🆙 Accident de la vie définition – MARRONE BIO INNOVATIONS 10-K: le 31 décembre

By | mars 29, 2019




















Obtenez Wall Street StreetInsider Premium. Ici, vous pouvez demander un essai gratuit de 2 semaines.


UNITED
ÉTATS

TITRES
ET COMITE DE GROUPE

Washington,
C.C. 20549

FORMULAIRE
K-10

(Mark
a)

[X] ANNÉE
RAPPORT SUR LE CHANGEMENT DES TITRES EN 1934 13

parce que
exercice clos le 31 décembre 2018

ou

[  ] TRANSITION
RAPPORT SUR LE CHANGEMENT DES TITRES EN 1934 13

parce que
la période de transition ________________ à ________________

commission
Numéro de dossier: 001-36030

Marrone
Bio Innovations, Inc.

(Corriger
le nom du déclarant tel que défini dans la Charte)

Delaware 20-5137161
(État ou autre
juridiction
(I. R.S. Employeur
inscription
ou organisation)
identification
Il n'est pas.)

1540
Drew Avenue, Davis, Californie 95618

(Adresse
bureaux exécutifs et code postal)

(530)
750-2800

(Recorder
numéro de téléphone avec indicatif régional)

titres
enregistré en vertu de l’alinéa 12 b) de la Loi:

département échange
sur lequel vous êtes inscrit
Les actions ordinaires,
0,00001 $ valeur faciale
Nasdaq Capital
marché

titres
enregistré en vertu de l'alinéa 12g) de la Loi: aucun

indiquer
coche si la personne inscrite est un émetteur expérimenté notoire, conformément à la règle 405 de la Loi sur les valeurs mobilières.

oui [  ] pas [X]

indiquer
vérifier si l'inscrit n'est pas tenu de soumettre un rapport en vertu de l'article 13 ou de l'article 15 (d) de la loi. oui [  ] pas [X]

indiquer
Vérifiez si le déclarant (1) a soumis tous les rapports soumis conformément à l'article 13 ou 15 de la bourse des valeurs mobilières.
Acte de 1934 au cours des 12 derniers mois (ou pour une période plus courte que le déclarant a dû déclarer);
et (2) ont été soumis à de telles obligations de déclaration au cours des 90 derniers jours. oui [X] pas [  ]

indiquer
Vérifier si le déclarant a soumis tous les fichiers de données interactifs requis par voie électronique
L'article 405 du règlement S-T (paragraphe 232.405 du présent chapitre) au cours des 12 derniers mois (ou pour une période plus courte t
le déclarant devait soumettre de tels fichiers). oui [X] pas [  ]

indiquer
coche si 405 ou S-K.
n'incluez pas l'autorisation finale ni les informations au mieux des connaissances du déclarant
de la forme 10-K. ou toute modification apportée au formulaire 10-K. [  ]

indiquer
vérifier que le déclarant est un grand déposant accéléré, un déposant accéléré, un déposant non accéléré, moins de rapports
entreprise ou une entreprise en croissance émergente. Voir "Filer accéléré", "Filier accéléré",
«Smaller Reporting Company» et «Emerging Growth Company» sont la loi sur les changes 12b-2. Par règlement.

Grand classeur accéléré [  ] Filer accéléré [X]
Pas un déposant accéléré [  ] Petite entreprise déclarante [X]
Société de croissance émergente [  ]

ha
entreprise émergente en croissance, cochez cette case si le déclarant a décidé de ne pas utiliser la période de transition prolongée
le respect des normes de comptabilité financière nouvelles ou révisées requises par l’article 13 a) de la loi sur les échanges. [  ]

indiquer
cochez la case pour indiquer que la personne inscrite est une société écran (conformément à l'article 12b-2 de la Loi). oui [  ] pas [X]

que
30 juin 2018, dernier jour du dernier trimestre complété de l'inscrit. t
99 473 099 $, calculés sur le prix de clôture des actions avec droit de vote et des actions avec droit de vote des filiales non subventionnées
actions cotées sur le marché des capitaux Nasdaq. Ce calcul n'inclut pas les actions de chaque action
un dirigeant, dirigeant et détenteur d’au moins 5% des actions ordinaires en circulation au 30 juin 2018. Ce calcul ne reflète pas
déterminer si ces personnes sont des filiales à d’autres fins.

indiquer
le nombre d'actions de chaque catégorie d'actions de l'émetteur à partir de la dernière date réalisable.

département part
En suspens le 18 mars 2019
Stock partagé, 0,00001 $
valeur nominale
110690532

DOCUMENTS
PAR RÉFÉRENCE

Certaines parties
La partie de la déclaration de procuration de l'inscrit relative à l'assemblée annuelle des actionnaires de 2018 est
le rapport annuel sur formulaire 10-K où il se trouve. Une telle déclaration de procuration devrait être soumise à la Securities and Exchange Stock Exchange.
La Commission doit, dans un délai de cent vingt jours à compter de la fin de l'exercice clos le 31 décembre 2018

TABLEAU
TABLE DES MATIÈRES

spécial
Note sur les déclarations prospectives et les noms commerciaux

cette
Le rapport annuel du formulaire 10-K contient un certain nombre de déclarations prospectives comportant un certain nombre de risques et d’incertitudes. prospective
les revendications peuvent être identifiées à l’aide des mots "serait", "peut", "veut", "peut",
"Espérance", "Crois", "Doit", "En avant", "Perspectives", "Ha",
“Futur”, “Intention”, “Plan”, “Estimation”, “Prévision”, “Potentiel”,
"Objectifs", "rechercher" ou "continuer", ainsi que des mots et expressions similaires, y compris
autres variantes de ces termes ou des termes indiquant des événements futurs. Ces déclarations prospectives sont: nos projets
cibler nos produits ou variantes de produits existants vers de nouveaux marchés, de nouvelles utilisations et de nouvelles applications; nos plans et attentes
augmentation des ventes de nos lignes de produits; nous sommes en mesure de développer, d’enregistrer et de commercialiser
Les nouveaux produits candidats apportent les nouveaux produits plus rapidement et à moindre coût à plus de catégories que les autres développeurs
produits phytopharmaceutiques, y compris projets pilotes de recherche, de développement et sur site; nous attendons la nouvelle inscription
produits et nouveaux produits et étiquettes étendues pour les produits existants; nous sommes convaincus que les défis auxquels sont confrontés les défis traditionnels sont
les pesticides chimiques continueront à se développer; nous sommes convaincus de la croissance des marchés et de la demande de produits biosourcés;
nous sommes convaincus de la pénétration de nos produits sur le marché et de notre compétitivité sur les marchés cibles; notre intention de maintenir
développer les canaux existants et nouveaux d'approvisionnement, de distribution et de distribution et élargir l'accès au marché; attentes concernant le potentiel
paiements futurs au titre d'accords de coopération et de développement stratégiques; nos plans et attentes en matière de dette;
par la direction, accès aux fonds d’actions, aux actions, au financement par emprunt, à la coopération stratégique
ou autrement; notre plan visant à accroître nos activités tout en améliorant notre efficacité, notamment en nous concentrant sur un nombre limité de produits
Les candidats doivent prendre des mesures pour réduire les coûts et élargir leur équipe de vente et de marketing; avec nos plans et attentes
pour la production et la production; nous prévoyons de travailler avec des tiers pour développer et commercialiser des produits à un stade précoce
candidats; notre intention est de continuer à consacrer des ressources importantes à notre propre technologie et à la recherche et au développement;
nous nous attendons à des ventes saisonnières et à l’impact des conditions météorologiques; nous sommes capables de protéger notre vie spirituelle
l'immobilier aux États-Unis et à l'étranger; nous sommes convaincus de l'impact de l'issue de certaines questions juridiques; attendu
impact de certains états comptables; notre capacité à utiliser les transferts; nos attentes en matière de risque de marché, y compris
les variations des taux d’intérêt, des fluctuations des taux de change et des prix des produits de base; attentes des futurs aspects réglementaires
limiter les produits ou composants de produits concurrentiels et les dépenses futures, les liquidités disponibles et les autres actifs financiers et financiers
résultats opérationnels. Ces déclarations reflètent notre vision actuelle des événements futurs et notre performance financière potentielle
et il existe des risques et des incertitudes qui peuvent considérablement différer de nos résultats et de notre situation financière réels
les conséquences prévues ou implicites des déclarations futures sous la forme 10K dans le rapport annuel. ces
Les facteurs incluent, mais ne sont pas limités à, la partie I – 1A. – Risques décrits dans la section "Facteurs de risque"
II – 7 – «Réunion de gestion et analyse de la situation financière et des résultats des opérations»,
ailleurs dans le rapport annuel du formulaire 10-K et dans d’autres documents que nous avons établis dans la déclaration américaine de titres et d’échanges
Commission (SEC). Ces déclarations prospectives sont basées sur les informations disponibles à ce jour.
Rapport annuel sur formulaire 10-K et nous n'avons aucune obligation (et nous rejetons explicitement une telle obligation) pour l'avenir
déclarations, qu’elles soient nouvelles ou non, sauf indication contraire dans la réglementation des valeurs mobilières.

que
Les termes "MBI", "Société", "nous", "nous" et les termes similaires utilisés dans la présente font référence à Marrone.
Bio Innovations, Inc., sauf indication contraire du contexte.

sauf
étant donné que le contexte exige le contraire, dans le présent rapport annuel, les références au formulaire 10-K font référence à nos familles de produits, telles que Regalia.
pour toutes les gammes de produits de la famille de produits, telles que Regalia Maxx, Regalia Rx ou Regalia SC, et toutes
Les distributeurs vendent de telles gammes de produits à l'international, telles que Sakalia TM, Sentry® ou Milsana®. Nos logos, Grandevo®,
Regalia®, Venerate®, Zequanox®, Haven®, Majestene®, Stargus®, Zelto®, AmplitudeTM, ennoblir
TM et les autres noms commerciaux, marques commerciales ou marques de service de Marrone Bio Innovations, Inc. sont la propriété
Bio Innovations, Inc. Ltd. Ce rapport annuel contient d'autres noms commerciaux, marques de commerce et marques de service sur le formulaire 10-K.
d'autres sociétés telles que Bio-Tam ® 2.0 et Jet-Ag ®. Nous ne souhaitons pas utiliser ou afficher d'autres sociétés
les noms commerciaux, marques commerciales ou marques de service qui représentent, soutiennent ou sponsorisent des relations avec ces sociétés.

PARTIE
Je

ARTICLE
MAGASIN 1

quoi
produits phytopharmaceutiques et phytosanitaires d'origine biologique. Les produits biosourcés sont constitués de micro-organismes naturels
par exemple des bactéries et des champignons et des extraits de plantes. Nos produits actuels ciblent les principaux marchés utilisant des pesticides chimiques traditionnels
y compris certains marchés de l’agriculture et de l’aquaculture où nos produits biologiques sont utilisés de manière traditionnelle ou alternative.
pesticides chimiques. Nous visons également de nouveaux marchés pour lesquels (i) il n’existe pas de pesticides chimiques classiques, ii
l'utilisation de pesticides chimiques conventionnels n'est pas souhaitable (y compris pour l'agriculture biologique) ni autorisée
pour des raisons sanitaires et environnementales, ou iii. considérant que le développement de la lutte antiparasitaire a réduit l'efficacité des médicaments conventionnels
pesticides chimiques. Six des sept familles de produits ont été approuvées par l’Environmental Protection Agency (EPA) des États-Unis.
Notre premier produit non EPA est Haven, le produit de santé végétale «biostimulant».
qui ne nécessite qu'un enregistrement officiel. Nous estimons que notre portefeuille de produits et notre portefeuille de produits actuels auront une incidence sur la norme mondiale croissante
Demande de produits efficaces, efficients et écologiques contre les parasites, augmentant les rendements et réduisant les rendements agricoles
tension.

quoi
nous vendons principalement nos produits sur le marché des pesticides et notre produit phytosanitaire, Haven, qui réduit le stress des plantes
sécheresse et soleil intense. Cinq lignes de produits phytopharmaceutiques disponibles dans le commerce pour Regalia, l’usine
maladies et croissance des plantes, Grandevo et Venerate, tous destinés au contrôle des insectes et des acariens, Majestene et plantes à gazon et ornementales
la marque opposée Zelto, le contrôle des nématodes et du Stargus et la culture série de la marque opposée Amplitude, la moisissure muqueuse et le blanc
Contrôle de l'outil. Ces produits peuvent être utilisés à la fois dans la production de cultures conventionnelles et biologiques et historiquement.
ils sont vendus à des cultures spéciales telles que les raisins, les agrumes, les tomates, les légumes, les noix, les légumes-feuilles et les plantes ornementales. Ban ben
En janvier 2017, nous avons signé un partenariat stratégique avec Albaugh, LLC (Albaugh) pour le traitement des semences.
est notre plate-forme pour notre produit Venerate, qui couvre la culture, y compris le coton, le soja et le maïs. Mai 2017, quoi
signé un accord avec Jet Harvest Solutions pour la distribution du biofongicide et du désinfectant Jet-Ag dans certaines régions
Les États-Unis Nous pensons que ces produits phytopharmaceutiques et phytosanitaires existants et leurs variantes, tels que Zelto
(Lancé en janvier 2018), peut être utilisé spécifiquement pour les plantes industrielles et institutionnelles, les pelouses et les plantes ornementales, à la maison et à la maison
utilisation dans les jardins ou à des fins vétérinaires, comme la vérification des vers, des fourmis, des mouches et des moustiques dans les écoles, les parcs, les terrains de golf et leurs environs
et d'autres espaces publics.

quoi
a développé Zequanox, une gamme de produits commerciaux que nous vendons au marché du traitement de l’eau. Zequanox sélectivement
inspecte les myes envahissantes qui causent des dommages importants aux infrastructures et à l'environnement d'un large éventail de tubes et d'eau libre
applications, y compris la production d'énergie hydroélectrique et thermoélectrique, les applications industrielles et les loisirs. continuer
pour la gestion des infections des mollusques et des crustacés et coopérer avec les centrales électriques et les installations industrielles, ainsi que l'intérêt du gouvernement
Zequanox pour aider à restaurer les écosystèmes de grands lacs infectés par les coquillages.

quoi
continuer à mettre en œuvre notre plan stratégique, qui concentre nos ressources sur le développement et la promotion de produits commerciaux,
promouvoir des produits candidats censés avoir le plus grand impact sur leur potentiel de croissance dans un proche avenir et étendre leur présence internationale;
la présence et le commerce international de nos produits. Nous continuons à nous concentrer sur la réduction des coûts et la conservation
augmentation de la trésorerie et de l'efficacité opérationnelle, suppression de la valeur des produits et de la gamme de produits et amélioration de notre support
le mouvement mondial de la durabilité, qui est la base des valeurs culturelles.

Ban ben
En termes de stratégie, nous nous concentrons sur les nouvelles ventes et le marketing, en accordant une plus grande attention aux grands producteurs.
notre domaine cible le plus élevé, les démonstrations agricoles, les formations et la formation aux produits tout en livrant nos produits
soutien technique aux ventes pour la croissance des ventes, les essais sur le terrain et le personnel de développement des démonstrations. parce que
les marchés en dehors des cultures spécialisées de grande valeur, telles que les plantes en série et les traitements de semences, s'efforcent d'élargir notre réseau
Partenaires centrés sur les distributeurs régionaux et nationaux aux États-Unis, au Canada et dans d'autres pays
qui offre une opportunité significative de générer des revenus dans un avenir proche. Nos efforts de recherche et développement se concentrent sur le support
produits de marchandise existants qui se concentrent sur la réduction des coûts de production, les méthodes de travail et une meilleure compréhension de la fabrication
support et réparation de préparations. Par conséquent, même si nous pensons avoir développé un solide portefeuille de nouveaux produits candidats,
Nous limitons actuellement nos efforts de développement interne à deux marqueurs de produits depuis le lancement de Haven et de Stargus / Amplitude.
En 2017 et Zelto en 2018: MBI-014, un bioherbicide basé sur le même microorganisme que Venerate et Majestene / Zelto.
En août 2018, nous avons soumis le biopesticide EPA et MBI-601 (Ennoble), qui produit des composés naturels gazeux.
en tant que "biofumigant" approuvé par l'EPA en novembre 2016. Nous recherchons la coopération en même temps
avec des tiers pour le développement et la commercialisation de candidats au pipeline en début de développement qui n'ont pas été sélectionnés
ressources internes importantes. Nous pensons que ces mesures, ensemble, sont les mieux placées pour continuer à réagir
tout en restant attachés à notre approche globale à long terme.

industrie
vue d'ensemble

Malware
et la santé des plantes est une industrie mondiale importante. Phillips McDougall, un cabinet de conseil indépendant estime que 2017 est
marché économique mondial des produits chimiques (protection des végétaux) avec un distributeur de 54,2 milliards de dollars, en hausse par rapport à 2,5% en 2016, d'abord avec l'Asie
16,3 milliards de dollars de ventes, suivis de 12,7 milliards de dollars en Amérique latine, 12,4 milliards en Europe et 10,7 milliards en NAFTA
et 2,1 milliards de dollars au Moyen-Orient et en Afrique. Le marché total des cultures, y compris les produits non phytosanitaires, est de 2,6%
61,5 milliards de dollars. Le coût et le temps requis pour commercialiser un nouveau pesticide chimique s’élève à plus de 286,0 millions de dollars et sa valeur moyenne
11 ans.

tandis que
Les estimations de l'industrie varient, nos recherches montrent que le marché mondial du traitement des semences dans lequel nous sommes entrés dans notre activité stratégique en 2017
En 2017, le partenaire d'Albaugh s'élevait à environ 5 milliards de dollars et est estimé à environ 5 milliards de dollars.
8-10% dans les cinq prochaines années. Cette catégorie de protection des végétaux devrait être le segment qui connaîtra la croissance la plus rapide dans les prochaines années
les insecticides constituent actuellement la plus grande partie de ce segment.

La plupart
Les marchés actuellement ciblés ou à planifier reposent principalement sur les pesticides chimiques classiques, régulateurs de croissance des plantes
et produits phytosanitaires complétés par l'utilisation de plantes génétiquement modifiées sur certains marchés agricoles. Généralement traditionnel
Les pesticides chimiques sont des matériaux synthétiques qui tuent ou inactivent directement les parasites. Certains produits chimiques peuvent également augmenter ou contrôler
croissance des plantes et autres effets sur la santé des plantes en l’absence de parasites et de maladies des plantes.

besoin
les bioproduits efficaces et respectueux de l'environnement continuent de se développer alors que les producteurs voient de plus en plus de bioproduits
les produits peuvent augmenter le retour sur leur investissement. Le marché mondial des biopesticides qui régule les organismes nuisibles avec des mécanismes non toxiques
y compris la prévention de la nutrition, l’arrêt du développement ou l’accouplement, évalués à 4,5 milliards de dollars en 2017 et prévus
En 2022, il a atteint 8,7 milliards de dollars, ce qui, selon BCC Research, correspond à un taux de croissance annuel composé de 14,0% sur la période.
firme indépendante d’études de marché. DunhamTrimmer, une firme d’études de marché, estime que le marché du biocontrôle (ou des pesticides) en 2017
3,3 milliards de dollars, taux de croissance annuel composé de plus de 17% d'ici 2020, comparativement à une croissance annuelle composée de moins de 6%
sur le marché mondial traditionnel de la protection des végétaux (ou de la protection des végétaux synthétiques). De même, le marché des biostimulants est ce que nous sommes
Il a rejoint Haven en 2017, enregistrant une croissance de 12 à 15% par an. Nous pensons que ces tendances continueront avec les avantages de l’utilisation biologique
les produits antiparasitaires et phytosanitaires sont plus largement connus.

coupe
protection

conventionnel
Production.
Les producteurs sont constamment mis au défi de répondre à la demande alimentaire mondiale croissante tout en réduisant la valeur négative
l'impact de la protection des végétaux et des pratiques de production sur les consommateurs, les ouvriers agricoles et l'environnement. Technologies dominantes
la protection des plantes est constituée des pesticides chimiques traditionnels et des plantes génétiquement modifiées. Les grandes entreprises agro-chimiques ont investi
Des milliards de dollars sont en cours de développement pour développer des plantes génétiquement modifiées résistantes aux parasites ou très tolérantes aux pesticides chimiques conventionnels.
Le marché des semences de plantes génétiquement modifiées était estimé à 21,4 milliards de dollars en 2017, selon Phillips, à 6,9%.
McDougall. En outre, le service international pour l’achat d’applications en agro-biotechnologie est un tiers.
organisation à but non lucratif, en 2017, 189,8 millions d'hectares (469 millions d'hectares) de plantes génétiquement modifiées ont été plantés
Dans 24 pays où les États-Unis, le Brésil, l'Argentine, le Canada et l'Inde sont les mieux plantés (dans cet ordre). Soja, maïs,
les plantations de coton et de colza ont poussé à l'extrême.

conventionnel
Les pesticides chimiques et les plantes génétiquement modifiées ont toujours été efficaces contre les parasites. Cependant, il grandit
les défis posés par les pesticides chimiques traditionnels tels que la résistance aux nuisibles et la protection de l'environnement, la sécurité des consommateurs et des travailleurs
préoccupations. Les autorités gouvernementales restreignent encore les producteurs, les distributeurs et les fabricants avec certaines restrictions ou interdictions
formes d'utilisation de pesticides chimiques conventionnels. Quelques pesticides chimiques conventionnels dans l'Union européenne ("UE")
Les produits ont été éliminés progressivement et au niveau local, où de nombreuses administrations municipales et de comtés ont interdit les ventes.
certains pesticides chimiques traditionnels qui augmentent la complexité de la commercialisation des entreprises de produits agrochimiques et
la conformité. Les consommateurs, les scientifiques et les groupes environnementaux ont également exprimé leurs préoccupations au sujet de la
plantes génétiquement modifiées, y compris la résistance aux parasites et la contamination par des plantes non génétiquement modifiées. Le consommateur en réponse
et les préoccupations du groupe environnemental et les limitations des pays importateurs, plusieurs acheteurs de produits alimentaires à grande échelle ont exigé
uniquement des plantes sous contrat génétiquement modifiées et un nombre important de chaînes de supermarchés et de transformateurs
et les principaux acheteurs de fruits, noix et légumes spéciaux introduisent des limites de résidus chimiques synthétiques limitant les pesticides
opportunités pour les producteurs proches de la récolte.

