering	$ 9.50	$ 12.00
Total gross proceeds from IPO		$ 65,550,000
Aggregate net proceeds received		$ 56,105,000
Convertible preferred stock and warrants to common stock		8,514,000
Common stock issued upon cash exercise of common stock warrants		3,000
Convertible notes converted into common stock		3,741,000
Common stock issued upon net exercise of common stock warrants		47,000
Common stock, shares outstanding		19,133,000	24,536,000	24,465,000
Warrants to purchase common stock outstanding		151,000
Total gross proceeds from issuance of common stock	$ 43,463,000
Proceeds from public offering, net of offering costs and underwriting commissions	$ 39,949,000		$ 0	$ 39,949,000	$ 56,105,000
Over Allotment Option [Member]
Subsidiary, Sale of Stock [Line Items]
Public offering, shares issued	675,000
Series B Convertible Preferred Stock Warrants [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock issued upon cash exercise of common stock warrants		10,000
Series A and Series C Convertible Preferred Stock Warrants [Member]
Subsidiary, Sale of Stock [Line Items]
Convertible preferred stock and warrants to common stock		71,000

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Quarterly Financial Information - Summary of Quarterly Financial Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]
Total revenues	$ 1,913	$ 2,475	$ 3,357	$ 2,056	$ 1,098	$ 2,200	$ 3,134	$ 2,704	$ 9,801	$ 9,136	$ 8,446
Gross profit (loss)	(11)	135	363	58	(334)	(1,302)	423	911	545	(302)	1,203
Net loss	$ (11,030)	$ (9,799)	$ (10,985)	$ (11,914)	$ (16,233)	$ (14,400)	$ (10,711)	$ (10,315)	$ (43,728)	$ (51,659)	$ (31,242)
Basic and diluted net loss per common share	$ (0.45)	$ (0.40)	$ (0.45)	$ (0.49)	$ (0.66)	$ (0.59)	$ (0.52)	$ (0.53)

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Subsequent Event - Additional Information (Detail) - California [Member]		12 Months Ended
	Jan. 19, 2016 USD ($) ft²	Dec. 31, 2015
Subsequent Event [Line Items]
Sublease description		The initial term of the sublease is for a period of approximately 43 months and commenced on February 1, 2016. The monthly base rent is approximately $5,000 per month for the first 12 months with a 5% increase each year thereafter
Subsequent Event [Member]
Subsequent Event [Line Items]
Area of vacant space as per lease agreement | ft²	3,800
Sublease term	43 months
Monthly rent per month | $	$ 5,000