Ban ben
Un nombre croissant de producteurs mettent en œuvre des programmes de lutte intégrée contre les ravageurs
produits de lutte antiparasitaire à base biologique ainsi que les pratiques et techniques culturales, telles que
avec des pesticides chimiques conventionnels et des plantes génétiquement modifiées. Les pesticides biosourcés se développent
La composante des programmes de lutte intégrée peut être partiellement expliquée par les pesticides chimiques traditionnels et les problèmes génétiques actuels.
plantes modifiées.

organique
Production.
Les cultures certifiées biologiques telles que les aliments, le coton et les plantes ornementales sont fabriquées sans utilisation de synthèse
produits chimiques, modification génétique, ou toute autre bioinstruction ou falsification. En tant que tel, le nombre d'agriculteurs biologiques est limité
alternatives à la protection des plantes. Le département de l'agriculture des États-Unis ou l'USDA a approuvé la production et l'étiquetage nationaux
Normes pour les aliments biologiques commercialisées aux États-Unis à la fin de 2000. Ces normes ont contribué à la croissance de la production biologique
Aux États-Unis et dans d'autres pays, la consommation alimentaire a mis en œuvre des programmes similaires. Selon l'Organic Trade Association,
Organic Suppliers 'Union (États-Unis), les produits alimentaires et en fibres en 2017 se sont élevés à 49,4 milliards de dollars, dont 45,2 milliards de dollars
les ventes de produits alimentaires, représentant 5,5% des ventes totales de produits alimentaires. En 2017, les ventes d'aliments biologiques ont augmenté de 6,4%, seulement 1,1%.
augmentation des ventes totales de produits alimentaires. Recettes des fruits et légumes biologiques En 2016, les recettes ont atteint 16,5 milliards de dollars US en hausse de 5,3% par rapport à 2016
Selon une étude menée par un institut de recherche, les ventes d'aliments biologiques ont atteint 97 milliards de dollars en 2017, avec 69,8 millions d'hectares.
au nom de la Fondation pour l'agriculture au nom de la Fondation pour l'agriculture biologique. Nous croyons qu'il s'agit d'une demande croissante
il est principalement causé par des préoccupations concernant la sécurité alimentaire, les pesticides chimiques traditionnels et les effets nocifs sur l'environnement. t
plantes génétiquement modifiées.

eau
gestion

global
Selon Freedonia, la demande de produits de traitement de l'eau en 2017 était de 30,6 milliards de dollars, en hausse de 5,3% par an
Groupe, firme indépendante d’études de marché. La demande de produits chimiques de traitement de l'eau aux États-Unis devrait augmenter de 3,2%
7,5 milliards de dollars par an en 2019, pour un total de 15,5 milliards de dollars. Les espèces nuisibles envahissantes et indigènes se développent
est préoccupé par diverses applications telles que la production hydroélectrique et thermoélectrique, les applications industrielles,
eau, aquaculture, irrigation et loisirs. Cependant, le rejet de produits chimiques de traitement de l’eau pour ces parasites est très élevé
réglementés, et dans de nombreux cas – tels que les eaux libres et les habitats environnementaux sensibles – est traditionnelle
l'utilisation de produits chimiques est interdite.

un
Les dommages causés par les invasions de zèbres et de mollusques et crustacés obstruant les tuyaux, perturbant les écosystèmes, sont particulièrement préoccupants.
Découvrez l'infrastructure et la couverture tranchante. Ces espèces ont initialement infecté la région des Grands Lacs et
répandu aux États-Unis. Selon les rapports de l'industrie, ces obus causent des dommages d'environ 1,0 milliard de dollars
Dans certaines régions des États-Unis uniquement, les coûts d'audit associés sont annuels. Il existe un nombre limité d’options de traitement, beaucoup de
qui sont toxiques pour la flore et la faune aquatiques. À ce jour, la plupart des options de traitement sont axées sur la
mollusques et crustacés, qui prennent du temps et sont coûteux, ou traitements chimiques traditionnels potentiellement dangereux pour l'environnement
contrôlée par des organismes de réglementation.

la
Le marché du traitement de l'eau comprend des produits pour le traitement des algues, des mauvaises herbes et des micro-organismes indésirables. Par exemple, un
les méthodes les plus efficaces contre les algues et les micro-organismes indésirables sont la chloration. L'un des principaux problèmes
le chlore dans les eaux de surface, le chlore est combiné à divers composés organiques pour produire des sous-produits,
dont certains sont potentiellement cancérogènes.

autre
Marchés cibles

quoi
prendre des mesures stratégiques pour commercialiser les produits phytopharmaceutiques existants ou leurs variantes,
autres marchés. Bien que les pesticides chimiques traditionnels aient traditionnellement servi l'industrie et les institutions
marchés de la pelouse et des plantes ornementales, de la maison et de l'horticulture et de la médecine vétérinaire, utilisation limitée par la réglementation gouvernementale et rapports
Indique que les utilisateurs finaux évaluent de plus en plus des produits respectueux de l'environnement et que certains ménages sont disposés à renoncer à la lutte antiparasitaire
pleinement disponible si des alternatives aux pesticides chimiques conventionnels ne sont pas disponibles.

avantages
produits phytopharmaceutiques et produits phytosanitaires à base biologique

tandis que
Les pesticides chimiques classiques sont souvent efficaces pour lutter contre les organismes nuisibles, dont certains sont toxiques.
cancérogènes présumés, et certains peuvent avoir des effets néfastes sur l'environnement et d'autres animaux. Santé et environnement
Ces préoccupations ont conduit à une législation plus stricte sur l'utilisation de pesticides chimiques conventionnels, notamment en Europe, où
l'utilisation de certains pesticides chimiques hautement toxiques ou perturbant le système endocrinien est interdite ou strictement réglementée, et t
sont soumis à des normes réglementaires strictes pour les résidus de pesticides. En outre, l’UE a adopté la directive sur l’utilisation durable, t
qui impose aux États membres de l'UE de réduire l'utilisation de pesticides chimiques conventionnels et de recourir à des méthodes alternatives de lutte antiparasitaire
biológiai alapú kártevő-kezelési termékeket. Az elmúlt két évtizedben az USA szabályozó ügynökségei is fejlődtek
szigorúbb előírások és előírások. Továbbá a fogyasztói preferenciák növekvő változása az ökológiai és fenntartható élelmiszertermelés felé
számos nagy, globális élelmiszer-kiskereskedő vezette be az ellátási láncaikat, hogy hajtsák végre ezeket a gyakorlatokat, beleértve a bioalapú felhasználást is
kártevő-kezelés és műtrágya-megoldások, víz- és energiahatékonysági gyakorlatok és helyi élelmiszeripari termékek beszerzése.

Félre
az egészségügyi és környezetvédelmi szempontok miatt a hagyományos kémiai növényvédő szer-használók további kihívásokkal szembesülnek, mint például a kártevő ellenállása
és a munkavállalók termelékenységének csökkenése, mivel a munkavállalók a kezelés után bizonyos ideig nem térhetnek vissza a mezőkbe. Hasonló
kockázatok és veszélyek is előfordulnak a vízkezelési piacon, mint a klór és más, az invazív víz szabályozására használt vegyszerek
kártevők szennyezik és veszélyeztetik a természetes vízi utakat. A hagyományos kémiai peszticidek használatának költségei is növekednek a
számos tényező, beleértve a nyersanyagköltségeket, a szigorú szabályozási követelményeket és a kártevő ellenállást a hagyományos vegyi anyagokkal szemben
peszticidek, amelyek megkövetelik az alkalmazási arány növelését vagy a drágább alternatív termékek használatát.

Mint
a hagyományos kémiai peszticidek költsége nő, a hagyományos kémiai növényvédő szerek és a géntechnológiával módosított növények használata
a kormányzati szervek és a fogyasztók fokozott ellenállása, valamint a biológiai alapú növényvédelem és a növényegészségügy hatékonysága
a termékek szélesebb körben elismertek a termelők körében, a bioalapú növényvédő szerek egyre népszerűbbek és képviselik őket
erőteljes növekedési szektor a kártevőirtási technológiák piacán. A termelők egyre inkább beépítik a bioalapú kártevőt
a termékek irányítása az IPM-programokba, mivel elismerik, hogy a bioalapú termékek a terméshozam növelésével jobban meg tudják valósítani a programjaikat
valamint a beruházások minősége és megtérülése. A bioalapú növényvédő szerek segítenek létrehozni a fenntartható mezőgazdasági programok típusát
hogy a termelők és az élelmiszeripari vállalatok egyre inkább hangsúlyozzák.

la
Az EPA két fő kategóriában regisztrálja a biopesticidokat: i. Mikrobiológiai peszticidek, amelyek mikroorganizmusokat, például baktériumot tartalmaznak;
vagy gomba (halott vagy élő) hatóanyagként és (ii) biokémiai peszticidek, amelyek természetben előforduló anyagok.
ilyenek például a rovarok párosodó feromonok, bizonyos növényi kivonatok és zsírsavak, amelyek nem toxikus hatásúak. A biostimulánsok, amelyeket az EPA nem regisztrál, további kártevőirtás-mentességet jelentenek, a mikroorganizmusok vagy a természetes anyagok
mikroorganizmusokból vagy növényekből származnak, amelyeket a termesztők a növényi stressz csökkentésére használnak, a növények élettanának ösztönzésére a hozam növelése, kezelése
kártevő ellenálló képességét és csökkenti a kémiai maradékokat.

Sok
a biológiai alapú kártevők elleni védekezési termékek a hagyományos kémiai növényvédő szereknél is jobban teljesíthetnek. Ha forgatásban használják
vagy a hagyományos kémiai növényvédő szerekkel készült permetező tartálykeverékekben a biológiai alapú növényvédő szerek növelhetik a terméshozamot és
csak a kémiai programok ellen. A mezőgazdasági iparági jelentések, valamint a saját kutatásunk azt mutatják, hogy a bioalapú kártevő
a kezelési termékek befolyásolhatják a növényi élettan és a morfológiát olyan módon, amely javíthatja a terméshozamot és növelheti a hatékonyságot
hagyományos kémiai növényvédő szerek. Ezen túlmenően a kártevők ritkán alakulnak ki ellenállást a biológiai alapú kártevő-kezelési termékek miatt
komplex cselekvési módjaik. Hasonlóképpen kimutatták, hogy a bioalapú növényvédő szerek kiterjesztik a hagyományos termékek termékéletét
vegyi növényvédő szerek és korlátozza a kártevő-rezisztencia kialakulását, amely a hagyományos kémiai növényvédő szerek felhasználóinak kulcskérdése,
a hagyományos kémiai növényvédő szerek kezelésére képes kártevők eltávolításával. A legtöbb bioalapú növényvédő szer felsorolásra kerül
az ökológiai gazdálkodásban való felhasználásra, amely a termelőknek kényszerítő kártevő-szabályozási lehetőségeket biztosít a hozamok és a minőség védelme érdekében. Adott
általánosan alacsonyabb toxicitásuk számos hagyományos kémiai peszticidhez képest, a bioalapú növényvédő szerek hozzáadhatók
az időzítés és a munkavállalók újbóli belépési idejének rugalmassága és a munkavállalók biztonságának javítása. Számos bioalapú kártevő-kezelési termék
are also exempt from regulations limiting residues that apply to conventional chemical pesticides. Bio-based pest management products
may not be subject to restrictions by food retailers and governmental agencies limiting chemical residues on produce (“exempt
from tolerance”), 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 to, 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;
are exempt from
    residue restrictions applicable to conventional chemical pesticides in both the agriculture and water markets;
provide viable alternatives
    where conventional chemical pesticides and genetically modified crops are subject to regulatory restrictions;
meet stringent organic
    farming requirements;
comply with market-imposed
    requirements for pest management programs by food processors and retailers;
improve worker productivity
    by shortening field re-entry times after spraying and allowing spraying up to the time of harvest;
are less likely
to result in the development of pest resistance; et
are environmentally
    and bee friendly.

Ban ben
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; et
delay the development
    of pest resistance to conventional chemical pesticides.

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. Azonban,
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 seven commercially available product lines including five crop protection lines (Regalia, Grandevo, Venerate, Majestene/Zelto
and Stargus/Amplitude), our plant health product Haven, and Zequanox for water treatment. All of our products requiring EPA registration
have been approved. Haven, which is a plant health product designed to increase yield and quality, is not subject to EPA registration.
Regalia is also approved in Canada, ten Latin American countries (including Mexico, Brazil and Chile), South Africa, Turkey and
Morocco. As of May 2016, Grandevo and Venerate are also registered in Mexico. In December 2018, Stargus’ and Haven’s
registration submission were approved in Canada, and both registration decisions have been published by Canadian regulatory authorities
for public comment, which is the final step before the expected clearance for commercial sales of each product, which management
is expecting will occur during 2019. 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 seven 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 addition, in January 2017, we entered into a strategic collaboration with Albaugh, to reach the seed treatment
platform with our Venerate product, which expanded our reach to row crops including cotton, soybeans and corn, and in May 2017,
we entered into an agreement with Jet Harvest Solutions for us to distribute their Jet-Ag biofungicide/disinfectant in most of
the United States. 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
and plant health 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. From one microorganism a Burkholderia rinojensis bacterium that we isolated using our
discovery process, we have three major product lines, two of which are already commercial (Venerate for insect control and Majestene/Zelto
for nematode control) and one that is in development (MBI-014, a bioherbicide for weed control, submitted to the EPA in August
2018). 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 approved by the EPA in November 2016. We previously 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 a “nature identical” sarmentine compound at a cost that
would allow us to introduce the product to the market in the future.

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/Zelto, Stargus/Amplitude,
Haven 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, reducing manufacturing costs, 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 $286.0 million, and these products have historically taken an average
of eleven 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
stress from drought and salt. We then use various analytical chemistry techniques to identify and characterize the natural product
chemistry of the compounds produced by the microorganisms, which we optimize and patent. Four of our pipeline product candidates,
one of which is EPA-approved, are what we believe to be newly identified microorganism species. We believe that five of our products
produce novel compounds that we identified, and five of our products 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 received 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 Stargus/Amplitude 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 each average over 30 years of experience in their respective field of expertise 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 15 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

Increase
Market Penetration of New Products, Product Applications and Product Lines by Providing a Full Suite of Products per Crop

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 cycles and for a limited number of crop and pest applications. Ezek
growers, many of whom have unmet market needs, help us to troubleshoot and refine our products and to maximize their value proposition,
enabling 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/Zelto product lines to accelerate adoption of new products, product applications and product lines, including
Stargus/Amplitude and Haven. We believe a product portfolio that encompasses a range of grower needs from planting to bloom to
harvest 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 and to grow faster. Further, by offering and developing multiple products simultaneously,
we believe we 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 products 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 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, in 2017, our strategic partner, Albaugh, deployed the microbe in Venerate as part of their BIOST®
Seed Treatment Technology Platform (“BIOST”) for cotton, corn and soybean crops, and in January 2018, we launched
a formulation of Majestene as Zelto for turf and ornamental pests. In 2018 we launched the CG (Cultivated Garden) line for Regalia,
Grandevo and Venerate, which is targeted for cannabis growers, greenhouse flower and vegetable growers, gardeners and small farmers.
We believe we will continue to 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, turf, cannabis, forestry and public
health to help drive significant growth for our company.

Leverage
one Microbe into Multiple Product Categories

We
discover and develop more than one product line based on the same technology. Par exemple, un Burkholderia rinoiensis
microbe on which Venerate is based is also active against a broad range of nematodes, enabling development as our bionematicide
product, Majestene/Zelto, and, when fermented under different conditions, produces several herbicidal compounds, enabling development
as our bioherbicide product candidate, MBI-014. In addition, the Chromobacterium species on which Grandevo is based may
also yield a promising bionematicide product, which we have developed as MBI-304 with positive results, both as a seed treatment
and with in-furrow applications, over the course of three growing seasons. 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.

Cél
International Markets

Expanding
international sales is an important component of our growth strategy, but the global markets for pest management products are
intensely competitive and highly regulated. 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 are working with regional distributors
and distributors in key countries who have brand recognition and understand how to test and market biopesticides.

Leverage
Our Technology in Adjacent Markets through Collaborations

Our
microbial collection is rich with candidates that can be deployed as products for improving fertilizer efficiency and reducing
salt and drought stress. Our discovery screen 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. Two companies with established expertise in the water treatment sector are testing these microbes in consideration of
a possible collaboration; one has confirmed activity against algae and the other is in progress.

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. In 2017, we completed
a medium-scale granulation line for Grandevo WDG. We have shown 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, Majestene/Zelto and Haven and for spray-dried powder formulations of Grandevo and Zequanox. We are also developing
plans to expand our manufacturing facility capacity in order to handle increased production volumes for increased sales.

Our
Products

Commercially
Available Products

la
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

(liquid
        formulations)

Crop Protection,
    Home and Garden, Turf and Ornamentals
Plant Disease/Plant
    Egészség
Protects against
    fungal and bacterial diseases and enhances yields/quality
Commercially Available
    Domestically and Internationally

Grandevo

(dry
        formulations)

Crop Protection,
    Home and Garden, Turf and Ornamentals, Public Health, Forestry, Seed Treatment
Insects and Mites Controls a broad
    range of sucking and chewing insects through feeding
Commercially Available
    Domestically and Mexico; International Expansion Efforts Underway

Venerate

(liquid
        formulation)

Crop Protection,
    Home and Garden, Turf and Ornamentals, Animal Health, Forestry, Seed Treatment
Insects and Mites Controls sucking
    and chewing insects on contact
Commercially Available
    Domestically and Mexico; International Expansion Efforts Underway

Majestene

(liquid
        formulation)

Crop Protection,
    Turf and Seed Treatment
Plant Parasitic
    Nematodes
Controls soil-dwelling
    nematodes by preventing and reducing root galls, and by reducing adult reproduction and egg hatch
Commercially Available
    Domestically, International Expansion Efforts Underway

Stargus

(liquid
        formulation)

Crop Protection,
    Home and Garden, Turf and Ornamentals, Forestry, Seed Treatment
Plant Disease/Plant
    Egészség
Protects against
    fungal and bacterial diseases and enhances yields
Commercially Available
    Domestically and in Canada anticipated in 2019; Pending in Mexico; International Expansion Efforts Underway

Haven

(liquid
        formulation)

Crops,
    Home and Garden, Turf and Ornamentals
Sun
    stress/Plant Health/Quality

Reduces
        sun stress and dehydration and increases yields and quality

Commercially
    Available Domestically and in Canada anticipated in 2019

Amplitude

(liquid
        formulation)

Row
    Crop, Crop Protection, Seed Treatment
Plant Disease/Plant
    Egészség
Protects
    against white molds, soil diseases and other fungal and bacterial diseases and enhances yields
Commercially Available
    Domestically International Expansion Underway

Zequanox

(dry
        formulation)

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: Controls
    Plant Diseases, Improves Plant Health, Increases Yields
Commercially Available Domestically and Internationally

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 Mexico (citrus and tree fruit, berries, tomatoes, peppers, potatoes,
cucurbits, flowers, potatoes, mangoes, apples, avocado, citrus, papaya and grapes), Canada (tomatoes, grapes, strawberries, cucurbits,
apples, turf, blueberries, hops (emergency use), ornamental plants and wheat, with cannabis pending for 2019 approval), Brazil
(tomatoes, potatoes, dried beans, and melons, with lettuce, carrot, papaya, mango, watermelon, sweet pepper and grape pending
for 2019 approval), Chile (table and wine grapes, blueberries and walnuts with tomato, strawberry, peach, onion and lettuce pending),
Turkey (covered vegetables), Peru (grapes and quinoa), South Africa (grapes), Morocco (cucurbits, tomatoes and grapes), Tunisia
(tomatoes), Ecuador (flowers), and Panama, Dominican Republic, El Salvador, Guatemala, Nicaragua and Honduras (potatoes, tomatoes,
peppers, tobacco, cucurbits, beans, avocados, citrus, peanuts, papayas, coffee and strawberries). Registration efforts are currently
underway in China, with Regalia demonstrating efficacy in multiple government-conducted trials over a two- year period 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.

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 key compounds in the
plant extract, and we improved the bioavailability these compounds several times in subsequent, 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.
The European Patent Office (EPO) has granted a patent relating to the use of Reynoutria sachalinensis as either a plant
or seed growth promoter. 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 but was not compliant for organic listing. 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. While we previously submitted Regalia for registration in the EU, which is one of the largest fungicide
markets in the world, we recently withdrew the EU application due to Brexit and plan to resubmit using the Netherlands rather
than the United Kingdom (“UK”) as the designated rapporteur. In 2013, 2014 and 2015, we received EPA approval for
three new formulations (12%, 16% and 5%). A new 5% formulation, with better mixing and handling properties, was launched in the
United States in 2016. The 12% and 16% may be used for market segmentation in the future. The new alternative formulation of Regalia
5% eliminated 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. In 2018, we launched Regalia CG
for home gardeners, small farmers and cannabis growers.

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, Seed Treatment: Targets Insects and Mites
Commercially Available
    Domestically and in Mexico, 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”)
and some flies, such as the spotted wing Drosophila larvae. 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 activity against new
foliar and soil-borne pests in international markets where there are often different but related pests.

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. However, as of January 2018, the USDA has indicated that we are the only current licensee.
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 May 2016, Grandevo was approved in Mexico for use on tomatoes, peppers, potatoes, tobacco and berries, and local
sales and label expansion efforts have since commenced under a distribution partnership with AgriStar. Recently completed trials
in Mexico and Brazil against Asian citrus psyllid, the vector for citrus greening disease, demonstrate that Grandevo is an effective
tool for the citrus industry, and with this data completed, MBI has applied for a label expansion for this crop-pest combination
in Mexico. Grandevo CG was launched in 2018 for small farmers, home gardeners and cannabis growers in the United States.

Grandevo
has received completeness determination from the European Commission and the process began for the evaluation for Annex 1 listing
and commercialization in the EU, with a draft decision completed by the Netherlands in 2016 that recommended some new toxicology
and product characterization studies that were completed in 2018 and 2017. With new studies recently completed, MBI is currently
working with the Netherlands to finalize the risk assessment for Annex 1 listing of the active ingredient in Grandevo and to advance
the product for review by the European Food Safety Authority.

la
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-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.

la
additional studies being conducted to support EU registration was also used to support Grandevo registration in Canada and Brazil.

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 and in Mexico, 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. Továbbá,
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. Venerate was approved in Mexico and along with
Grandevo, is being distributed by AgriStar. As with Grandevo, Venerate has also shown to be effective against Asian citrus psyllid
in citrus, and AgriStar and MBI has accordingly, have applied for an expansion of the Mexican label for Venerate beyond its current
uses in tomatoes, peppers, strawberries, cole crops and potatoes. Venerate CG was launched in 2018 for small farmers, home gardeners
and cannabis growers in the United States.

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. Field trials of both Grandevo and Venerate again conducted in 2017
and 2016 indicated good control of corn rootworms and nematodes in corn and soybeans.

We
have received notice of allowance for a U.S. patent on the microorganism and received a patent on the natural product compounds
that demonstrate insecticidal and nematicidal activity, and have filed applications on product formulations containing the microorganism.

Ban ben
August 2016, we entered into a strategic collaboration with Albaugh to expand our reach into the row crop market, including crops
such as cotton, soybeans and corn, through Albaugh’s BIOST platform. The BIOST platform delivers a broad portfolio of highly
effective and proven biological seed treatments through proprietary formulations that utilize our Venerate product. We supply
Albaugh with Venerate, and Albaugh is responsible for the promotion, sale and services related to BIOST products.

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

Majestene
and Zelto

Bionematicide
Crop Protection, Ornamentals and Turf, Seed
    Treatment; Targets Plant Parasitic Nematodes
Commercially Available Domestically

Majestene/Zelto
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, pepper, squash, potato and banana. Usage for Majestene/Zelto 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 been issued a U.S. patent for use of the bacterial strain in Majestene/Zelto 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,
and launched the Zelto brand for turf and ornamentals in January 2018.

Stargus
and Amplitude

Biofungicide and
    Plant Health
Crop Protection,
    Home and Garden, Turf and Ornamentals, Forestry, Row Crops: Targets Plant Disease, Improves Plant Health
Commercially Available
    Domestically, Approved in Canada with commercialization anticipated in 2019; International Expansion Efforts Underway

Stargus/Amplitude
is based on microbial fermentations of a newly identified Bacillus nakamurai strain we isolated using our proprietary screening
platform with the “Stargus” brand targeted to most applications and “Amplitude” targeted at row crops.
Stargus/Amplitude is a biofungicides, targeting difficult to control plant diseases such as Sclerotinia white molds, gray
mold/bunch rot and downy mildews. We have identified different compounds, some of which are novel, produced by the microorganism
in Stargus/ Amplitude 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 received the EPA registration of Stargus/Amplitude in October 2017
and started sales in December 2017 in the Southeast United States and also in Arizona. 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. Trials
since that time continue to confirm efficacy against these diseases. We have also completed sufficient field trials in Europe
to support uses on potatoes, grapes and sugar beets, and anticipate submitting Stargus/Amplitude to the Netherlands, as our EU
rapporteur member state, in 2020. We are producing Stargus/Amplitude with a third-party manufacturer. Registrations are pending
in California and Mexico. Registration in Canada was approved in December 2018, and the PMRA decision has been published for public
comment. Commercial sales in Canada are expected to commence in 2019, once the public comment period closes and PMRA stamps the
final product label.

Haven

Plant Health
Crops, Turf and Ornamentals: Increases Yields
    and Quality
Commercially Available Domestically and Approved
    in Canada; International Expansion Efforts Underway

Haven
is a plant health product that is applied to the leaves of plants to reduce sun stress. In stressful environments, such as intense
sunlight or drought, crops lose yield and quality. Haven 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. Haven reflects light and heat from leaves, which lowers plant temperatures,
resulting in less stress to the crops and higher yields and quality. 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 deposit or residue on crops. Field trials in 2018 and 2016 demonstrated increased
yields, plant growth and/or quality of almonds, walnuts, apples, corn, tomatoes, blackberries, grapes and citrus. As a biostimulant,
Haven did not require EPA registration, but state submissions were made in the first quarter of 2017 and we launched Haven commercially
in March 2017. We received California approval in January 2018 and CFIA approval for Canada in December 2018, with the decision
currently out for public comment. Commercialization efforts are also underway in the European Union and Brazil.

Zequanox

Biomolluscicide
Water Treatment: Targets Invasive Mussels (In-Pipe
    and Open Water Habitat Restoration)
Commercially Available in United States and
    Canada, International Expansion Underway
USDA “BioPreferred” Program Certified
    Termék

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. In 2017, we
successfully treated a power plant in Illinois with periodic low dose applications that generated gross profit.

Nál nél
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. Ban ben
addition, we 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. Recently, 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 new development resources to Zequanox to market it full-scale and ramp revenues to their full potential.
We are working with selected power and industrial customers for in-pipe treatments. 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 (“GLRI”) 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. In 2016, the GLRI awarded a grant of more than $600,000 to support a
2017 large-scale, open water evaluation of Zequanox in Michigan. This “Tip of the Mitt” project is being jointly administered
by the U.S. Geological Survey and state and local government agencies in Michigan, with MBI serving as a technical collaborator
and provider of Zequanox to continue the project in 2019. In November 2017, we signed an exclusive distribution agreement with
Solenis. LLC, a large water treatment company, to distribute Zequanox for in-pipe treatments in the United States and Canada.
This agreement was not renewed in 2018.

Termék
Pipeline

Our
pipeline consists of product candidates in various stages of development, including products submitted to the EPA for registration
as well as other early-stage discoveries. We have implemented 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.

Under
Fejlesztés

MBI-601(Ennoble)

Biofumigant
Crop Protection, Home, Industrial: Targets Plant
    Disease, Nematodes and Insects
Under Development

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 (e.g., Fusarium, Verticillium
et Sclerotinia) 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 and received approval in November 2016. The product, Ennoble, is now registered in
several states and approval is pending in California. 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. In 2018 and 2017, field trials on
strawberry, celery and lettuce were successful, showing efficacy as good as or better than commercial standards such as Piclor,
a chemical fumigant. We are currently conducting additional field additional trials and demos in selected crops where we see the
best initial fit for commercial launch. In 2018, an organic strawberry grower confirmed the yield increase in an on-farm demonstration
with MBI-601. Our research and development team is continuing to work on reducing the application rate in the field and
reduce the manufacturing cost.

MBI-014

Bioherbicide
Crop Protection, Home and Garden, Turf: Targets
    Weeds
Under Development

MBI-014 (formerly referred to as MBI-010) is
based on the same species of bacteria used to produce Venerate and Majestene/Zelto, which we isolated using a proprietary discovery
process that identifies herbicides that inhibit a certain plant enzyme. MBI-014 produces several herbicidal compounds, some of
which are novel, which can kill the weeds when applied to the foliage or taken up by the roots or seeds. We are focusing MBI-014
on post-emergence applications (sprayed on the weeds after they emerge) against a range of weeds, including palmer amaranth and
water hemp that are resistant to leading conventional chemical herbicides, such as plyphosate. MBI-014 has also demonstrated a
novel mode of action (inhibiting histone deacetylase enzymes and disrupting the splicing of at least two genes involved in RNA
transcription), and some of its active compounds are transmitted systemically through the vascular structure of weeds. These compounds
were found by our USDA collaborators to be orders of magnitude more active than glyphosate, glufosinate and several other chemical
herbicide chemistries. We have filed a patent application with respect to the MBI-014 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-014 and certain
other bioherbicides. In 2016, we confirmed that MBI-014 can enhance glyphosate (the active ingredient in Monsanto Company’s
widely-distributed herbicide, Roundup), providing better control than glyphosate alone on glyphosate-resistant Palmer Amaranth,
otherwise known as pigweed. In August 2018, our application of MBI-014 to the EPA was submitted. Due to the large market potential
of MBI-014, our research and development team is working on new versions that are even more effective and lower cost. További
toxicology studies are also in progress. After an initial review, EPA requested additional information and testing before advancing
MBI-014 through its review process. We are currently conducting the additional studies necessary to address EPA questions and will
submit these data to EPA in 2019 or early 2020.

Más
Products and Candidates

Ban ben
May 2017, pursuant to an agreement with Jet Harvest Solutions, we began distributing Jet-Ag by Jet Harvest Solutions in most regions
of the United States. Jet-Ag is a sanitizer and biochemical fungicide that works on contact against numerous fungal and bacterial
plant pathogens.

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; et
MBI-302, a bionematicide candidate. We are also developing Stargus/Amplitude in combination with Regalia and a pre-mixture combination
of reduced risk fungicides with Regalia. We are seeking collaborations with third parties to develop and commercialize some 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, certain of which are being tested by third-party collaborators
for efficacy, 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.

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.

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

Felfedezés

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-014, a systemic bioherbicide, MBI-302 and MBI-303, bionematicides,
MBI-110, a biofungicide, 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 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 engaged in collaborations to source 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
árnyékolás
. 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 and genomics
. 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, potential effects of our products on target crops and information about the possible mode of action on the target
pest, which helps us better inform our customers how our products work. We also file additional patent applications based on the
results of these genetic identification processes.

Termék
Fejlesztés

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:

Fejlesztés
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 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
tesztelés
. 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, crop consultants, influential growers and food processors on larger acreages. For Zequanox, we worked
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

Ban ben
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 6 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 Great Lakes regions, with
an emphasis on high-value specialty crops (fruits, nuts and vegetables). We currently sell our crop protection product lines,
Regalia, Grandevo, Venerate, Majestene/Zelto and Stargus/Amplitude, as well as Haven, through leading agricultural distributors,
such as Nutrien Ag, Helena Chemical, Simplot, Wilbur Ellis and Aligned Ag Distributors. These are the same distribution partners
that most major agrichemical companies use for delivering solutions to growers across the country. We use Albaugh for distribution
of a version of Venerate for the seed treatment market in the United States and Canada. During 2016 through January 2018, we had
an exclusive distribution agreement with Koch Agronomic Services to distribute Regalia Rx in the United States and Canada. parce que
our water treatment product line, Zequanox, is currently being marketed and sold directly to a selected group of U.S. power and
industrial companies. We will continue to work with federal, state and regional agencies for open water use of Zequanox and may
consider working with private, commercial companies in the future.

Val vel
respect to sales outside of the United States, we have exclusive legacy international distribution agreements for Regalia with
major international distributors such as FMC (for certain markets in Latin America) and Syngenta (for specialty crop markets in
Europe). Our current strategy is to work with regional distributors and distributors in key countries who have brand recognition,
established customer bases, who can effectively conduct field trials and grower demonstrations with biopesticides and lead or
assist in regulatory processes and market development. As such, we have signed a number of distribution agreements: Agristar (for
Grandevo and Venerate in Mexico), Nufarm (for Grandevo for certain markets in New Zealand and Australia), Joacanima (for Regalia,
Grandevo, Venerate and Majestene in the Philippines), Elephant Vert and Kenya Biologics (for Regalia, Venerate, Grandevo and Majestene
in certain parts of Africa), Hoptri (Vietnam), Lidorr (Israel), AMC/Agrimatco (Turkey), Disagro (for a Regalia brand in certain
countries in Central America) and Kyung Nong Corporation (South Korea for Majestene and Venerate). We also distribute Jet-Ag by
Jet Harvest Solutions in most regions of the United States. We believe we can leverage our existing sales, marketing and distribution
network to bring in additional revenues from sales of these products, while enhancing our overall product portfolio.

We
derived approximately 93% and 87% of our total revenues from Regalia, Grandevo and Venerate for the years ended December 31, 2018
and 2017, 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, 2018, our top two distributors accounted for 52% 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:

Maintain
a focused and effective sales and marketing team that shares our values.
We were significantly negatively impacted by the
tenure of our former chief operating officer, who led our sales and marketing teams, and the departure of significant members
of our sales staff in the third quarter of 2014, as well as further departures in late 2017 and early 2018 due primarily to concerns
about our financial viability, we have rebuilt our sales and marketing teams, including hiring a highly experienced national sales
director to train and coach our sales force. In addition, we are now more effectively organizing the data and educational material
that we have amassed over ten 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 and educate distributors and growers. We believe that hiring and training
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 have invested in our
field development team to include more technical service activities to support sales. These concerted efforts to rebuild and train
our sales and marketing teams are yielding positive results, including growth in sales.

fejleszt
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.

Cél
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’ 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, podcasts, teach-ins, by-line articles 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.

fejleszt
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/Zelto, Haven, Stargus/Amplitude,
and 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 Regalia, Grandevo, Venerate, Majestene/Zelto, Stargus/Amplitude and Haven 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 and in parts of
the Midwestern United States and Canada for row crops and Venerate in the United States one of our nematicide/insecticides for
seed treatment. For the fast-growing Cannabis market, we have set up several specialty distributors and expect to add more. We
also are in discussions with consumer home and garden companies to distribute our products.

Manufacturing

Our
manufacturing processes are developed in-house at our Davis, California research and development facilities and transferred 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, ensuring quality, strengthening intellectual property security and
lowering manufacturing costs over time to achieve desired margins. The facility has room for expansion to install larger drying
capacity and larger fermenters to accommodate production of multiple products at significantly higher volumes. In 2017, we added
a granulation line for Grandevo WDG and purchased a packaging line, which was placed into service in the first half of 2018.

We
currently ferment our Grandevo and Zequanox products in our manufacturing facility but continue to 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, Majestene/Zelto, Stargus/Amplitude and Haven as a result of regulatory requirements that would require
additional capital investment to produce these products in-house. With necessary permitting now in place, we are currently working
on designs to adapt our fermenters to comply with regulatory requirements that will allow us to commence manufacturing Venerate
and Majestene/Zelto at our Bangor plant using existing capacity. Stargus/Amplitude is also made at a third-party vendor because
la Bacillus bacteria produce spores that are hard to contain and could contaminate our Grandevo and Venerate fermentations.
We intend to have fermentation of Bacillus at our plant at some point in the future, but will require a separate facility
from our other products.

We
anticipate ramping up production volumes as we expand the facility in the future. We expect to continue to utilize third-party
manufactures in North America and the EU for supplemental production capacity to meet excess seasonal demand. As needed, we will
also use our own facility or third parties to package and label products. We currently engage toll manufacturers to produce Haven
(launched in March 2017), Stargus/Amplitude (first sales in December 2017), and MBI-601 (for field and demonstration trials).
The active ingredient in our Regalia product line is derived from the giant knotweed plant, which is a food and medicinal plant
native to China and Japan. We have scaled production of Regalia using a reliable, single supplier that acquires raw knotweed from
numerous regional sources and performs an extraction process on this plant, following our specification. The resulting dried extract
is shipped to our manufacturing plant for formulations, 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 ingredient will be sufficient
to manufacture product to meet the next 6 months’ demand. Should we elect or be required to do so, we do not believe that
we would have substantial difficulty in finding alternative suppliers as we have identified and received quality knotweed from
a number of new possible suppliers, in the event additional inventory or diversified sourcing is necessary.

Kutatás
and Development

Mint
of December 31, 2018, we had 38 full-time equivalent employees dedicated to research and development and patent related activities,
7 of whom hold Ph.D. degrees, plus 6 field development personnel who focus on technical support and demonstration and research
field trials. Our research and development team has technical expertise in microbiology, molecular biology, 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 $10.7 million and $10.8 million for the years ended December 31, 2018 and 2017, respectively.

Intellectual
Property Rights

We
rely on patents and other proprietary right protections, including trade secrets and proprietary know-how, to preserve our competitive
pozíció. As of December 31, 2018, we had 42 issued U.S. patents and 294 issued foreign patents (of which 3 U.S. patents and 45
foreign patents were in-licensed), 19 pending U.S. provisional and non-provisional patent applications (of which 1 was in-licensed),
and 93 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, 2018, we have received 8 copyright registrations. As of December 31, 2018, we
had received 19 U.S. trademark registrations and had 14 trademark applications pending in the United States. As of December 31,
2018, we also had received 121 trademark registrations and had 48 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; et
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/Zelto and MBI-014, which are based on a Burkholderia bacterium,
with respect to which we have 51 issued patents and 17 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 6 issued patents and 7 pending patent applications
(both U.S. and foreign).

We
have also entered into in-license and research and development agreements with respect to the use and commercialization of Regalia,
Grandevo and Haven, as well as certain products under development, including 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 was related to a method of extraction of knotweed. The patents
we acquired or in-licensed for Regalia and Zequanox expired in 2017, such that we are no longer required to pay royalties on sales
of these products. We have filed separate patent applications with respect to both product lines and have been issued four U.S.
patents with respect to Regalia and five for Zequanox. In addition, the in-licensed U.S. patent for Grandevo is expected to expire
in or around 2024, but there are pending patent applications relating to Grandevo that could expire later than 2024, and we have
also filed separate patent applications for Grandevo of which six 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. Two U.S. patents have been issued on the synergistic combinations with biopesticides and conventional chemical
    pesticides, one patent has been issued on the new uses for soil and roots, and one patent has been issued on the new formulations
    of Regalia. The European Patent Office (EPO) has granted claims relating to the use of Reynoutria sachalinensis mint
    either a plant or seed growth promoter.

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
la Chromobacterium subtsugae bacteria, and for new uses and new formulations of our Grandevo product line. Five 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. The USDA informed us that we are the only current licensee for the patent with respect
    to the Chromobacterium subtsugae bacteria.
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. Four 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
szempontok

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, auxiliary plant substances, soil amendments, beneficial substances and/or
biostimulants in each of the fifty states.

Ban ben
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. Azonban,
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.

Ban ben
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. Külföldi
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.

We
also generally pursue organic certification, including USDA National Organic Program, Organic Materials Review Institute (OMRI),
EcoCert and Control Union, for our product portfolio. These certifications often entail a two to four-month review process and,
in many instances, require annual or semi-annual audits.

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, have and will continue to 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, including Haven, for which registrations
were submitted in the first quarter of 2017, 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. In January 2016, we launched a new formulation of Regalia disperses better in water and
is easier to mix and rinse from containers and spray equipment. Regalia is currently registered in all U.S. states and Puerto
Rico. We have also registered Regalia Maxx in Brazil, Mexico, Canada, Chile, Columbia, South Africa, Ecuador, Turkey, Panama,
El Salvador, Guatemala, Nicaragua, Honduras, Peru, the Dominican Republic, Morocco and Tunisia.

Ban ben
November 2011, we submitted an Annex 1 registration dossier to the EU. Our Regalia registration package completed initial review
by regulatory authorities in the UK, which was serving as lead for completing the Annex 1 (active substance) listing of Regalia
for the EU. Because the UK has indicated its intention to leave the EU, we have withdrawn the Regalia dossier and will resubmit
it using the Netherlands as the lead (rapporteur) country to continue the EU process. The EU regulatory process remains unpredictable
and slow, but recent EU decisions on guidance for botanical pesticides and a proposed new process for biopesticide approvals in
recent months indicate that the EU may become more invested in expediting the approvals of reduced risk biopesticides. Regalia
Maxx would be marketed as “Sakalia” by Syngenta throughout Europe and certain parts of the Middle East and Africa.

Ban ben
2016, we successfully completed regulatory field trials China, with good results on the targeted crops of grapes, strawberries,
cucurbits and tomatoes. A required second season of repeat field trials were conducted successfully in 2017, and we are currently
seeking a commercial partner in China to continue with the regulatory submission in China. Similarly, regulatory field trial efforts
to support product approvals or label expansions are underway by MBI or with our distribution partners in South Africa, Kenya,
Israel, Turkey, the Philippines and Vietnam. We continue to discuss additional distribution partnerships with other countries
in Asia, Africa and the Middle East.

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, in 2016, we received approval for registration dossier for Grandevo in Mexico. We conducted field trials
for Grandevo in Brazil, the Philippines, Vietnam, Australia, New Zealand, South Africa and certain West African countries, allowing
us to prepare the dossiers for submission in those countries. We have submitted Grandevo to the Netherlands for Annex 1 listing
review for Europe, and are working with the Netherlands to address issues raised in their science review to allow them to complete
their draft risk assessment and forward the Grandevo dossier to the European Food Safety Authority for EU-wide review and approval.
Additional studies and data generation to support the EU review will be conducted in 2019. Also, in 2017-2018, we conducted several
successful field trials in Brazil on a variety of insect pests, thus allowing us to submit the dossier to regulatory authorities.
We intend to submit Grandevo to Brazilian authorities in 2019.

Venerate.
In February 2014, the EPA granted approval for Venerate. Venerate is currently registered in 48 states and Puerto Rico, with registration
pending in Hawaii. Seed treatment uses are approved and sold under Albaugh’s BIOST brand. In 2014, we submitted Venerate
registration dossiers in Canada and Mexico, receiving approval in Mexico in 2016. We conducted field trials for Venerate in Brazil,
the Philippines, Vietnam, New Zealand, South Africa, and certain West African countries, allowing us to prepare the dossiers for
submission in those countries. Several key regulatory efficacy trials to support Venerate Annex 1 listing in Europe have been
completed and ongoing work, including additional toxicology studies we expect will be required will enable us to submit a dossier
for Venerate in 2018. We have conducted field trials in Brazil on a variety of insect pests are scheduling additional field trials
in 2019 and plan to submit a dossier to regulatory authorities in 2020.

Majestene/Zelto.
In October 2015, the EPA granted product registration for Majestene. Majestene/Zelto is currently registered in almost all
50 states, including key states of California, New York, Florida, Georgia, South Carolina, North Carolina, Wisconsin, Idaho, Washington
and Oregon. With additional efficacy trial data generated in 2016, we gained approval of an expanded crop label from most states
in 2017. We are conducting field trials to expand the crops uses in California to fruit trees and vines.

Stargus/Amplitude.
In October of 2017, the EPA granted approval for Stargus and Amplitude. They are registered in almost every United States,
with California pending. Canadian authorities announced their intention to approve Stargus in December 2018, and the decision
is now posted for public comment, with product registration anticipated in 2019. Stargus is pending in Mexico with regulatory
authorities there recently confirming (February 2019) that the product has been granted reduced-risk, “fast track”
review status. We are completing the dossier for EU submission of Stargus, as we have already conducted several efficacy trials
and are completing additional toxicology and physical-chemical testing needed to support the EU dossier. We anticipate submitting
Stargus to the Netherlands for Annex 1 listing review in 2020.

Haven.
Haven is registered by states but not the EPA. Haven has been cleared for commercialization and sale in all targeted states
in the United States for use on nut crops, grapes, berries, pome fruit, stone fruit, citrus, fruiting vegetables, bulb vegetables,
cucurbits, brassicas, leafy vegetables, strawberries and asparagus. In late December 2018, the Canadian Food Inspection Agency
announced its intent to approval Haven for use on grapes, tree fruit, nut crops and fruiting vegetables. MBI is also working on
commercialization of Haven in several EU countries and Brazil.

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.

Mint
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-”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

parce que
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.

la
pest management market is very competitive and is dominated by multinational chemical and life sciences companies such as UPL/Arysta,
BASF, Bayer, Corteva Agriscience (owned by DowDuPont), FMC, Monsanto (acquired by Bayer), Sumitomo Chemical and Syngenta (acquired
by ChemChina). 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 (owned by Bayer), Certis USA (owned by Mitsui & Co), Novozymes (in a joint venture with Monsanto)
and Valent Biosciences (subsidiary of Sumitomo Chemical) 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.

Ban ben
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

Mint
of December 31, 2018, we had 113 full-time equivalent employees, of whom 12 hold Ph.D. degrees. Approximately 38 employees are
engaged in research and development and patent related activities, 21 in sales and marketing (including 6 sales and field development
personnel who focus on technical support and demonstration and research field trials), 36 in operations, including manufacturing,
supply chain and quality assurance, and 19 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.

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.

kockázatok
Relating to Our Business and Strategy

We
have incurred significant losses to date and anticipate continuing to incur losses in the future, and we may not achieve or maintain
profitability.

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, 2018 and 2017, we had an accumulated deficit of $283.5 million and $265.6 million, respectively. parce que
the years ended December 31, 2018 and 2017, we had a net loss attributable to common stockholders of $20.2 million and $30.9 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, 2018, we have derived substantially all of our revenues from sales of Regalia, Grandevo and Venerate. Továbbá,
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, Majestene/Zelto, Haven, and Stargus/Amplitude as well as our ability to increase sales of Regalia, Grandevo
and Venerate and 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 our crop protection and plant health 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
our crop protection and plant health products 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 historical operating results as of December
31, 2018 indicate substantial doubt exists related to our ability to continue as a going concern for the 12 months from the issuance
of the accompanying financial statements. However, we believe that our existing cash and cash equivalents and restricted
cash of $19.8 million at December 31, 2018, together with expected revenues, net proceeds from expected future debt or
equity financings, and continued cost management will be sufficient to fund operations as currently planned for at least one year
from the date of the issuance of the accompanying financial statements. However, we cannot predict, with certainty, the outcome
of actions to grow revenues, obtain financing and/or manage or reduce costs. We have based this belief on assumptions and estimates
that may prove to be wrong, and we could spend our available financial resources less or more rapidly than currently expected.
We may continue to require additional sources of cash for general corporate purposes, which may include operating expenses, working
capital to improve and promote our commercially available products, advance product candidates, expand international presence
and commercialization, general capital expenditures and satisfaction of debt obligations. Management may seek additional capital
through debt financings, collaborative or other funding arrangements with partners, or through other sources of financing. Should
we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at
all. The actions discussed above cannot be considered probable of occurring and mitigating the substantial doubt raised by our
historical operating results and satisfying our estimated liquidity needs for 12 months from the issuance of the accompanying
financial statements. If we become unable to continue as a going concern, we may have to liquidate our assets, and stockholders
may lose all or part of their investment in our common stock.

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.

We
expect to continue to incur significant losses until we are able to significantly increase our revenue. Accordingly, we expect
to need significant additional financing to maintain and expand our business, including, for example, costs associated with increased
headcount, potential capital expenditures to grow capacity at our Bangor manufacturing facility and potential acquisitions of
complementary technologies, as well as to meet the financial covenants of and pay the principal and interest under our debt agreements,
under which approximately $21.4 million of principal and deferred interest payments remained outstanding as of March 18, 2019.
We intend to seek additional funds from public or private equity offerings, debt financings, strategic collaborations involving
up-front cash payments or other means. Additional capital may not be available on terms acceptable to us, or at all. Any additional
equity financing may be significantly dilutive to stockholders or, in some cases, require us to seek stockholder approval for
the financing, and debt financing, if available, may include restrictive covenants and bear high rates of interest. Továbbá,
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 provisions providing for
an event of default if there is a material adverse change in our financial condition or if we are in default under certain of
our other agreements. We are not in compliance with certain of these covenants and have received waivers from our lenders, none
whom have previously declared an event of default on our indebtedness. Breach of covenants included in our debt agreements,
which could result in the lenders demanding payment of the unpaid principal and interest balances. 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, which would have a material adverse effect upon our business and would likely
require us to seek to renegotiate these debt arrangements with the lenders, as 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.

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, Majestene in December 2015, Haven in March 2017 and Stargus/Amplitude in December
2017. However, while we have invested considerable resources in the launch of our products, various factors have impeded higher
growth in sales of these products.

parce que
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 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 in row crops and outside of the Unites States. Due to our strategic 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 2015 financial 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 continue expanding our sales and marketing infrastructure.

We
currently have limited sales and marketing experience and capabilities. As of December 31, 2018, we employed 21 full-time equivalent
sales and marketing personnel, 6 of whom focus on technical support and demonstration and conducting field trials and 7 of which
focus on marketing. The majority of these sales personnel were hired following the departures in the third quarter of 2014, including
our former chief operating officer, who led our sales and marketing teams, and significant members of our sales staff. Továbbá,
we believe that prior to the financing transactions we completed in the first half of 2018, concerns and rumors about our ability
to continue operations led to some turnover of our sales and marketing team, which we believe impacted our sales during that quarter
and could impact our sales in the near-term. New personnel require 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. There can be no
assurance that our field development 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.

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.

Ban ben
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/Zelto, Haven, Stargus/Amplitude and other products we are developing. We also are leveraging
these relationships to sell Jet-Ag in most U.S. regions. 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.

parce que
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 and key influencers (pest control advisors and university researchers), or 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. For example, a portion of our sales of Venerate are tied to Albaugh’s promotion, sales
and services related to products under its BIOST platform, in addition to the effectiveness of their proprietary blend, which
while containing Venerate, is developed by Albaugh and not by us. To the extent our distributors are unsuccessful in selling our
products to end users, or in marketing their own products that incorporate our products, they may purchase lower volumes from
us, which could have a material adverse effect on our business. In addition, our distributors may earn higher margins by selling
competing products or combinations of competing products. If we are unable to establish or maintain successful relationships with
independent distributors, we need to further develop our own sales and demand creation capabilities, which would be expensive
and time-consuming, and the success of which would be uncertain.

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, 2018 and 2017, our top two distributors accounted for 52% and 33%
of our total revenues, respectively. 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.

la
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.

Our
internal development efforts are limited to two product candidates: MBI-014, a bioherbicide that is based on the same microorganism
in Venerate and Majestene/Zelto, which we submitted to the EPA in August 2018; and MBI-601, a biopesticide that produces gaseous
natural compounds that functions as a “biofumigant,” which received EPA approval in November 2016. We are now focusing
on the MBI-014 submission and reducing the manufacturing cost of MBI-601. Simultaneously, we are seeking collaborations with third
parties to develop and commercialize 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. Ezek
risks include the possibility that any product candidate may:

be found unsafe;
be harmful to consumers,
    growers, farm workers or the environment;
be harmful to crops
    when used in connection with conventional chemical pesticides;
cause a major crop
    failure;
be ineffective or
    less effective than anticipated;
be displaced by
    new technologies;
fail to receive
    or take longer to receive necessary regulatory approvals;
be difficult to
    competitively price relative to alternative pest management solutions;
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; ou
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.

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.

la
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 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.

la
field testing, manufacture, sale and use of pest management products, including Regalia, Grandevo, Zequanox, Venerate, Majestene/Zelto,
Stargus/Amplitude 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/Zelto, Stargus/Amplitude, MBI-601, MBI-005 and MBI-011. As we introduce new formulations of and applications
for our products, we 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.

Néhány
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. As such, we view California as one of the most natural and attractive
markets for our products, but it is also very stringent in its regulations, generally requiring more time and effort, and lacking
legally mandated deadlines for its reviews of reduced-risk biopesticides. Therefore, gaining concurrent approvals with the EPA,
other states 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.

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

Termelés
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 acreages planted and incidence (or timing) of certain crop diseases or
pest infestations, each of which may reduce demand for our products. For example, since 2012, global warming has led all or parts
of the United States to experience abnormally low rainfall or drought relative to historical periods, reducing the incidence of
fungal diseases such as mildews and the demand for fungicides such as Regalia. These conditions have persisted or worsened particularly
in California and the Pacific Northwest, resulting in continued reductions in acreage planted throughout those regions. 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. Climate change has also led to increasingly
powerful hurricanes, which disrupt agriculture and significantly affected sales of crop protection products to Florida and Puerto
Rico in the third and fourth quarters of 2017.

Ban ben
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.

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.

Ban ben
recent years, we have increasingly had higher sales during the first half of the year than the second half, and expect this trend
to continue. However, the level of seasonality in our business may change due to a number of factors, including our expansion
into new geographical territories, the introduction of new products, the timing of introductions of new formulations and products,
the addition or changes to distributors or distributor programs and the impact of weather and climate change. It is possible that
our business may become more seasonal, or experience seasonality in different periods.

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. 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.

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.

la
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.

Ban ben
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.

la
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.

la
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 UPL/Arysta, BASF, Bayer, Corteva Agriscience (owned by DowDuPont), 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.

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 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 level staffing, 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. Továbbá,
we had significant turnover in our sales and marketing department during the fourth quarter of 2017, which we believe impacted
our sales during that quarter and could impact our sales in the near-term. 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, for all of our production
of Venerate, Majestene/Zelto, Stargus/Amplitude and Haven, 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;
price increases;
manufacturing deviations
    from internal and regulatory specifications, including contaminations;
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, including contaminations;
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; et
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,
and on timelines, sufficient to meet commercial demand and for us to satisfy our delivery schedules. 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
and for all our production of Venerate, may adversely affect our ability to satisfy demand and meet delivery obligations, as well
as to develop and commercialize new 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, which could adversely affect customer relationships, 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 three months prior to the anticipated
product delivery dated to customers 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 of suppliers orders, 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 and pesticidal activity or contamination of our production runs could negatively impact
our operating results.

We
do not know whether a yield problem exists until our products are manufactured. 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 or third-party manufacturers. Ban,-ben
event that we continue to rely on third-party manufacturers, resolution of yield problems requires cooperation among, and communication
between, us and our manufacturers. Third-party manufacturers as well as our own plant in Michigan may contaminate the runs of
our products while in process, causing a run failure and causing us to miss sales opportunities or a season. We will not succeed
if we cannot maintain or decrease our production costs and effectively scale our technology and manufacturing processes with the
desired yields and pesticidal activity and without contaminations.

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, following our specifications, thus creating a dried extract
that is shipped to our manufacturing facility in Bangor, Michigan. Although we have identified additional sources of knotweed
at competitive prices 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, including due to impact of any deterioration in the trade
relationship between the United States and China such as tariffs placed on Chinese goods exported to the United States,
changes in the exchange rate between the U.S. Dollar and the Renminbi and potential actions taken by regulators in China.
We endeavor to keep 6 months of knotweed extract on hand at any given time and have identified and qualified other knotweed suppliers.

Más
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
efforts on Zequanox may not result in increased sales.

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. Due to our prioritization plan, we have not committed sufficient
resources to this product in order to market it full-scale. Our collective ability to generate significant revenues from Zequanox
has been dependent on persuading 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 could remain 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.

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 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.

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, 2018, we
had 42 issued U.S. patents and 294 issued foreign patents (of which 3 U.S. patents and 45 foreign patents were in-licensed), 19
pending provisional and non-provisional U.S. patent applications (of which 1 was in-licensed) and 93 pending foreign patent applications
(of which 5 were in-licensed).

la
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. Továbbá,
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.

parce que
certain of our products, we hold co-exclusive licenses to certain of the intellectual property related to these products. Habár
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.

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. Továbbá,
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.

Más
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. Termék
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.

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 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/or 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. Ban ben
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.

Ban ben
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.

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.

la
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, Haven 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.

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

Mint
of December 31, 2018, we had approximately $216.0 million of federal operating loss carryforwards available to offset future
taxable income, which expire in varying amounts beginning in 2026 if unused. As of December 31, 2018, we had approximately $150.4
million of state operating loss carryforwards available to offset future taxable income, which began expiring in 2016. 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 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 2018 was 2.51%.

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 the financing transactions we completed in February 2018 and
our April 2018 equity offering. Our inability to use these net operating loss carryforwards as a result of the Section 382 limitations
could harm our financial condition.

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.

la
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 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.

Significant
disruptions of information technology systems or breaches of data security could adversely affect our business.

We
are increasingly dependent on information technology systems and infrastructure to operate our business. Potential vulnerabilities
can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious
third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity,
and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not
limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states
and others. In addition to the extraction of sensitive information, such attacks could include the deployment of harmful malware,
ransomware, denial-of-service attacks, phishing attacks social engineering and other means to affect service reliability.

kockázatok
Related to Ownership of our Common Stock

Our
stock price has in the past and may in the future fail to meet minimum requirements for continued listing on The Nasdaq Capital
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 Capital Market or if we are unable to transfer our listing to another stock market.

Ban ben
the past we have received written notifications from Nasdaq informing us that we were not in compliance with certain continued
listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”). As previously disclosed, on January 2, 2018, we received
written notice from the Listing Qualifications Department of Nasdaq indicating that we were not in compliance with the rules for
continued listing because we had not yet held an annual meeting of stockholders within twelve months of the end of our 2016 fiscal
year end. As a result of our holding the 2017 Annual Meeting on January 31, 2018, we regained compliance with the applicable rule.
There can be no assurance that we will continue to maintain compliance with the requirements for listing our common stock on Nasdaq.
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 have significant voting power and may take actions that may not be in the best interest of other stockholders.

As of March 18, 2019, our executive officers
and directors and their affiliates, including Ospraie Ag Science LLC (“Ospraie”), beneficially owned or controlled
(i.e., directly or indirectly and including exercisable warrants), an aggregate of approximately 61.3 million
shares, or 43.4% of our common stock, including 27.7% of our currently outstanding shares. In addition, affiliates
of Waddell & Reed Financial, Inc. (“Waddell”), beneficially own 25.0% of our common stock and 22.3%
of our currently outstanding shares, Ardsley Advisory Partners (“Ardsley”) beneficially owns 14.0%
of our common stock and 9.9% of our currently outstanding shares, and Van Herk Investments B.V. owns 10.7% of our
common stock and 6.4% of our currently outstanding share. These principal stockholders collectively beneficially owned or controlled,
directly or indirectly an aggregate of 73.5 million shares or 66.4% of our total common stock outstanding and if all of these
security holders act together, or exercise their warrants, 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 have had a history of losses, and our business,
financial results and stock price have been adversely affected by concerns regarding our ability to continue operations. 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 $0.60 and $20.00 through December 31, 2018. 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

our 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 our financials or 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; et
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 March 18, 2019, we had approximately 110.7 million shares of common stock outstanding,
31.5 million which were held by our directors and officers and their affiliates and an additional 35.7 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
shares to sell our stock, or the perception that such sales may occur, could cause our stock price to decline.

Ban ben
addition, as of March 18, 2019, we had 6.2 million shares of our common stock available to be awarded under our equity incentive
plans, 1.1 million shares of our common stock issuable upon the settlement outstanding restricted stock units, 7.1 million shares
of our common stock issuable upon the exercise of outstanding options with a weighted average exercise price of $3.31 per share
and 52.7 million shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise
price of $1.10 per share. These shares may be sold in the public market upon issuance.

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 a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to smaller
reporting companies will make our common stock less attractive to investors.

We
are a “smaller reporting company” as defined by the Securities and Exchange Commission. For as long as we continue
to be a smaller reporting company, we may choose to take advantage of certain scaled disclosures from various reporting requirements
applicable to other public companies but not to smaller reporting companies, which include, among other things:

reduced disclosure
    obligations related to Management’s Discussion and Analysis of Financial Conditions and Results of Operations;
reduced disclosure
    obligations regarding executive compensation in our periodic reports and proxy statements;
exemption from the
requirements of selected financial data and supplementary financial information; et
reduced income statement,
    cash flow, and changes in stockholders’ equity statements from three years to two years.

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.

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.

Mint
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. Our management and other personnel also have devoted a substantial amount of
time to ensure compliance with these initiatives, and our legal and accounting compliance costs have increased and are expected
to increase in connection with the additional compliance measures. We may also need to hire additional staff or consultants in
the areas of investor relations, legal and accounting, to continue to operate as a public company and greater expenditures may
be necessary in the future with the advent of new laws and regulations pertaining to public companies. We also expect that, it
will continue to be expensive for us to obtain directors’ and officers’ liability insurance.

la
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. During 2018, we were required to comply with the auditor
attestation provisions of Section 404, 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.

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 could adversely affect our consolidated
operating results, our ability to operate our business, our stock price 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, but in the past, we have identified material weaknesses in these controls. For example, 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, 2017 related to the accounting for embedded
derivative instruments that were a part of certain loan instruments that we entered into during the year ended December 31, 2017.
We developed and implemented new internal controls during 2018 and remediated this material weakness as of December 31, 2018.
While we believe we have appropriately remediated the previously disclosed material weakness in our internal control over financial
reporting related to the accounting for embedded derivative instruments, we can provide no assurances that other material weaknesses
in our internal control over financial reporting, will not be identified in the future.

Remediating
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.

Unforeseen
problems with the implementation and maintenance of our information systems, or failure to design and operate effective internal
controls over information systems, could have an adverse effect on our operations and could result in ineffective internal control
over our financial reporting.

Ban ben
fourth quarter of 2016, we began the process of implementing a cloud-based enterprise resource planning (“ERP”) system.
During the second quarter of fiscal 2017, we transitioned to our ERP system for manufacturing operations for material requirements
planning, general ledger, procurement, payment, billings and cash receipts functions. This transition, including our engagement
of third-party experts to help in the design, training and implementation of the new ERP system, has accounted for increases in
sales, general and administrative costs, relative to prior periods. As we add functionality and increase the use of the ERP system,
we will incur additional costs and problems could arise that we have not foreseen, including interruptions in service, loss of
data, or reduced functionality. Such problems could adversely impact our ability to provide quotes, take customer orders, and
otherwise run our business in a timely manner. In addition, if our new systems fail to provide accurate and increased visibility
into pricing and cost structures, it may be difficult to improve or maximize our profit margins. As such, our results of operations
and cash flows could be adversely affected.

Ban ben
addition, we do not have experience with implementing and maintaining controls over this ERP system. While we believe we have
designed the appropriate controls around this ERP system, if we have not designed controls within or around these systems that
are effective at preventing and detecting unreliable data, or if we are unable to design or operate controls within or around
these systems to provide effective control around program changes and access to the systems, we may be at risk for future material
weaknesses. The existence of a material weakness could result in errors in our financial statements that could result in a restatement
of financial statements, which could cause us to fail to meet our reporting obligations, to be in breach of agreements with our
lenders and equity inventor, lead to a loss of investor confidence and have a negative impact on the trading price of our common
stock.

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:

la
    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;
la
    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;
la
    prohibition of cumulative voting in our election of directors, which would otherwise allow less than a majority of stockholders
    to elect director candidates;
la
    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;
la
    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;
la
    ability of our board of directors to alter our bylaws without obtaining stockholder approval;
la
    inability of our stockholders to call a special meeting of stockholders and to take action by written consent in lieu of a
    meeting;
la
    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;
la
    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;
la
    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; et
la
    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.

Mint
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 November 2018, we provided irrevocable notice to the landlord to exercise the first
lease extension option, extending the lease term for an additional 60 months, as discussed in Footnote 10 and 17. 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.

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
April 3, 2018, the Company was named as a defendant in a complaint filed by Piper Jaffray, Inc. (“Piper”) with the
Superior Court of the State of Delaware. The Company was informed of and received Piper’s complaint and related documents
on April 5, 2018, following the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Piper’s complaint alleges one breach of contract claim, specifically, that the Company breached an engagement letter with
Piper by failure to pay a $2,000,000 transaction fee, which Piper alleges is due under the engagement letter as a result of the
Company’s consummation of its private placement and debt refinancing transactions in February 2018. Piper’s complaint
includes a demand for payment the foregoing transaction fee, in addition to interest and costs and expenses incurred in pursuing
the action, including reasonable attorneys’ fees. While the Company believes Piper’s complaint is without merit, this
matter is at an early stage, and the outcome of this matter is not presently determinable. As of December 31, 2018, a trial date
for the matter has been scheduled for July of 2020.

Tól től
time to time we may also 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.

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 was been listed on the NASDAQ Global Market under the symbol “MBII” from August 2, 2013 through September
5, 2016. Since September 6, 2016, our common stock has been listed on the Nasdaq Capital Market. Prior to that time, there was
no public market for our stock.

Holders
of Record

Mint
of December 31, 2018, there were 64 stockholders of record of our common stock, and the closing price of our common stock was
$1.47 per share as reported on the Nasdaq Capital 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, 2018:

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 8,282,242 $ 3.04 6,174,668
Equity compensation plans not approved by stockholders
Teljes 8,282,242 $ 3.04 6,174,668

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

ITEM
6. SELECTED FINANCIAL DATA

Not
applicable – this item is not required for smaller reporting companies.

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

Ön
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. Additional information regarding the Company is also available in our other reports filed
with the Securities and Exchange Commission, which are also available on our investor relations website, investors.marronebio.com,
which we also use, together with our corporate Twitter account, @Marronebio, as a means of disclosing material non-public information
and for complying with our disclosure obligations under Regulation FD. We encourage our investors to monitor and review the information
we make public in these locations. The information contained in the foregoing locations are not incorporated by reference into
this filing, and the Company’s references to website URLs are intended to be inactive textual references only. Továbbá
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.”

Our
current products target major markets that use conventional chemical pesticides, including certain agricultural and water markets,
where our bio-based products are used as alternatives for, or used in programs 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. Six of seven of our
current products, including our newest biological fungicide, Stargus/Amplitude, are approved by the United States Environmental
Protection Agency (“EPA”) and registered as “biopesticides.” Our first non-EPA product is Haven, a plant
health product, is a “biostimulant” which requires state registrations, but does not require EPA registration. 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.

2018
Főbb

la
following are the more significant financial results for the fiscal year ending December 31, 2018:

Revenues
    grew to $21.2 million in 2018, a 16.8% increase compared with $18.2 million in 2017, as sales of the current portfolio of
    products expanded both with current customers and across new crops and geographies.
Gross margins expanded
    to 48.6% in 2018, compared with 42.0% in 2017, reflecting a favorable mix effect from higher sales of the Venerate product
    family.
Full-year operating
    expenses were $29.8 million in 2018, compared to $30.6 million in operating expenses in 2017.
Net loss improved
    by $10.7 million to a loss of $20.2 million, or $(0.20) per share, reflecting revenue growth and higher gross margins. Net
    income for the fiscal year ending December 31, 2018 included the benefit of lower interest expense, and the one-time non-cash
    effect of changes in the fair value of financial instruments and the extinguishment of debt

la
following are the more significant business results for the fiscal year ending December 31, 2018:

The expansion of our sales
                                         and marketing function to serve new US specialty crop regions and increased focus
                                         on showing the return on investment of our products to potential customers;

The submission to the EPA of
                                         the registration package for our new bioherbicide, MBI-014, a water dispersible microbial
                                         herbicide made from a new species of heat-killed bacteria, Burkholderia rinojensis;

The launch of TerraConnect™,
                                         a new global biological soil-applied and seed-treatment platform, delivering growers
                                         high-performance products as well as a broad range of valuable tools to improve and protect
crops; et

la
    expansion of our international distribution network through new agreements with Hop Tri Investment Corporation in Vietnam
    and Cambodia, with AMC/Agrimatco in Turkey for Grandevo, Majestene and/or Regalia, and with Kyung Nong Corporation
    in South Korea for Majestene and Venerate.

Business
Strategy

la
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. 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. In May 2017, we entered
into an agreement with Jet Harvest Solutions to sell their contact biofungicide, Jet-Ag, in most regions of the United
States, and we continue to launch new product lines, with first sales of Haven and Stargus/Amplitude in 2017. 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.

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 a solvent that is difficult
to source and may 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. In addition, in June 2016, we launched a new formulation of Grandevo,
Grandevo WDG, which offers improved handling and better, more convenient packaging. The water dispersible granule mixes easily
in spray tanks with no dust or foam, which saves valuable time in the preparation and application processes. 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. For example, in 2018, we launched the CG (Cultivated
Garden) line for Regalia, Grandevo and Venerate, which is targeted for cannabis growers, greenhouse flower and vegetable growers,
gardeners and small farmers.

Financial
Áttekintés

Our total revenues were $21.2 million and
$18.2 million for the years ended December 31, 2018 and 2017, 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, Grandevo and Venerate product lines, but which also included sales of Majestene, Zequanox,
Bio-Tam 2.0, Haven, Stargus, Amplitude and Jet-Ag, as well as Bio-Tam 2.0, a third party biofungicide that compliments Regalia,
which we distributed from 2016 to 2018, but whose distribution we did not renew given the launch of our Stargus product. Going
forward, we believe our revenues will largely be impacted by weather, trade tariffs, natural disasters and other factors
affecting planting and growing seasons and incidence of pests and plant disease, and, accordingly, the 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.

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
la
CUSTOMER
B
CUSTOMER
C
Year ended December 31,
2018 17 % 1 % 35 %
2017 24 % 2 %

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.

Since
2011, we have also recognized revenues from our strategic collaboration and distribution agreements, which amounted to $0.4 million
and $0.2 million for the years ended December 31, 2018 and 2017, respectively.

Our
cost of product revenues was $10.9 million and $10.5 million for the years ended December 31, 2018 and 2017, respectively. Költség
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 and idle capacity at our manufacturing
plant. 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, Zequanox, Haven, Stargus and Amplitude. We expect
to see a gradual increase in gross margin over the life cycle of each of our products 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, however we are expecting these
charges to decrease over time.

Our
research, development and patent expenses have historically comprised a significant portion of our operating expenses, amounting
to $10.7 million and $10.8 million for the years ended December 31, 2018 and 2017, respectively. We are seeking collaborations
with third parties to develop and commercialize more early stage candidates, on which we have elected not to expend significant
resources given our efforts on cost containment.

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 $19.2 million and $19.8 million for the years ended December 31,
2018 and 2017, respectively. We have been building a sales and marketing organization that provides for increased training and
a better ability to educate and support customers and for our product development staff to undertake responsibility for technical
sales support, field trials and demonstrations to promote sales growth. We expect that our selling, general and administrative
expenses to remain approximately flat in all departments with the exception of sales and marketing. In 2018, we increased our
marketing communications campaigns and put more “boots on the ground”, which should increase grower demand, or pull-through,
and develop new customers, as well as expand business with existing customers.

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 February 2018, we completed private placement
and debt refinancing transactions, which we refer to as the February 2018 Financing Transactions. Upon the completion of those
transactions, the aggregate principal amounts outstanding under our debt agreements was reduced to approximately $10.7
million. As of December 31, 2018, the aggregate amount of principal and capitalized interest under our debt agreements is approximately
$21.4 million, with approximately $8.6 million of such principal accruing interest at a variable rate of 7.25% and which is repayable
in monthly payments through June 2036, an aggregate of approximately $7.5 million of such principal accruing interest at 8% per
annum, and which both the principal and accrued interest payable are repayable upon maturity in December 2022, and under a LOC
facility an aggregate of $2.1 million of such principal amount accruing interest at 12.8% per annum and which was payable in January
2019.

Key
Components of Our Results of Operations

Termék
Revenues

Termék
revenues consist of revenues generated primarily from sales to distributors, net of rebates and cash discounts. Product revenues
constituted 98% and 99% of our total revenues for the years ended December 31, 2018 and 2017, respectively. Product revenues in
the United States constituted 91% and 92% of our total revenues for the years ended December 31, 2018 and 2017, respectively.

parce que
the period prior to the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from contracts with
Customers
, in some cases, we recognize distributor revenue as title and risk of loss passes, provided all other revenue recognition
criteria have been satisfied either on a “sell-in” or “sell-through” method. Additionally, for periods
prior to the adoption of ASC 606, 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 in the past 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). For the year ended December 31, 2017,
40% of product revenues were recognized on a sell-through basis. On January 1, 2018, we adopted Accounting Standards Codification
(“ASC”) 606, Revenue from contracts with Customers. During fiscal year 2018, we recognized distributor revenue
provided all revenue recognition criteria were satisfied, consistent with the “sell-in” method used for revenue recognition
during prior periods. 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. Upon the adoption of ASC 606, the majority of the deferred revenues and associated
deferred cost of product revenues, on the consolidated balance sheet as of December 31, 2017, was deemed to have satisfied all
revenue recognition criteria under ASC 606 and approximately $5.9 million and $3.1 million, respectively, was reclassified into
retained earnings. See Note 2 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.

License
Revenues

License revenues generally consist of revenues
recognized under our strategic collaboration and distribution agreements for exclusive distribution rights, either for Regalia,
for other commercial products, 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, 2018 and 2017, license revenues constituted 2% and 1% of total revenues, respectively. As of December 31, 2018 and
2017, we have received an aggregate of $4.1 million and $3.9 million in payments under our strategic collaboration
and distribution agreements. In addition, $0.8 million in payments under these agreements that we could potentially receive if
certain testing validation, regulatory progress and commercialization events occur.

Költség
of Product Revenues and Gross Profit

Költség
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, production 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 is the difference between total revenues and cost of product revenues.
Gross margin is gross profit expressed as a percentage of total revenues.

We
have entered into in-license technology agreements with respect to the use and commercialization of four of our commercially available
product lines, Regalia, Grandevo, Zequanox, Haven 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 expired in 2017 and the in-licensed U.S. patent
for Grandevo is expected to expire in 2024. We have filed separate patent applications with respect to the Regalia and Zequanox
product lines and have been issued four U.S. patents with respect to Regalia and five with respect to Zequanox. There are pending
in-licensed patent application relating to Grandevo, which could expire later than 2024 if issued. The licensed patents for Haven
begin to expire in 2019. 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, Zequanox, and Haven 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, or as we experience changes
in the sales mix of these products. In particular, we may experience downward pressure on overall gross margins as we rollout
Haven, Stargus and Amplitude and expand sales of Grandevo and Zequanox. 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 sales mix and average selling prices.

Ban ben
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, Majestene, Haven, Stargus and Amplitude,
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.

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.

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, public company expenses 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.

We
expect selling, general, and administrative expenses to remain approximately flat in all departments with the exception of sales
and marketing. In 2018, we increased our marketing communications campaigns and put more “boots on the ground”, which
should increase grower demand, or pull-through, and develop new customers, as well as expand business with existing customers.

Interest
Költség

We recognize interest expense on notes payable
and other debt obligations. In June 2014, we entered into a $10.0 million promissory note with a variable interest rate that varies
with the prime rate. In August 2015, 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 of 8%, with respect to which $35.0 million
of principal converted to equity in connection with the February 2018 Financing Transactions, leaving $5.0 million of principal
outstanding. Further due to the manner in which we accounted for the transaction, the total amount of future interest was included
in the principal balance, both due on the maturity date of the note, resulting in no further interest expense under this note.
In October 2012 and April 2013, we entered into a series of promissory notes totaling $12.5 million with an initial interest
rate of 18% and reduced to 14% by subsequent amendments in November 2016. In connection with the February 2018 Financing
Transactions, $10 million of principal under the October 2012 and April 2013 note was converted to equity, leaving $2.5
million of principal outstanding, and the interest rate on the notes was further reduced to 8%. Further due to the manner in
which we accounted for the transaction, the total amount of future interest was included in the principal balance, both due on
the maturity date of the note, resulting in no further interest expense under this note. In March 2017, we entered into an
invoice purchase agreement with LSQ Funding Group, L.C. (“LSQ”), which was subsequently amended in June 2018, that
allowed us to receive advances of up to $7.0 million against receivables sold to LSQ. As of December 31, 2018, we had an outstanding
balance of $2.1 million in secured borrowings. In October 2017, we began to borrow funds pursuant to a convertible promissory
note which provided for borrowings up to $6 million at the lender’s sole discretion. As of December 31, 2017, the outstanding
balance of this convertible note was $3.6 million, net of a $400,000 discount, and bore interest at a rate of 1%. All of the principal
under this outstanding note converted to equity in connection with the February 2018 Financing Transactions.

As of December 31, 2018, our expenses
decreased significantly based on the February 2018 Financing Transactions, including the recognition of one-time gain on
extinguishment of debt of $9.2 million which was offset by a change in fair value of derivative liability of $5.2 million and
loss on extinguishment of debt of $2.2 million. See Notes 6 and 17 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.

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.

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 consolidated 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, 2018, 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, 2018, we had net operating
loss carryforwards for federal income tax reporting purposes of $216.0 million, which begin to expire in 2026, and California
and other state net operating loss carryforwards of $150.4 million and $49.2 million, respectively, which will expire
from 2028 through 2037. The federal net operating loss generated in 2018 in the amount of $28.8 million will never expire.
Additionally, as of December 31, 2018, we had federal research and development tax credit carryforwards of $2.6 million, which
begin to expire in 2026, and state research and development tax credit carryforwards of $2.8 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.

The Tax Cuts and Jobs Act (the “TCJA”) was enacted on December 22, 2017. The Act reduces the US
federal corporate tax rate from 35% to 21%. As of December 31, 2018, we completed the accounting for the tax effects of enactment
of the TCJA. The most significant impact of the legislation for us was a reduction of approximately $28 million in the value of
our net deferred tax assets (which represent future tax benefits) as a result of lowering the U.S. corporate income tax rate from
35% to 21%. As we have taken a full valuation allowance against all of our U.S. deferred tax assets, the TCJA reduced our valuation
allowance by $28 million.

Eredmények
of Operations

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

YEAR ENDED
DECEMBER 31,
2018 2017
Revenues:
Termék 98 % 99 %
License 2 1
Total revenues 100 100
Cost of product
bevételek
51 58
Gross profit 49 42
Operating Expenses:
Research, development and patent 50 60
Selling, general and administrative 90 109
Total operating expenses 140 169
Loss from operations (91 ) (127 )
Other income (expense):
Interest expense (10 ) (19 )
Interest expense to related parties (2 ) (24 )
Change in estimated fair value of financial instruments (24 ) (1 )
Gain
on extinguishment of debt, net
(10 )
Gain
on extinguishment of debt, related party
43
Other income (expense), net (1 )
Total other expense, net (3 ) (45 )
Loss before income taxes (94 ) (172 )
Net loss (94 )% (172 )%

Comparison
of the Years Ended December 31, 2018 and 2017

Termék
Revenues

YEAR ENDED DECEMBER 31,
2018 2017
(Dollars in thousands)
Product revenues $ 20,775 $ 17,935
% of total revenues 98 99

Termék
revenues increased by $2.8 million, or 16%, in 2018 compared to 2017 due to an increase in sales across certain product offerings,
as well as favorable product mix of higher priced product offerings, in each case driven most significantly by increased sales
of the Venerate product family, offset by decreases in sales of Regalia.

License
Revenues

YEAR ENDED DECEMBER 31,
2018 2017
(Dollars in thousands)
License revenues $ 445 $ 232
% of total revenues 2 % 1 %

License
revenues related to certain strategic collaboration and distribution agreements increased $0.2 million or 92% in 2018 compared
to 2017. The increase in 2018 was primarily due to contractual terms dependent on reaching the anniversary of our license registration.
License revenues do not comprise a significant portion of our total revenues.

Költség
of Product Revenues and Gross Profit

YEAR ENDED DECEMBER 31,
2018 2017
(Dollars in thousands)
Cost of product revenues $ 10,907 $ 10,528
% of total revenues 51 % 58 %
Gross profit 10,313 7,639
% of total revenues 49 % 42 %

Költség
of product revenues increased by $.4 million, or 4%, in 2018 compared to 2017. Our gross margins increased to 49% in 2018 from
42% in 2017. Cost of products decreased as a percentage of revenues, and gross margins increased in 2018 compared to 2017, primarily
due to a favorable mix of higher margin product offerings and continued improved manufacturing and third-party manufacturing efficiencies.

Research,
Development and Patent Expenses

YEAR ENDED DECEMBER 31,
2018 2017
(Dollars in thousands)
Research, development and patent $ 10,662 $ 10,820
% of total revenues 50 % 60 %

Research,
development and patent expenses decreased by $0.2 million, or 1%, in 2018 compared to 2017 as the Company continued to focus on
increased field trial activities for existing products on a wider range of prospective crops.

Selling,
General and Administrative Expenses

YEAR ENDED DECEMBER 31,
2018 2017
(Dollars in thousands)
Selling, general administrative expenses $ 19,155 $ 19,814
% of total revenues 90 % 109 %

Selling,
general, and administrative expenses decreased $0.7 million, or 3%, in 2018 compared to 2017. The decrease primarily related to
a decrease in legal costs, associated with corporate transaction activities, reduced audit and consulting fees and a 2018 non-reoccurring
item of a $0.4 million credit realized as a result of insurance recoveries related to the Company’s restatement of our consolidated
financial statements and litigation from 2016. In addition, the Company incurred a non-cash write down on sale of approximately
$0.4 million related to manufacturing assets in 2017.

Más
Income (Expense), Net

YEAR ENDED DECEMBER 31,
2018 2017
(Dollars in thousands)
Interest expense $ (2,057 ) (3,374 )
Interest expense to related parties (451 ) (4,355 )
Change in estimated fair value of derivative liability (5,177 ) (96 )
Loss on extinguishment of debt, net (2,196 )
Gain on extinguishment of debt, related party 9,183
Other (expense) income, net (11 ) (105 )
$ (709 ) $ (7,930 )

Interest
income and expense decreased significantly in 2018 compared to 2017. Interest expense decreased by $1.3 million, interest expense
due to related party decreased by $3.9 million and the Company recognized a gain on extinguishment of debt of $9.2 million which
was offset by a change in fair value of derivative liability of $5.2 million and loss of extinguishment of debt of $2.2
million in connection with the February 2018 Financing Transaction. An expense of $0.1 million was recognized related to the change
in the underlying fair value of this feature as of December 31, 2017. See Note 16 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.

Seasonality
and Quarterly Results

In recent years, we have increasingly had
higher sales during the first half of the year than the second half, and expect this trend to continue. However, the level of
seasonality in our business may change due to a number of factors, our expansion into new geographical territories, the introduction
of new products, the timing of introductions of new products, and the impact of weather and climate change. 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 the number of variables on which sales of our products
are dependent. Weather conditions, new trade tariffs, natural disasters and other factors affect planting and growing seasons
and incidence of pests and plant disease, may, 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. Ban ben
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, and the California drought in 2015 and the Northeast U.S. drought in 2016 affected fungicide sales
and Hurricanes Irma and Maria affected Florida and Puerto Rico crops in the third quarter of 2017. 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.

Liquidity
and Capital Resources

Since
our inception, our operations have been financed primarily by net proceeds from public offerings of common stock and private placements
of convertible preferred stock, convertible notes and 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 December 2016, we filed a shelf registration
statement on Form S-3 with the SEC that provides for the sale and issuance of up to $50.0 million of our common stock, preferred
stock, debt securities, warrants, rights and/or units, including the ability to sell up to $15.0 million of our common stock through
an at-the-market program in accordance with an offering agreement we entered into with H.C. Wainwright. The Company began selling
common shares under this registration statement in January 2017. As of December 31, 2017, the Company had sold 104,000 shares
of common stock under at-the-market program at a weighted average exercise price of $2.22 per share for proceeds (net of commission)
of $0.2 million, and $14.8 million remained available for sale under the agreement with H.C. Wainwright. In April 2017, the Company
completed a public offering of 6,571,000 registered shares of its common stock (inclusive of 857,000 shares of its common stock
to cover over-allotments). The public offering price of the shares sold in the offering was $1.40 per share. The total gross proceeds
to the Company from the offerings were $9,200,000. Additionally, in April 2018, we completed an underwritten public offering
of 8,366,250 registered shares of our common stock. The public offering price of the shares sold in the offering was $1.65 per
share, and after deducting underwriting discounts and commissions and other offering expenses payable by us, the aggregate net
proceeds to us from the offering totaled approximately $12.7 million. Following these and other prior transactions, as
of December 31, 2018, a total of $12.0 million remained available for sale under the shelf registration statement

Ban ben
March 2017, we entered into an invoice purchase agreement with LSQ, pursuant to which LSQ may elect to purchase up to $7,000,000
of eligible customer invoices from us. Our obligations under the LSQ financing are secured by a lien on substantially all of the
Company’s personal property; such lien is first priority with respect to the Company’s accounts receivable, inventory,
and related property. In April 2017, we began to draw down the LSQ financing. The agreement was amended in June 2018 to extend
the expiration date of the agreement from March 2017 to June 2019, include international invoices, and reduce certain fees. Mint
of December 31, 2018, we had an outstanding balance of $2.1 million in secured borrowings.

Ban ben
October 2017, the Company and Dwight W. Anderson (the “Anderson”) entered into an unsecured convertible promissory
note (the “October 2017 Convertible Note”) in which the Company could borrow an aggregate amount of up to $6,000,000,
at Anderson’s sole discretion, due on October 23, 2020 (the “Maturity Date”). This note would bear interest
at 1% through December 31, 2017 and 10% thereafter. Through December 22, 2017, this Note was convertible into shares of the Company’s
common stock at a rate of one share of common stock per $1.00 of converting principal or interest, rounded down to the nearest
share with any fractional amounts cancelled, at the election of Anderson by delivery of written notice to the Company. In December
2017, the October 2017 Convertible Note was amended and restated. As part of this amendment, this note became secured debt. Until
January 31, 2018, conversion of all or part of this note was subject to certain limitations that were removed when the stockholders
of the Company voted on that date to approve a related equity financing.

Ban ben
December 2017, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited
investors named therein including Ospraie and Ardsley, pursuant to which the investors thereunder agreed, subject to the satisfaction
of certain closing conditions, to purchase units consisting of shares of our common stock and warrants to purchase a share of
our common stock. Concurrently with the entry into the Purchase Agreement, the Company entered into amendments to the senior promissory
notes issued to affiliates of Waddell & Reed Financial, Inc. (“Waddell”) and our secured promissory notes issued
in October 2012 and April 2013 (the “October 2012 and April 2013 Promissory Notes”). In February 2018, we completed
the transactions contemplated in the Purchase Agreement, the note amendments and certain related agreements, which resulted in:

la
    issuance of an aggregate of 40,000,001 shares of our common stock and warrants to purchase an aggregate of 41,333,333 shares
    of our common stock to purchasers under the Purchase Agreement for an aggregate purchase price of $30.0 million, which includes
    conversion of all outstanding principal under the October 2017 Convertible Note;
la
    conversion of $35.0 million aggregate principal amount of the Waddell notes into an aggregate of 20,000,000 shares of our
    common stock and warrants to purchase 4,000,000 shares of our common stock, such that $5.0 million of principal under such
    notes remained outstanding, in connection with which the maturity of such notes was extended to December 31, 2022, all interest
    payments under such notes was deferred to maturity on December 31, 2022, and Ospraie was granted a right of first refusal
    to acquire such notes;

la
    conversion of $10.0 million aggregate principal amount of indebtedness outstanding under the October 2012 and April 2013 Promissory
    Notes to an aggregate of 5,714,285 shares of our common stock and warrants to purchase 1,142,856 shares of our common stock
    such that $2.45 million of principal under such notes remained outstanding, and in connection with which the maturity of such
    notes was extended to December 31, 2022, the interest was reduced from 14% to 8% and all interest payments under such notes
were deferred to the maturity on December 31, 2022; et
the issuance of
    800,000 shares of common stock and warrants to purchase 2,017,143 shares of common stock to the placement agent that facilitated
    the foregoing transactions.

Ban ben
sum, the completion of the February 2018 Financing Transactions resulted in the issuance of an aggregate of 70.5 million shares
of common stock and warrants to purchase an aggregate of 48.9 million shares of common stock, the deleveraging of our balance
sheet by reducing principal payments that were outstanding as of December 31, 2017 by $49 million, and the deferral of payment
on $7.5 million of remaining outstanding debt until December 31, 2022.
The gross proceeds to the Company from the offering
were approximately $24.0 million, which excludes the $6.0 million in debt converted under the Secured December 2017 Convertible
Note. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, the aggregate
net proceeds to the Company totaled $21.8 million.

Mint
of December 31, 2018, our cash and cash equivalents totaled $18.2 million, and we had an additional $1.6 million of restricted
cash that we are contractually obligated to maintain in accordance with a debt agreement with Five Star Bank. While we were out
of compliance with certain covenant requirements associated with that agreement. Five Star Bank waived their right to deem recurring
losses, liquidity, going concern, and financial condition as material adverse changes through November 15, 2020. Unless Five Star
Bank extends its waiver of the applicable covenants, or we enter into strategic agreements that include significant cash payments
upfront, significantly increase revenues from sales or raise additional capital through the issuance of equity, we will exceed
the maximum debt-to-worth requirement under our promissory note with Five Star Bank at the expiration of the waiver on November
15, 2020. As of December 31, 2018, we had an accumulated deficit of $283.5 million, and we estimate that we will continue to incur
losses, which will further increase our accumulated deficit.

Our
historical operating results as of December 31, 2018 indicate substantial doubt exists related to our ability to continue as a
going concern for the next 12 months from the date of the issuance of the accompanying financial statements. However, we believe
that our existing cash and cash equivalents and restricted cash of $19.8 million at December 31, 2018, expected
revenues, the net proceeds from expected future debt or equity financings, and cost management as well as cost reductions will
be sufficient to fund operations as currently planned through one year from the date of the issuance of these consolidated financial
statements. We also anticipate securing additional sources through equity and/or debt financings, collaborative or other funding
arrangements with partners, or through other sources of financing, consistent with historic results. However, we cannot predict,
with certainty, the outcome of our actions to grow revenues, to manage or reduce costs or to secure additional financing from
outside sources on terms acceptable to us or at all. Further, we may continue to require additional sources of cash for general
corporate purposes, which may include operating expenses, working capital to improve and promote our commercially available products,
advance product candidates, expand international presence and commercialization, general capital expenditures and satisfaction
of debt obligations. We have based our beliefs on assumptions and estimates that may prove to be wrong, and we could spend our
available financial resources less or more rapidly than currently expected. The actions discussed above cannot be considered probable
of occurring and mitigating the substantial doubt raised by our historical operating results and satisfying our estimated liquidity
needs for 12 months from the issuance of these consolidated financial statements. If we become unable to continue as a going concern,
we may have to liquidate our assets, and stockholders may lose all or part of their investment in our common stock.

Since
our inception, we have incurred significant net losses, and 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.

További
information regarding risks related to our capital and liquidity is described in this Annual Report filed on Form 10-K in Part
I— Item 1A— “Risk Factors”, which should be read in connection with this disclosure.

We
had the following debt arrangements in place as of December 31, 2018, in each case as discussed below (dollars in thousands):

PRINCIPAL
STATED ANNUAL BALANCE (INCLUDING
DESCRIPTION INTEREST RATE ACCRUED INTEREST) PAYMENT/MATURITY
Promissory Notes (1) 8.00 % $ 2,640 Due December 31, 2022 (5)
Promissory Note (2) 7.25 % 8,875 Monthly/
                                         Due June 2036
Promissory Notes (3) 8.00 % 5,699 Due December 31, 2022(5)
Secured Borrowing (4) 12.78 % 2,084 Varies(6)/
                                         Due June 2019

(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) See “—LSQ
    Financing.”
(5) In February 2018,
    the maturity date and all interest payments were extended to December 2022
(6) Payable through
    the lender’s direct collection of certain accounts receivable through June 2019.

October
2012 and April 2013 Secured Promissory Notes

Ban ben
connection with a series of transactions in October 2012 and April 2013, we borrowed from a group of lenders an aggregate of $12.5
million in original principal pursuant to senior notes, collateralized by substantially all of the Company’s assets (collectively,
“October 2012 and April 2013 Secured Promissory Notes”).

Pursuant to an amendment entered into in December 2017, in connection with the February 2018 Financing Transactions, $10.0 million
aggregate principal amount of indebtedness outstanding under the October 2012 and April 2013 Promissory Notes converted to an
aggregate of 5,714,285 shares of our common stock and warrants to purchase 1,142,856 shares of our common stock, such that $2.5
million of principal under such notes remained outstanding, the maturity of the such notes was extended to December 31, 2022,
the interest was reduced from 14% to 8% and all interest payments under such notes were deferred to the maturity on December 31,
2022.

juin
2014 Secured Promissory Note

In June 2014, we borrowed $10.0 million pursuant
to a business loan agreement and promissory note (“June 2014 Secured Promissory Note”) with Five Star Bank (“Five
Star Bank”) which bears interest at 6.25% as of September 30, 2017. The interest rate is subject to change and is based
on the prime rate plus 2.00% per annum. The June 2014 Secured Promissory Note is repayable in monthly payments of $73,695 and
adjusted from time-to-time as the interest rate changes, with the final payment due in September 2036. Certain of our deposit
accounts and MMM LLC’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 Five Star Bank of $1.6 million, which is recorded
as restricted cash included in non-current assets.

août
2015 Senior Secured Promissory Notes

On August 20, 2015, we 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, which is a beneficial owner of more than 5% of our common stock. Pursuant
to such purchase agreement, we sold to such affiliates senior secured promissory notes (“August 2015 Senior Secured Promissory
Notes”) in the aggregate principal amount of $40.0 million. 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
$10.0 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 connection with the February 2018 Financing Transactions, $35.0 million aggregate principal
amount of the August 2015 Senior Secured Promissory Notes was converted into an aggregate of 20,000,000 shares of our common stock
and warrants to purchase 4,000,000 shares of our common stock, such that $5.0 million of principal under the such notes remained
outstanding, the maturity of such notes was extended to December 31, 2022, all interest payments under the such notes was deferred
to maturity on December 31, 2022 and Ospraie was granted a right of first refusal to acquire such notes.

The August 2015 Senior Secured Promissory
Notes are secured by substantially all of our personal property assets. The agent, acting on behalf of 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.

LSQ
finanszírozás

On March 24, 2017, we entered into an Invoice Purchase Agreement (the “LSQ Financing”) with LSQ,
which may elect to purchase up to $7.0 million of eligible customer invoices from the Company.

Ban ben
June 2018, we amended the LSQ Financing arrangement which effectively decreased (i) invoice purchase fee from 1.00% to a range
of 0.40% to 1.00%, (ii) the funds usage fee from 0.035% to a range of 0.020% to 0.035%, and (iii) extended the term of the agreement
to June 30, 2019. As of December 31, 2018, the outstanding balance under the LSQ Financing totaled $2.1 million. Our obligations
under the LSQ Financing are secured by a lien on substantially all of our personal property. LSQ may terminate this agreement
with 30 days written notice, at which time the LSQ Financing will be terminated at the earlier of the 30-day period, the end of
the current term, or the end of the then renewal term. The events of default under the LSQ Financing include failure to pay amounts
due, failure to turn over amounts due to LSQ within a cure period, breach of covenants, falsity of representations, and certain
insolvency events.

Upon
sale of the receivable, we may elect to set up a reserve where upon the cash for the sale remains with the third-party and the
Company can draw on the available amount on the reserve account at any time. Since April 2017, there were times when we elected
to utilize the reserve account, and we had no excess funds available on the reserve account outstanding as of December 31, 2018.
As of December 31, 2018, we had $2.7 million included in accounts receivable that were transferred under this arrangement.

Our
debt arrangements contain certain representations and warranties by and between us and each of the debtors, certain indemnification
provisions in favor of the lenders and customary restrictive covenants (including limitations on other debt, liens, acquisitions,
investments and dividends), and events of default (including payment defaults, breaches of covenants, a material impairment in
the lender’s security interest or in the collateral, and events relating to bankruptcy or insolvency). See Note 6, 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. As of December 31, 2018, we were in compliance with these covenants or have obtained
the appropriate waivers for non-compliance with such covenants.

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

YEAR ENDED DECEMBER 31,
2018 2017
(Audited)
Net cash used in operating activities $ (19,626 ) $ (21,056 )
Net cash used in investing activities (579 ) (814 )
Net cash provided in financing activities 37,153 12,090
Net increase (decrease) in cash, cash equivalents, and restricted cash 16,948 (9,780 )

Cash
Flows from Operating Activities

Net
cash used in operating activities of $19.6 million during the twelve months ended December 31, 2018 primarily resulted from our
net loss of $20.2 million, which included $1.9 million of depreciation and amortization expense, $1.9 million of share-based compensation
expense, $0.9 million of non-cash interest expense, $5.2 million of change in the fair value of financial instruments, and $2.2
million on loss on extinguishment of debt offset by a gain of $9.2 million gain on extinguishment of debt with related parties.
In addition, net cash used in operating activities resulted from a decrease in accounts receivable of $1.1 million and inventories
of $1.6 million offset by a $2.0 million decrease in accounts payable, a $1.2 million decrease in accrued and other liabilities,
and decrease of $1.6 million related to accrued interest due to related parties. The includes any impact from errors discussed
in Note 16 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.

Net
cash used in operating activities of $21.1 million during the twelve months ended December 31, 2017 primarily resulted from our
net loss of $30.9 million, which included $2.0 million of depreciation and amortization expense, $2.1 million of share-based compensation
expense, $1.6 million of non-cash interest expense, and $0.4 million of loss on sale of equipment. In addition, net cash used
in operating activities resulted from an increase in inventories of $1.3 million, increases in prepaid expenses and deferred product
revenues of $0.5 million, all of which was offset by a $2.3 million increase in accounts payable, a $2.6 million increase in accrued
and other liabilities, and a $0.8 million increase in deferred revenues.

Cash
Flows from Investing Activities

Net
cash used in investing activities of $0.6 million during the twelve months ended December 31, 2018 resulted from the purchase
of property, plant and equipment to support growth of our operations.

Net
cash used in investing activities of $0.8 million during the twelve months ended December 31, 2017 resulted from the purchase
of property, plant and equipment to support growth of our operations.

Cash
Flows from Financing Activities

Net
cash provided in financing activities of $37.2 million during the twelve months ended December 31, 2018 consisted primarily of
$34.5 million in net proceeds from the issuance of common stock and $23.8 million in proceeds from the issuance of debt, offset
by reductions and repayment of debt of $21.3 million.

Net
cash provided by financing activities of $12.1 million during the twelve months ended December 31, 2017 consisted primarily of
$8.2 million in proceeds from the issuance of common stock net of offering costs, proceeds from debt, net of repayments and financing
costs of $4.3 million. This was partially offset by $0.4 million in payments on our capital lease obligations.

Contractual
Obligations

la
following is a summary of our contractual obligations as of December 31, 2018:

TOTAL 2019 2020 – 2021 2022-2023 2024 AND
BEYOND
(In thousands)
Operating lease obligations $ 615 $ 615 $ $ $
Debt 18,367 2,338 588 8,130 7,311
Interest payments 9,900 619 1,180 4,364 3,737
Teljes $ 28,882 $ 3,572 $ 1,768 $ 12,494 $ 11,048

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.

Ban ben
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 November 2018, we provided irrevocable notice to the landlord exercising the first lease extension option under the initial
lease agreement, extending the lease term of the lease for an additional 60 months through 2024.

Ban ben
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, 2018, 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, 2018 and
2017.

Off-Balance
Sheet Arrangements

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

Mostanában
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”.

Kritikai
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. 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.

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; et
Level 3, unobservable inputs in which there is little or no market data, which requires that we develop our own assumptions. Ez
hierarchy requires the use of observable data, when available, and minimizes the use of unobservable inputs when determining fair
value.

Revenue
Recognition

On
January 1, 2018, we adopted the Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers
and all the related amendments (“the new revenue standard”) and applied it to all contracts using the modified retrospective
method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance
of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards
in effect for those periods.

Under
ASC 606, we recognize revenue for product sales at a point in time following the transfer of control of such products to the customers,
which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. We may enter into contracts
in which the standalone selling prices (“SSP”) is different from the amount we are entitled to bill the customer.
As of December 31, 2018, we had deferred product revenue in the amount of $0.5 million associated primarily with billings in excess
of SSP. Product revenues consist of revenues generated from sales of our products to distributors and direct customers, net of
rebates and cash discounts.

Historically,
prior to the adoption of ASC 606, for sales of products made to distributors, we recognized 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 had a pattern of granting
concessions for the benefit of the distributor and whether there were other conditions that may indicate that the sale to the
distributor was not substantive. In some cases, we recognized distributor revenue as title and risk of loss passed, provided all
other revenue recognition criteria were satisfied (the “sell-in” method). For certain sales to certain distributors,
the revenue recognition criteria for distributor sales were not satisfied at the time the title and risk of loss passed to the
distributor; specifically, in instances where “inventory protection” arrangements were offered to distributors that
permitted these distributors to return to us certain unsold products, we considered the arrangement not to be fixed or determinable,
and accordingly, revenue was deferred until such products were resold to the end customers of the distributor (the “sell-through”
method). During the years ended December 31, 2017, 39% of total revenues were recognized on a sell-through basis. 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.

Mint
of December 31, 2017, we recorded deferred product revenues of $6.5 million net of estimated customer incentives and rebates.
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.
Upon the adoption of ASC 606, we made an adjustment to the opening balance of accumulated deficit of $2.3 million which reduced
the recorded deferred product revenues and deferred cost of product revenues by approximately $5.4 million and $3.1 million, respectively,
in the consolidated balance sheet.

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. We received $0.3 million in payments under these agreements for the year ended
December 31, 2018 and there were no amounts included in accounts receivable under these agreements as of December 31, 2018. During
the year ended December 31, 2017, we received no payments under these agreements and there were no amounts included in accounts
receivable under these agreements.

Mint
of December 31, 2018, we recorded current and non-current deferred revenues of $0.3 million and $1.5 million, respectively, related
to payments received under these agreements. As of December 31, 2017, we recorded current and non-current deferred revenues of
$0.2 million and $1.6 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, 2018 and 2017, we recognized $0.8 million and $0.1 million of share-based compensation expense on
restricted stock units.

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.

During the years ended December 31, 2018 and 2017, we recorded share-based compensation expense related to
stock options of $1.0 million and $1.9 million, respectively.

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.

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.

la
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.

Warrants

la
warrants granted in connection with the February 2018 Financing Transactions was accounted for in equity. In connection with the
February 2018 Financing Transactions, the Company estimated the fair value of the warrants issued using an Option Pricing
Model.

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 consolidated 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORTS
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Nak nek
the Stockholders and Board of Directors of

Marrone
Bio Innovations, Inc.

Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheet of Marrone Bio Innovations, Inc. (the “Company”) as of December
31, 2018, the related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December
31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results
of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally
accepted in the United States of America.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the Company’s internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and
our report dated March 28, 2019, expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.

Explanatory
Paragraph – Going Concern

la
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully
described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and
sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Explanatory
Paragraph – Change in Accounting Principles

Mint
discussed in Note 2 to the financial statements, the Company changed its method of accounting for revenues in 2018 due to the
adoption of Accounting Standard Codification 606, Revenue from Contracts with Customers.

Basis
for Opinion

Ezek
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.

/s/
    Marcum LLP
Marcum
    LLP
We
    have served as the Company’s auditor since 2018.
San
    Francisco, CA
March
2019

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Nak nek
the Stockholders and Board of Directors of

Marrone
Bio Innovations, Inc.

Opinion
on Internal Control over Financial Reporting

We
have audited Marrone Bio Innovations, Inc.’s (the “Company”) internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control –
Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated balance sheet as of December 31, 2018 and the related consolidated statements of operations, stockholders’
equity, and cash flows for the year then ended of the Company and our report dated March 28, 2019 expressed an unqualified opinion,
which included explanatory paragraphs for going concern and change in accounting principles, on those financial statements.

Basis
for Opinion

la
Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report
on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Meghatározás
and Limitations of Internal Control over Financial Reporting

la
company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because
of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that degree of compliance with the policies or procedures may deteriorate.

/s/
Marcum llp

Marcum
llp

San
Francisco, CA

March
2019

Report of Independent
Registered Public Accounting Firm

To the Shareholders and the Board of Directors
nak,-nek

Marrone Bio Innovations, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated
balance sheet of Marrone Bio Innovations, Inc. (the Company) as of December 31, 2017, the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2017, and the results of its operations and its cash
flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The Company's Ability to Continue as
a Going Concern

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 consolidated
financial statements, the Company’s historical operating results and negative working capital indicate substantial doubt
exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions
and management’s plans regarding these matters also are 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.

Basis for Opinion

These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required
to obtain an understanding of internal control over financial reporting 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.

Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company’s auditor
from 2008 to 2018.

Roseville, California

April 4, 2018

MARRONE
BIO INNOVATIONS, INC.

Consolidated
Balance Sheets

(In
Thousands, Except Par Value)

DECEMBER 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 18,221 $ 786
Restricted cash, current portion 487
Accounts receivable 2,720 3,785
Inventories, net 8,224 9,827
Deferred cost of product revenues 4 3,063
Prepaid expenses and other current assets 967 1,170
Total current assets 30,136 19,118
Property, plant and equipment, net 14,512 16,016
Restricted cash, less current portion 1,560 1,560
Other assets 359 219
Total assets $ 46,567 $ 36,913
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable $ 1,692 $ 3,800
Accrued liabilities 6,871 8,189
Accrued interest due to related parties 1,622
Deferred revenue, current portion 438 6,193
Derivative liability 674
Debt, current portion, net 2,318 1,524
Total current liabilities 11,319 22,002
Deferred revenue, less current portion 2,399 2,046
Debt, less current portion, net 11,819 24,407
Debt due to related parties 7,300 37,822
Other liabilities 794 1,287
Total liabilities 33,631 87,564
Commitments and contingencies (Note 10)
Stockholders’ equity (deficit):
Preferred stock: $0.00001 par value; 20,000 shares authorized and no shares issued or outstanding at December 31, 2018 and December 31, 2017
Common stock: $0.00001 par value; 250,000 shares authorized, 110,691 and 31,351 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively 1
További
paid in capital
296,409 214,921
Accumulated
hiány
(283,474 ) (265,572 )
Total stockholders’ equity (deficit) 12,936 (50,651 )
Total liabilities and stockholders’ equity (deficit) $ 46,567 $ 36,913

See
accompanying notes.

MARRONE
BIO INNOVATIONS, INC.

Consolidated
Statements of Operations

(In
Thousands, Except Per Share Data)

YEAR ENDED
DECEMBER 31,
2018 2017
Revenues:
Termék $ 20,775 $ 17,935
License 445 232
Total revenues 21,220 18,167
Cost of product revenues 10,907 10,528
Gross profit 10,313 7,639
Operating Expenses:
Research, development and patent 10,662 10,820
Selling, general and administrative 19,155 19,814
Total operating expenses 29,817 30,634
Loss from operations (19,504 ) (22,995 )
Other income (expense):
Interest expense (2,057 ) (3,374 )
Interest expense, related parties (451 ) (4,355 )
Change in fair value of financial instruments (5,177 ) (96 )
Loss
on extinguishment of debt, net
(2,196 )
Gain
on extinguishment of debt, related party
9,183
Other expense, net (11 ) (105 )
Total other expense, net (709 ) (7,930 )
Net loss $ (20,213 ) $ (30,925 )
Basic and diluted net loss per common share: $ (0.20 ) $ (1.06 )
Weighted-average shares outstanding used in computing basic and diluted net loss per common share: 101,248 29,235

See
accompanying notes.

MARRONE
BIO INNOVATIONS, INC.

Consolidated
Statements Stockholders’ Equity (Deficit)

(In
Thousands)

TOTAL
COMMON
    STOCK
ADDITIONAL ACCUMULATED STOCKHOLDERS’
SHARES AMOUNT PAID IN CAPITAL HIÁNY EQUITY (DEFICIT)
Balance at January 1, 2017 24,661 $ $ 204,463 $ (234,647 ) $ (30,184 )
Net loss (30,925 ) (30,925 )
Exercise of stock options 14 17 17
Share-based compensation 2,060 2,060
Issuance of common
    stock warrants for services
54 54
Issuance of restricted
    stock units
139 139
Issuance
    of common stock in follow-on offering, net of offering costs and underwriter commissions
6,676 8,188 8,188
Balance at December 31, 2017 31,351 214,921 (265,572 ) (50,651 )

New revenue
                                 standard adoption impact

2,311 2,311
Net loss (20,213 ) (20,213 )
Net settlement of
    opciók
44 26 26
Exercise of warrants 78 98 98
Share-based compensation 1,850 1,850
Issuance of restricted
    stock units in lieu satisfaction of bonus payment
205 205
Settlement of restricted
    stock units
338
Conversion of related
party notes for common stock and warrants
20,000 21,685 21,685
Conversion of secured
promissory notes for common stock and warrants
5,714 6,196 6,196
Conversion of convertible
notes for common stock and warrants
12,000 16,843 16,843
Fair value of common
    stock and warrants issued to placement agent in connection with private placement and note
átalakítás (1)
800 1,610 1,610
Issuance of common
    stock and warrants in private placement, net of offering costs and underwriter commissions
32,000 1 20,310 20,311
Issuance
    of common stock in follow-on offering, net of offering costs and underwriter commissions
8,366 12,665 12,665
Balance at December
    31, 2018
110,691 $ 1 $ 296,409 $ (283,474 ) $ 12,936

See
accompanying notes.

MARRONE
BIO INNOVATIONS, INC.

Consolidated
Statements of Cash Flows

(In
Thousands)

YEAR ENDED DECEMBER 31,
2018 2017
Cash flows from operating activities
Net loss $ (20,213 ) $ (30,925 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,890 2,044
Gain on disposal of equipment 363
Share-based compensation 1,850 2,114
Non-cash interest expense 994 1,596
Change in fair value of financial instruments 5,177 96
Loss on extinguishment of debt, net 2,196
Gain on extinguishment of debt, related party, net (9,183 )
Net changes in operating assets and liabilities:
Accounts receivable 1,065 (193 )
Inventories 1,603 (1,345 )
Prepaid Expenses and other assets 33 (144 )
Deferred cost of product revenues 1 (375 )
Accounts payable (2,028 ) 2,305
Accrued and other liabilities (857 ) 2,599
Accrued interest due to related parties (1,614 ) 4
Deferred revenue (339 ) 805
Net cash used in operating activities (19,425 ) (21,056 )
Cash flows from investing activities
Purchases of property, plant and equipment (580 ) (849 )
Proceeds from the sale of equipment 35
Net cash used in investing activities (580 ) (814 )
Cash flows from financing activities
Proceeds from issuance of common stock, net of offering costs 34,486 8,188
Proceeds from issuance of debt 2,000 4,000
Proceeds from secured borrowings 21,844 16,228
Reductions in secured borrowings (21,046 ) (14,952 )
Repayment of debt (254 ) (756 )
Financing costs (201 ) (215 )
Repayment of capital leases (420 )
Exercise of stock options 40 17
Net settlement of options (14 )
Exercise of warrants 98
Net cash provided by financing activities 36,953 12,090
Net increase in cash and cash equivalents and restricted cash 16,948 (9,780 )
Cash and cash equivalents and restricted cash, beginning of period 2,833 12,613
Cash and cash equivalents and restricted cash, end of period $ 19,781 $ 2,833
Supplemental disclosure of cash flow information
Cash paid for interest $ 2,772 $ 5,993
Supplemental disclosure of non-cash investing and financing activities
Property, plant and equipment included in accounts payable and accrued liabilities $ 51 $ 245
Conversion of debt to equity $ 10,000 $
Conversion of bridge loan (convertible note) to equity $ 6,000 $
Conversion of debt, related party to equity $ 35,000 $
Conversion of accrued liabilities into equity associated with the granting of restricted stock units $ 205 $
Increase in debt discount associated with change in fair value of derivative
    felelősség
$ 573
Conversion of accrued interest, related party, into
    debt, related party
$ 324

See
accompanying notes.

MARRONE
BIO INNOVATIONS, INC.

Megjegyzések
to Consolidated Financial Statements

December
31, 2018

premier
Summary of Business, Basis of Presentation

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.

Going
Concern, Liquidity, and Management Plans

la
accompanying consolidated financial statements have been prepared under the assumption that the Company will continue to operate
as a going concern for the 12 months upon the issuance of these consolidated financial statements, 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 the Company’s ability to continue as a going concern.

The Company is an early stage company and
has a limited number of commercialized products. As of December 31, 2018, the Company had an accumulated deficit of $283,474,000,
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, 2018, the Company had a
working capital surplus of $18,817,000, including cash and cash equivalents of $18,221,000. In addition, as of December
31, 2018, the Company had debt and debt due to related parties of $14,137,000 and $7,300,000, respectively, for which the underlying
debt agreements contain various financial and non-financial covenants, as well as certain material adverse change clauses. Mint
of December 31, 2018, the Company had a total of $1,560,000 of restricted cash relating to these debt agreements (See Notes 6
and 13 for further discussion).

la
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.

The Company’s historical operating results,
including prior periods of negative working capital, indicate substantial doubt exists related to the Company’s ability
to continue as a going concern for the next 12 months from the date of issuance of these consolidated financial statements. Azonban,
the Company believes that its existing cash and cash equivalents and restricted cash of $19,781,000 at December
31, 2018, together with expected revenues, expected future debt or equity financings and cost management as well as cost
reductions will be sufficient to fund operations as currently planned through one year from the date of the issuance of these
consolidated financial statements. The Company anticipates securing additional sources of through equity and/or debt financings,
collaborative or other funding arrangements with partners, or through other sources of financing, consistent with historic results.
However, the Company cannot predict, with certainty, the outcome of its actions to grow revenues, to manage or reduce costs or
to secure additional financing from outside sources on terms acceptable to the Company or at all. Further, the Company may continue
to require additional sources of cash for general corporate purposes, which may include operating expenses, working capital to
improve and promote its commercially available products, advance product candidates, expand international presence and commercialization,
general capital expenditures and satisfaction of debt obligations.

If
the Company further 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. Without entering into a
continuation of its current waiver, which expires November 15, 2020, entering into strategic agreements that include significant
cash payments upfront, significantly increasing revenues from sales or raising additional capital through the issuance of equity,
the Company expects it will exceed its maximum debt-to-worth requirement under the June 2014 Secured Promissory Note with Five
Star Bank. Further, 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. 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.

Habár
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 stockholders 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.

la
June 2014 Secured Promissory Note contains a material adverse change clause that could be invoked by the lender as a result of
the uncertainty related to the Company’s ability to continue as a going concern. If the lender were to declare an event
of default, the entire amount of borrowings related to all debt agreements at that time would have to be reclassified as current
in the consolidated financial statements. The lender has waived its right to deem recurring losses, liquidity, going concern,
and financial condition a material adverse change through November 15, 2020. As a result, none of the long-term portion of the
Company’s outstanding debt has been reclassified to current in these consolidated financial statements as of December 31,
2018.

Ban ben
December 2017, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited
investors named therein including Ospraie and Ardsley, pursuant to which the investors thereunder agreed, subject to the satisfaction
of certain closing conditions, to purchase units consisting of shares of the Company’s common stock and warrants to purchase
a share of the Company’s common stock. Concurrently with the entry into the Purchase Agreement, the Company entered into
amendments to the senior promissory notes issued to affiliates of Waddell & Reed Financial, Inc. (“Waddell”) and
the secured promissory notes issued in October 2012 and April 2013 (the “October 2012 and April 2013 Promissory Notes”).
In February 2018, the Company completed the transactions contemplated in the Purchase Agreement, the note amendments and certain
related agreements, which resulted in:

la
    issuance of an aggregate of 40,000,001 shares of the Company’s common stock and warrants to purchase an aggregate of
    41,333,333 shares of the Company’s common stock to purchasers under the Purchase Agreement for an aggregate purchase
    price of $30.0 million, which includes conversion of all outstanding principal under the October 2017 Convertible Note;
la
    conversion of $35.0 million aggregate principal amount of the Waddell notes into an aggregate of 20,000,000 shares of the
    Company’s common stock and warrants to purchase 4,000,000 shares of the Company’s common stock, such that $5.0
    million of principal under such notes remained outstanding, in connection with which the maturity of such notes was extended
    to December 31, 2022, all interest payments under such notes were deferred to maturity on December 31, 2022;

la
    conversion of $10.0 million aggregate principal amount of indebtedness outstanding under the October 2012 and April 2013 Promissory
    Notes to an aggregate of 5,714,285 shares of the Company’s common stock and warrants to purchase 1,142,856 shares of
    the Company’s common stock such that $2.45 million of principal under such notes remained outstanding, and in connection
    with which the maturity of such notes was extended to December 31, 2022, the interest was reduced from 14% to 8% and all interest
payments under such notes were deferred to the maturity on December 31, 2022; et
la
    issuance of 800,000 shares of common stock and warrants to purchase 2,017,143 shares of common stock to the placement agent
    that facilitated the foregoing transactions.

Mint
a result of the completion of the February 2018 Financing Transactions, the Company issued an aggregate of 70.5 million
shares of common stock and warrants to purchase an aggregate of 48.9 million shares of common stock, the deleveraging of the Company’s
balance sheet by reducing principal payments that were outstanding as of December 31, 2017 by $49.0 million, and the deferral
of payment on $7.5 million of remaining outstanding debt until December 31, 2022.

Ban ben
December 2016, the Company filed a shelf registration statement on Form S-3 with the SEC that provides for the sale and issuance
of up to $50,000,000 million of the Company’s common stock, preferred stock, debt securities, warrants, rights and/or units,
including the ability to sell up to $15,000,000 million of the Company’s common stock through an at-the-market program in
accordance with an offering agreement the Company entered into with H.C. Wainwright. As of December 31, 2017, the Company had
sold 104,000 shares of common stock under at-the-market program at a weighted average exercise price of $2.22 per share for proceeds
(net of commission) of $0.2 million, and $14.8 million remained available for sale under the agreement with H.C. Wainwright.
In April 2017, using the shelf registration statement, the Company completed an underwritten
public offering of 6,571,000 registered shares of common stock (inclusive of 857,000 shares of its common stock to cover
over-allotments).
The public offering price of the shares sold in the offering was $1.40 per share, and after levonása
underwriting discounts and commissions and other offering expenses payable by the Company, the aggregate net proceeds to the Company
from the offering totaled approximately $8,188,000
. In April 2018, also under the December 2016 shelf registration statement,
the Company completed a public offering of 8,366,250 registered shares of its common stock. The public offering price of the shares
sold in the offering was $1.65 per share, and after deducting the underwriting discounts and commissions and other offering expenses
payable by the Company, the aggregate net proceeds to the Company from the offering totaled $12,665,000 million. See Note
14 for further discussion.

la
Company has based its beliefs on assumptions and estimates that may prove to be wrong, and the Company could spend its available
financial resources less or more rapidly than currently expected. The actions discussed above cannot be considered probable of
occurring and mitigating the substantial doubt raised by its historical operating results and satisfying its estimated liquidity
needs for 12 months from the issuance of these consolidated financial statements. If the Company becomes unable to continue as
a going concern, it may have to liquidate its assets, and stockholders may lose all or part of their investment in the Company’s
common stock.

deuxième
Significant Accounting Policies

Használat
of Estimates

la
preparation of these consolidated 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 consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

la
Company believes 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 with variable considerations, fair value of
financial instruments, inventory valuation, warrants and share-based compensation have the greatest potential impact on the consolidated
financial statements. Therefore, the Company considers these estimates to be its significant estimates.

Cash
and Cash Equivalents

la
Company considers all highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Cash and cash equivalents consist 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. The following table provides a reconciliation of cash,
cash equivalents and restricted cash to amounts shown in the statement of cash flows in thousands as a result of the adoption
of Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”):

DECEMBER 31,
2018 2017
Cash and cash equivalents $ 18,221 $ 786
Restricted cash, current portion 0 487
Restricted cash, less current portion 1,560 1,560
Total cash, cash equivalents and restricted cash $ 19,781 $ 2,833

Restricted
Cash

la
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. See Note 6 for further discussion.

Derivative
Liability

From time-to-time, the Company may issue convertible
notes that contain embedded features that required derivative accounting including the determination of the fair value of the
financial instruments at the execution of the contract and the change in such fair values through each reporting period until
such time the liability is extinguished. The Company’s convertible debt as further discussed in Note 6, has an embedded
derivative that required bifurcation from the host instrument. The October 2017 Convertible Note was extinguished as part
of the February 2018 Financing Transaction (See Notes 6 and 13 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:

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

la
following table presents the Company’s financial liabilities measured at fair value on a recurring basis as of December
31, 2018 and 2017 (in thousands):

DECEMBER 31, 2018
TOTAL LEVEL 1 LEVEL 2 LEVEL 3
Derivative liability $ $ $ $

DECEMBER 31, 2017
TOTAL LEVEL 1 LEVEL 2 LEVEL 3
Derivative liability $ 674 $ $ $ 674

la
Company estimated the fair value of the derivative liability using an Option Pricing Model as of December 31, 2017, for
the period January 11-17, 2018 on issuance of additional derivative liability commensurate with the receipt of additional principle
under the convertible note, and upon extinguishment of the convertible note on February 5, 2018 (See Note 6). The fair value is
subjective and is affected by certain significant inputs to the valuation model, which are disclosed in the table below. The fair
value of the derivative liability is based upon the outputs of the Option Pricing Model probability-weighted to reflect three
different conversion option exercise dates. As the Option Pricing Model estimates the fair value of derivative liability using
unobservable inputs, it is considered to be a Level 3 fair value measurement.

la
periodic changes in the estimated fair value between the collective issuance dates, at each reporting period, and on the
extinguishment of the convertible note, resulted in the Company recognizing a net loss from the total change in estimated fair
market value of the derivative liabilities as of December 31, 2018, as shown in the tables below. This loss is included in the
change in estimated fair value of derivative liability in the Company’s consolidated statement of operations.

la
following table provides a reconciliation of the activity for the derivative liability measured between the most recent reporting
period and as of the balance sheet date based on the fair value using significant inputs including the unobservable inputs (Level
3) (in thousands):

DERIVATIVE
LIABILITY
Fair value at December 31, 2017 $ 674
Derivative liability issued 573
Change in estimated fair value recorded of financial instruments 5,177
Derivative liability extinguished (6,424 )
Fair value at December 31, 2018 $

la
following table represents the significant inputs used in determining the fair value of the derivative liability:

FEBRUARY 5, JANUARY 11-17 DECEMBER 31,
2018 2018 2017
Price $ 0.50 $ 01h00 $ 01h00
Stock Price volatility 60 % 60 % 60 %
Risk-free rate 1.46 % 1.43 % 1.28 %
Probability weighted term in years 0.18 0.23 – 0.25 0.42

Expected
Élet
. Expected life represents the period that management estimates the conversion option is expected to be outstanding, or
the estimated period until the holder exercises the conversion option, not to exceed the contractual term of the note.

Estimated
Volatility Factor
. The Company’s volatility assumption is based on the volatility of the Company’s common stock
adjusted for credit spread and recovery factors, also giving consideration for convertible bond implied volatilities for similarly
traded instruments.

Interest
Rate
. The Company’s interest rate is based on interest rates of comparable distressed credits, also giving consideration
to historical average recovery for subordinate debt for the equivalent remaining term as the expected life of the convertible
note.

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.

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.

la
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, 2018 and 2017, 11% and 9%, respectively, of the Company’s revenues were generated from international
customers.

la
Company’s principal sources of revenues were its Regalia, Grandevo, and Venerate product lines for the years ended December
31, 2018 and 2017, accounting for 90% and 87%, respectively, of the Company’s total revenues.

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
la
CUSTOMER
B
CUSTOMER
C
Year ended December 31,
2018 17 % 1 % 35 %
2017 24 % 2 %

Customers
to which 10% or more of the Company’s outstanding accounts receivable are attributable as of either December 31, 2018 or
2017 consist of the following:

CUSTOMER
DECEMBER 31, la B C D E F G
2018 8 % 24 % 52 %
2017 22 % 3 % 16 % 11 % 11 %

Concentrations
of Supplier Dependence

la
active ingredient in the Company’s Regalia product line is derived from the giant knotweed plant, which the Company obtains
from China. The Company currently relies on one supplier for this plant. Such 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. While the Company does not have a long-term supply contract with this supplier, the Company does have a long-term
business relationship with this supplier. The Company endeavors to keep 6 months of knotweed extract on hand at any given time,
but an unexpected disruption in supply could have an effect on Regalia supply and revenues. 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

la
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 collectability 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, 2018 and 2017, no receivables balances were written off. Mint
of December 31, 2018 and 2017, 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, 2018, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves
of $327,000 due to quantities on hand that may not be used or sold prior to expiration, and an adjustment of $1,078,000 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, 2017, the Company recorded, as a component of cost of product revenues, adjustments to inventory reserves
of $125,000 due to quantities on hand that may not be used or sold prior to expiration, and an adjustment of $224,000 as a result
of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity.

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

DECEMBER 31, DECEMBER 31,
2018 2017
Raw materials $ 1,844 $ 2,310
Work in progress 1,580 2,441
Finished goods 4,800 5,076
$ 8,224 $ 9,827

Mint
of December 31, 2018 and 2017, the Company had $579,000 and $252,000, respectively, in reserves against its inventories.

Deferred
Cost of Product Revenues

Deferred
cost of product revenue is 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, 2018 and 2017, the Company recorded deferred cost
of product revenues of $4,000 and $3,063,000, respectively. A portion of the amounts deferred as of December 31, 2017 was recognized
in connection with the Company’s adoption of Accounting Standards Codification (“ASC”) 606, Revenue from
Contracts with Customers,
refer to Deferred Revenue and Revenue Recognition policies within this note.

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
Épület 30
    évek
Computer
    felszerelés
2-3
    évek
Machinery
    and equipment
3-20
    évek
Hivatal
    felszerelés
3-5
    évek
Furniture 3-5
    évek
Leasehold
    fejlesztések
Shorter
    of lease term or useful life
Szoftver 3
    évek

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.

la
Company recognized a combined loss on disposals or impairment charge totaling $369,000 for the year ended December 31, 2017 on
these disposed or held for sale assets. The Company included the loss on disposal or impairment charge in selling, general and
administrative expenses. The Company did not recognize any amounts related to disposals or impairment for the year ended December
31, 2018.

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.

Deferred
Revenue

Historically,
prior to the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.
(“ASC 606’), for sales of products made to distributors, the Company recognized 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 were not limited to, whether the payment terms offered to the distributor were structured to correspond to when product was
resold, the distributor’s history of adhering to the terms of its contractual arrangements, whether the Company had 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 recognized distributor revenue as title and risk of loss passed,
provided all other revenue recognition criteria were satisfied (the “sell-in” method). For certain sales to certain
distributors, the revenue recognition criteria were 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 certain unsold products to the Company, and therefore considered the arrangement not to be fixed or determinable,
and accordingly, revenue was deferred until the products were resold to end customers by the distributor (the “sell-through”
method).

On
January 1, 2018, in connection with the Company’s adoption of ASC 606, the Company reassessed the contracts giving rise
to the deferred revenues at December 31, 2017. Under ASC 606, management also considered its historical experience under these
contractual arrangements and the Company’s overall estimates for returns, along with those factors initially considered
in the deferral of such revenues. Under ASC 606, when the Company receives consideration, or such consideration is unconditionally
due, from a customer prior to transferring control of goods or services to the customer under the terms of a sales contract, the
Company records deferred revenue, which represents a contract liability. The Company recognizes deferred revenue as net sales
after the Company has transferred control of the goods or services to the customer and all revenue recognition criteria are met.
The Company’s deferred revenue is broken out as follows:

DECEMBER 31, 2018 DECEMBER 31, 2017
Product revenues $ 457 $ 6,449
Financing costs(1) 604
License revenues 1,776 1,790
2,837 8,239
Less current portion (438 ) (6,193 )
$ 2,399 $ 2,046

(1) finanszírozás
    costs relate to the implementation of ASC 606. Refer to the Company’s revenue recognition policy in this note.

Revenue
Recognition

On
January 1, 2018, the Company adopted ASC 606 and all the related amendments (“the new revenue standard”) and applied
it to all contracts using the modified retrospective method. The cumulative effect of initially applying the new revenue standard
was an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues
to be reported under the accounting standards in effect for those periods.

Under
ASC 606, the Company recognizes revenue for product sales at a point in time following the transfer of control of such products
to the customers, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. The Company
may enter into contracts in which the standalone selling prices (“SSP”) is different from the amount the Company is
entitled to bill the customer. As of December 31, 2018, deferred product revenue in the amount of $0.5 million associated primarily
with billings in excess of SSP. 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 the year ended December 31, 2018, the
adoption of this standard had a material impact on the Company’s consolidated financial statements, and it is expected to
have a material impact on future periods, because the Company will no longer recognize revenue on a sell-through basis. la
adoption also resulted in a change in accounting method for income tax purposes, the impact of which was not material to the Company’s
overall income taxes. See Note 11.

la
cumulative effect of the changes made to the Company’s consolidated balance sheet on January 1, 2018 for the adoption of
the new revenue standard was as follows (in thousands):

BALANCE SHEET

As Reported

December 31, 2017

Adjustments

Due to ASC 606

Balance at

January 1, 2018

ASSETS
Deferred cost of product revenues $ 3,063 $ (3,058 ) $ 5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deferred revenue, current portion 6,193 (5,893 ) 300
Deferred revenue, less current portion 2,046 524 2,570
Accumulated deficit $ (265,572 ) $ 2,311 $ (263,261 )

Ban ben
accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the Company’s Consolidated
Balance Sheet and Consolidated Statement of Operations was as follows (in thousands):

DECEMBER 31, 2018
BALANCE SHEET As Reported Impacts Due to ASC 606 Eredmények
without Impact of ASC 606
ASSETS
Deferred cost of product revenues $ 4 $ 2,285 $ 2,289
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deferred revenue, current portion 438 4,518 4,956
Deferred revenue, less current portion 2,399 (604 ) 1,795
Accumulated deficit $ (283,474 ) $ (1,629 ) $ (285,103 )

For the YEAR ENDED DECEMBER 31, 2018
STATEMENT OF OPERATIONS As Reported Impacts Due to ASC 606 Results without Impact of ASC 606
Revenues
Termék $ 20,775 $ 1,327 $ 22,102
License 445 (182 ) 263
Cost of product revenues 10,907 773 11,680
Interest expense (2,057 ) 310 (1,747 )
Net loss $ (20,213 ) $ 682 $ (19,531 )
Basic and Diluted net loss per common share: $ (0.20 ) $ 0.01 $ (0.19 )

Termék
Sales.
The Company recognizes revenue for product sales at a point in time following the transfer of control of such products
to the customers, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. The Company
may enter into contracts in which the standalone selling prices (“SSP”) is different from the amount the Company is
entitled to bill the customer. As of December 31, 2018, the Company had deferred product revenue in the amount of $457,000 associated
primarily with billings in excess of SSP.

Licenses Revenues. 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. As of December 31, 2018 and 2017, the Company has received an aggregate
of $4.1 million and $3.9 million in payments under these strategic collaboration and distribution agreements of
which $0.4 million and $0.2 million, respectively was recognized as of December 31, 2018 and 2017. In addition to the amounts
already received, an additional $0.8 million in payments under these agreements could potentially receive if certain testing validation,
regulatory progress and commercialization events occur.

finanszírozás
Component Revenues.
The Company recognizes a financing component, if material, when the Company receives consideration from
the customer, and when the Company expects control of the product or service to be transferred to the customer in a period of
greater than one year from the date of receipt of the consideration. As such, the financing component is determined to be long-term
and therefore recorded in the consolidated balance sheet as part of deferred revenues. As of December 31, 2018 the Company recognized
$0.2 million of financing revenues.

Revenue
recognition requires the Company to make a number of estimates that include variable consideration. For example, customers may
receive sales or volume-based pricing incentives or receive incentives for providing the Company with marketing-related information.
The Company makes estimates surrounding variable consideration and the net impact to revenues. In making such estimates, significant
judgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance
incentives and the likelihood that customers will achieve them. In the event estimates related to variable consideration change,
the cumulative effect of these changes is recognized as if the revised estimates had been used since revenue was initially recognized
under the contract. Such revisions could occur in any reporting period, and the effects may be material.

Tól től
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.

Contract
Assets.
The Company does not have contract assets since revenue is recognized as control of goods are transferred or as services
are performed or such contract assets are incurred or expensed within one year of the recognition of the revenue.

Contract
Liabilities.
The contract liabilities consist of deferred revenue. The Company classifies deferred revenue as current or noncurrent
based on the timing of when the Company expects to recognize revenue. Generally, all contract liabilities, excluding deferred
revenue, are expected to be recognized within one year and are included in accounts payable in the Company’s consolidated
balance sheet.

Research,
Development and Patent Expenses

Kutatás
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, 2018 and 2017, research and development expenses totaled $9,681,000
and $9,711,000, respectively, and patent expenses totaled $981,000 and $1,109,000, respectively.

Szállítás
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. Shipping and handling costs for the year ended December 31, 2018 and
2017 were $837,000 and $488,000, respectively.

Advertising

la
Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2018 and 2017 were $1,022,000
and $386,000, respectively.

Share-Based
Compensation

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

la
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.

la
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.

la
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, 2018 and 2017, the Company calculated the fair
 value of stock options granted based on the following assumptions:

YEAR ENDED DECEMBER 31,
2018 2017
Expected life (years) 2.51-6.08 6.08
Estimated volatility factor 53%-58 % 43%-45 %
Risk-free interest rate 2.42%-2.98 % 1.82%-2.30 %
Expected dividend yield

Expected
Élet
. 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 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
. From the Company’s inception as a public company through December 31, 2017, as the Company’s
common stock had limited trading history, the Company calculated the estimated volatility factor based on the trading history
and calculated volatility of the common stock of comparable agricultural biotechnology companies. Beginning January 1, 2018, the
Company began the use of a methodology giving weight to both the volatility of its common stock and the volatility of the common
stock of comparable agricultural biotechnology companies.

Risk-Free
Kamatláb
. 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.

Warrants

la
warrants granted in connection with the February 2018 Financing Transactions were accounted for in equity. In connection with
the February 2018 Financing Transactions, the Company estimated the fair value of the warrants issued using an Option Pricing
Model. The fair value is subjective and is affected by certain significant inputs to the valuation model, which are disclosed
in the table below.

FEBRUARY 5, 2018
Contractual life (years) 2.9
Estimated volatility factor 55 %
Risk-free interest rate 2.13 %
Expected dividend yield

Contractual
Élet
. Contractual life represents the period that the warrants are expected to be outstanding and are commensurate with the
contractual terms in the agreements.

Estimated
Volatility Factor
. During the first three, six and nine months of 2018, the Company valued the warrants using estimated volatility
factor based on the trading history and calculated volatility of the common stock of comparable agricultural biotechnology companies.
It was determined the lack of consideration for the volatility of the Company’s common stock and the comparable agricultural
biotechnology companies used in reporting for such periods was an error. The inputs in the valuation model above reflect the estimated
volatility giving weight to both the volatility of the Company’s common stock and the volatility of the common stock of
comparable agricultural biotechnology companies. Refer to Footnote 16.

Risk-Free
Kamatláb
. 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.

Income
Taxes

The Tax Cuts and Jobs Act (the “TCJA”)
was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%. As of December 31, 2018,
the Company completed the accounting for the tax effects of the TCJA. The most significant impact of the legislation for
the Company was a $27,971,000 reduction of the value of the Company’s net deferred tax assets (which represent future tax
benefits. As all deferred tax assets were fully offset by a valuation allowance, the impact of the TCJA also reduced the Company’s
valuation allowance by $27,971,000.

la
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 consolidated 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.

Mint
of December 31, 2018 and 2017, 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.

Ezek
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, 2018 and 2017, the Company concluded that there were no additional uncertain tax positions were required to be recognized
in its consolidated financial statements.

la
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, 2018 and 2017.

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. From time to time the Company is impacted by foreign currency
translation in the receipt of payment from customers and payment to vendors. These amounts are not material, and net
loss is the only component of the Company’s comprehensive loss for the periods presented.

Segment
Information

la
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.

Mostanában
Adopted Accounting Pronouncements

Ban ben
May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09”). ASU 2014-09 and its related amendments provide new, globally applicable converged guidance concerning recognition
and measurement of revenue. The new guidance requires the application of a five-step model to determine the amount and timing
of revenue to be recognized. The underlying principle is that revenue is to be recognized for the transfer of goods or services
to customers that reflects the amount of consideration that the Company expects to be entitled to in exchange for those goods
or services. Additionally, 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. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. The full retrospective
method requires ASU 2014-09 be applied to each prior period presented in the year of adoption and the cumulative effect of adoption
would be reflected at the beginning of the year of adoption. The modified retrospective method has the cumulative effect of applying
ASU 2014-09 at the beginning of the year of adoption.

On
January 1, 2018 the Company adopted ASU 2014-09, using the modified-retrospective method. This adoption primarily affected the
Company’s product revenues accounted for using the sell-through method under ASC 605, Revenue Recognition, and also the
accounting for variable consideration in the form of customer incentives. Generally, under the ASU, the Company is required to
recognize revenue and profit from its product sales arrangements earlier and in a more linear fashion than historical practice
under ASC 605, including the estimation of sell-through revenue and variable consideration that would otherwise have been deferred.
Following the adoption of ASU 2014-09, the revenue recognition for the Company’s license arrangements remained materially
consistent with its historical practice. See “Revenue Recognition” above for further discussion of the effects of
the adoption of ASU 2014-09 on the Company’s significant accounting policies. The adoption of this standard had a material
impact on the Company’s consolidated financial statements as disclosed above and is expected, to continue to have
a material impact for the foreseeable future.

Ban ben
August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments (“ASU 2016-15”). The amendments in this update clarify how certain cash receipts and
cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 will be effective for fiscal years
beginning after December 15, 2017, with early adoption permitted. On January 1, 2018 the Company adopted Accounting Standards
Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU
2016-15”). The adoption of this standard did not have a material impact on the consolidated financial statements and is
not expected to have a material impact on future periods.

Ban ben
August 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU
2016-18”). The amendment requires that the statement of cash flows explain the change during the period in the total cash,
cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. On January 1, 2018, the Company
adopted ASU 2016-18. The adoption primarily resulted in the inclusion of the restricted cash balances within the overall cash
balances and a reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheet. The adoption
of this standard did not have a material impact on the consolidated financial statements and is not expected to have a material
impact for the foreseeable future. See “Cash and Cash Equivalents and Restricted Cash” above for further discussion
of the effects of the adoption of ASU 2016-18 on the Company’s significant accounting policies.

Ban ben
July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic
480); Derivatives and Hedging (Topic 815), (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part
II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and
Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception,” (ASU No. 2017-11) which allows for the
exclusion of a down round feature, when evaluating whether or not an instrument or embedded feature requires derivative classification.
The Company early adopted this guidance beginning January 1, 2018. The adoption of this standard had a material impact on the
Company’s consolidated financial statements as the Company was not required to classify the warrants issued in conjunction
with the February 5, 2018 Financing Transactions as derivatives.

In March 2018, the FASB issued ASU No. 2018-05,
“Income Taxes (Topic 740)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,” (ASU
No. 2018-05) which amends certain Securities and Exchange Commission (SEC) material in Topic 740 for the income tax accounting
implications of the recently issued Tax Reform. This guidance clarifies the application of Topic 740 in situations where a registrant
does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting under
Topic 740 for certain income tax effects of Tax Reform for the reporting period in which Tax Reform was enacted. The adoption
of this guidance did not have a material impact on the consolidated financial statements of the Company. In March 2018, the Financial
Accounting Standards Board (“FASB”) issued guidance pertaining to the accounting of the TCJA, allowing companies a
year to finalize and record any provisional or inestimable impacts of the TCJA. This guidance is effective upon issuance. la
Company has completed its analysis related to the adoption of this particular guidance, and it did not have a material
effect on the Company’s consolidated financial statements.

Ban ben
June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718); Improvements to Nonemployee
Share Based Payment Accounting” (ASU No. 2018-07) which aligned certain aspects of share-based payments accounting between
employees and nonemployees. Specifically nonemployee share-based payment awards within the scope of Topic 718 are measured at
grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service
has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied and
an entity considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such
conditions. The Company early adopted this guidance beginning January 1, 2018 using the modified –retrospective method.
The adoption of this standard did not have a material impact on the consolidated financial statements.

Ban ben
June 2018, the SEC adopted the final rule under SEC Release No. 33-10513, “Amendments to Smaller Reporting Company Definition”,
amending the thresholds in smaller reporting company (“SRC”) definition, thereby expanding the number of smaller companies
eligible to comply with the scaled disclosure requirements in several Regulation S-K and Regulation S-X Items. This final rule
is effective on September 10, 2018. The Company has applied the new guidance to its consolidated financial statements for fiscal
year ended 2018, and in connection with the application of the final rule has elected to reflect scaled disclosures as
part of these consolidated financial statements.

Mostanában
Issued Accounting Pronouncements

Ban ben
February 2016, the 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 consolidated 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 consolidated 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, and related ASUs issued after February 2016, including Accounting Standard
Update No. 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and Accounting Standard Update
No. 2018-11, Leases (Topic 842): Targeted Improvement (“ASU 2018-11”) issued in July 2018 to determine the potential
impact to its consolidated financial statements and related disclosures. ASU 2018-20

la
Company will adopt ASU 2016-02 in the first quarter of 2019 under a modified retrospective transition method. The Company has
assessed significant impacts of the new guidance on its accounting policies and procedures and has evaluated the new requirements
as applied to existing leasing arrangements. The Company believes the most significant impact will relate to the recording of
right of use assets and corresponding lease liability identified in connection with the Company’s lease arrangements. Mint
of December 31, 2018, the Company has two building leases classified as operating leases and two subleases in which the Company
is the Lessor. When the Company adopts the leasing standard, the Company estimates that the impacts to the consolidated financial
statements will be material. In addition, the new guidance is currently expected to result in expanded disclosures related to
the terms of the Company’s leasing arrangements beyond those currently made in these consolidated financial statements.
The Company is still in the process of estimating the necessary adjustments associated with ASU 2016-02. The Company will likely
adopt the practical expedients available under ASU 2016-02 but that determination is not yet finalized. The Company is also in
the process of implemented updates to its business processes, systems and controls in connection with the adoption of ASU 2016-02.

Ban ben
June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new forward-looking approach,
based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. la
estimate of expected credit losses will require entities to incorporate considerations of historical information, current information
and reasonable and supportable forecasts. ASU 2016-13 also expands the disclosure requirements to enable users of consolidated
financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. parce que
public business entities that meet the definition of a Securities and Exchange Commission filer, ASU 2016-13 is effective for
annual and interim reporting periods beginning after December 15, 2019, and the guidance is to be applied using the modified-retrospective
approach. Earlier adoption is permitted for annual and interim reporting periods beginning after December 15, 2018. In November
2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses,”
(ASU No. 2018-19), which clarifies that operating lease receivables arising from operating leases are not within the scope of
Topic 326-20. The provisions of ASU No. 2018-19 are effective consistent with ASU No. 2016-13. The Company is currently evaluating
both ASU 2016-13 and ASU 2018-19 to determine the impact to its consolidated financial statements and related disclosures.

Ban ben
August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820),” (ASU No. 2018-13), which modifies
the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The provisions of ASU No. 2018-13
are effective for annual reporting periods beginning after December 15, 2019 and interim reporting periods within those annual
periods, with early adoption permitted. Amendments on changes in unrealized gains and losses, the range and weighted average of
significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurements
uncertainty should be applied prospectively for only the most recent interim or annual periods presented in the initial year of
adoption with all other amendments applied retroactively to all periods presented upon their effective date. The Company has not
yet determined the impact of implementing this new standard on the consolidated financial statements.

Ban ben
August 2018, the FASB issued ASU No. 2018-15, “Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40),”
(ASU No. 2018-15), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that
is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
The provisions of ASU No. 2018-15 are effective for annual reporting periods beginning after December 15, 2019 and interim reporting
periods within those annual periods, with early adoption permitted. This ASU shall be applied either retrospectively or prospectively
to all implementation costs incurred after the date of adoption. The Company has not yet determined the impact of implementing
this new standard on the consolidated financial statements.

Ban ben
November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the Interactions between
Topic 808 and Topic 606” (ASU No. 2018-18), which clarifies certain transactions between collaborative arrangement participants
should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context
of a unit of account including aligning Topic 808 with the guidance in Topic 606. The provisions of ASU No. 2018-18 are effective
for annual reporting periods beginning after December 15, 2019 and interim reporting periods within those annual periods, with
early adoption permitted, including adoption in any interim period for public business entities for periods for which consolidated
financial statements have not yet be issued. This ASU shall be applied retrospectively to the date of initial application of Topic
606. The Company has not yet determined the impact of implementing this new standard on the consolidated financial statements.

troisième
Property, Plant and Equipment

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

DECEMBER 31,
2018 2017
Land $ 1 $ 1
Buildings 6,528 6,528
Computer equipment and software 528 522
Furniture, fixtures and office equipment 347 343
Machinery and equipment 15,701 15,302
Leasehold improvements 2,373 2,373
Construction in progress 95 218
25,573 25,287
Less accumulated depreciation (11,061 ) (9,271 )
$ 14,512 $ 16,016

la
Company recognized depreciation and amortization expense during the years ended December 31, 2018 and 2017 of $1,890,000 and $2,044,000,
respectively, inclusive of amortization expense related to assets disposed of during the period and related to capital leases
(See Note 6). During December 31, 2018 and 2017 the Company disposed of $0.1 and $.5 million in property, plant, and equipment.

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.

la
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,
2018 2017
Stock options outstanding 7,136 3,121
Warrants to purchase common stock 52,647 4,232
Restricted stock units outstanding 1,146 822
Convertible notes payable 4,005
Common shares to be issued in lieu of agent fees 498
61,427 12,180

5.
Accrued Liabilities

Accrued
liabilities consist of the following (in thousands):

DECEMBER 31,
2018 2017
Accrued compensation $ 2,570 $ 1,825
Accrued warranty costs 320 556
Accrued legal costs 69 1,558
Accrued customer incentives 2,170 1,986
Accrued liabilities, other 1,742 2,264
$ 6,871 $ 8,189

la
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, 2017 $ 556
Warranties issued (released) during the period (202 )
Settlements made during the period (34 )
Balance at December 31, 2018 $ 320

6.
Debt

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

DECEMBER 31,
2018 2017
Secured promissory notes (“October 2012 and April 2013 Secured Promissory Notes”) bearing interest at 8.00% per annum, interest and principal due at maturity (December 31, 2022), collateralized by substantially all of the Company’s assets, net of unamortized debt discount as of December 31, 2018 and December 31, 2017 of $0 and $103, respectively $ 3,425 $ 12,347
Secured promissory note (“June 2014 Secured Promissory Note”) bearing interest at
    prime plus 2% (7.25% as of December 31, 2018) 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,
    net of unamortized debt discount as of December 31, 2018 and December 31, 2017 of $205 and $226, respectively, discount is
    based on effective interest rate of 7.02%
8,639 8,872
Senior secured convertible promissory notes (“Secured December 2017 Convertible Note”) bearing interest at 10% per annum, interest and principal through the conversion date in February 2018, collateralized by substantially all of the Company’s assets, net of unamortized discount as of December 31, 2018 and December 31, 2017 of $0 and $510, respectively 3,490
Secured revolving borrowing (“LSQ Financing”) bearing interest at (12.8% annually)
    payable through the lenders direct collection of certain accounts receivable through June 2019, collateralized by substantially
    all of the Company’s personal property, net of unamortized debt discount as of December 31, 2018 and December 31, 2017
    of $0 and $54, respectively, with an effective interest rate of 18.41%.
2,073 1,222
Senior secured promissory notes due to related parties (“August 2015 Senior Secured Promissory Notes”) bearing interest at 8% per annum, interest and principal payable at maturity (December 31, 2022), collateralized by substantially all of the Company’s assets, net of unamortized discount as of December 31, 2018 and December 31, 2017 of $0 and $2,178, respectively debt discount is based on imputed interest rate of 0% (see Note 13 and 15) 7,300 37,822
Debt, including debt due to related parties 21,437 63,753
Less debt due to related parties, non-current (7,300 ) (37,822 )
Less current portion (2,318 ) (1,524 )
Debt, non-current $ 11,819 $ 24,407

Mint
of December 31, 2018, aggregate contractual future principal payments on the Company’s debt, including debt due to related
parties, are due as follows (in thousands):

Period ended December 31, 2018 Debt

Debt to

Related

Party

2019 $ 2,338
2020 283
2021 305
2022 2,778 5,000
2023 352
Thereafter 7,311
Total future principal payments 13,367 5,000
Interest payments included in debt balance (1) 976 2,300
$ 14,343 7,300

(1) Due to the debt extinguishment requirement, the Company has included both accrued interest
    and future interest in the debt balance for certain outstanding debt, as further discussed in Notes 13 and 14.

la
fair value of the Company’s outstanding debt obligations, which excludes debt due to related parties, as of December 31,
2018 and 2017 was $14,137,000 and $21,133,000, respectively. For the October 2012 and April 2013 Secured Promissory Notes, the
debt was valued by applying the ratio of the value of common stock the lender agreed to take as consideration in connection with
the Securities Purchase Agreement (Note 15) and applying this ratio to the outstanding principal balance. The Company used 7.25%,
the current interest rate, to value the variable rate debt. This debt is classified as Level 3 within the fair value hierarchy.
The debt entered during 2017 was valued using the outstanding principal balance.

la
following is a reconciliation of interest expense for the debt outstanding during the year ended December 31, 2018 and 2017 (in
thousands):

DECEMBER 31, 2018
Interest
Költség Related Party, Net Non-cash
October 2012 and April 2013 Secured Promissory Notes $ 213 $ $ 13
June 2014 Secured Promissory Note 638 21
Secured December 2017 Convertible Note (1) 529 480
LSQ Financing 361 57
August 2015 Senior Secured Promissory Note 451 113
ASC 606 Financing Component(2) 310 310
Más 6
$ 2,057 $ 451 $ 994

DECEMBER 31, 2017
Interest
Költség Related Party, Net Non-cash
October 2012 and April 2013 Secured Promissory Notes $ 1,925 $ $ 185
June 2014 Secured Promissory Note 574 23
Secured December 2017 Convertible Note (1) 288 71
LSQ Financing 438 162
August 2015 Senior Secured Promissory Note 4,355 1,155
Capital leases and other 149
$ 3,374 $ 4,355 $ 1,596

(1)
This agreement was terminated in February 2018

(2)
The Company adopted ASC 606 on January 1, 2018.

October
2012 and April 2013 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. 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 a $1,250,000 subordinated convertible note (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 October 2012
and April 2013 Secured Promissory Notes bore interest at 14% at until February 5, 2018.

On
February 5, 2018, the Company converted, pursuant to an amendment, dated December 15, 2017, to the October 2012 and April 2013
Secured Promissory Notes, $10,000,000 aggregate principal amount of indebtedness outstanding under the October 2012 and April
2013 Secured Promissory Notes to an aggregate of 5,714,285 shares of common stock and warrants to purchase 1,142,856 shares of
common stock (such conversion, the “Snyder Debt Conversion”), such that $2,450,000 of principal under the October
2012 and April 2013 Secured Promissory Notes is outstanding as of December 31, 2018. Simultaneously with the Snyder Debt Conversion,
the maturity of the October 2012 and April 2013 Secured Promissory Notes was extended to December 31, 2022 (“Maturity Date”),
the interest was reduced from 14% to 8% and all interest payments under the October 2012 and April 2013 Secured Promissory Notes
were deferred to the Maturity Date. This loan is collateralized by substantially all of the Company’s assets. The October
2012 and April 2013 Secured Promissory Notes contain representations and warranties by the Company and the lender, certain indemnification
provisions in favor of the lenders and customary covenants (including limitations on other debt, liens, acquisitions, investments
and dividends), and events of default (including payment defaults, breaches of covenants, a material impairment in the lender’s
security interest or in the collateral, and events relating to bankruptcy or insolvency). The October 2012 and April 2013 Secured
Promissory Notes contain several restrictive covenants. The Company is in compliance with all related covenants, or has received
an appropriate waiver of these covenants.

Ban ben
conjunction with the Snyder Debt Conversion, the Company accounted for the partial debt extinguishment under the troubled debt
restructuring accounting guidance. The Company recognized a gain of $3,015,000 for the year ended December 31, 2018 on partial
extinguishment of the October 2012 and April 2013 Secured Promissory Notes, which included the recognition of the debt discount.
Because the Company recognized a gain on the partial extinguishment of debt, the Company was required to include all future interest
and additional consideration, which included accrued interest, under the terms of this agreement as a reduction of the gain. Mint
a result, the amount of the debt on the Company’s consolidated balance sheet related to the October 2012 and April 2013
Secured Promissory Notes is $3,425,000, as compared to $2,450,000 of contractual principal outstanding thereunder. Going forward,
subject to future amendments to debt agreement or costs, the Company will not recognize future interest expense on the October
2012 and April 2013 Secured Promissory Notes.

la
accounting for the change due to the Snyder Debt Conversion is as follows (in thousands):

Principal (pre-conversion) $ 12,450
Discount (pre-conversion) (134 )
Consideration of common stock and warrants provided at conversion (6,196 )
Gain on extinguishment (2,695 )
Principal and future interest at December 31, 2018 $ 3,425

Additionally,
in conjunction with the terms of the October 2012 Secured Promissory Notes and the April 2013 Secured Promissory Notes, the Company
agreed to pay a fee of 7% of the funded principal amount to the agent that facilitated the 2018 February Financing Transactions
between the Company and the collective lenders. As part of the Snyder Debt Conversion, the Company renegotiated the Agent Fee,
which resulted in 498,000 shares to the Company’s common stock in lieu of a cash payment for services. These shares are
issuable at the Maturity Date of the note. The Company has included this liability in other non-current liabilities. la
change in the value of the agent fee and the fair value of the common stock granted in lieu of cash was also included in the gain
on partial extinguishment of debt as follows:

Agent fee, included in other liabilities, long term (pre-conversion) $ 827
Gain on extinguishment (319 )
Agent fee payable in common shares $ 508

juin
2014 Secured Promissory Note

Ban ben
June 2014, the Company borrowed $10,000,000 pursuant to a business loan agreement and promissory note (“June 2014 Secured
Promissory Note”) with Five Star Bank (“Lender”) which bears interest at 7.25% as of December 31, 2018. The
interest rate is subject to change and is based on the prime rate plus 2.00% per annum. The June 2014 Secured Promissory Note
is repayable in monthly payments of $73,695 and adjusted from time-to-time as the interest rate changes, 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.

la
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.

Under
this note 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 Five Star Bank. 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, Five Star Bank may declare the entire unpaid principal and interest immediately due and payable. As of December 31,
2018, the Company was in compliance with each of these covenants (the current ratio, debt to worth ratio, and a loan-to-value
ratio of no greater than 70%), however would not be in compliance with the material adverse situation given the Company’s
current going concern assessment and compensation limitation increases. As such, the Company has obtained a waiver from the lender
for the non-compliance through November 15, 2020.

la
following table reflects the activity under this note:

Principal balance, net at December 31, 2017 $ 8,872
Payments (868 )
Interest 614
Debt discount amortization 21
Principal balance, net at December 31, 2018 8,639

LSQ
finanszírozás

On
March 24, 2017, the Company entered into an Invoice Purchase Agreement (the “LSQ Financing”) with LSQ Funding Group,
L.C. (“LSQ”), pursuant to which LSQ may elect to purchase up to $7,000,000 of eligible customer invoices from the
Company. The Company’s obligations under the LSQ Financing are secured by a lien on substantially all of the Company’s
personal property; such lien is first priority with respect to the Company’s accounts receivable, inventory, and related
property, pursuant to an intercreditor agreement, dated March 22, 2017 (the “Three Party Intercreditor Agreement”),
with administrative agents for the October 2012 and April 2013 Secured Promissory Notes holders and the August 2015 Senior Secured
Promissory Notes holders.

Advances
by LSQ may be made at an advance rate of up to 80% of the face value of the receivables being sold. Upon the sale of the receivable,
the Company will not maintain servicing. LSQ may require the Company to repurchase accounts receivable if (i) the payment is disputed
by the account debtor, with the purchaser being under no obligation to determine the bona fides of such dispute, (ii) the account
debtor has become insolvent or (iii) upon the effective date of the termination of the LSQ Financing. LSQ will retain its security
interest in any accounts repurchased from the Company.

la
Company will also pay to LSQ (i) an invoice purchase fee equal to 1% of the face amount of each purchased invoice, at the time
of the purchase, and (ii) a funds usage fee equal to 0.035%, payable monthly in arrears. An aging and collection fee is charged
at the time when the purchased invoice is collected, calculated as a percentage of the face amount of such invoice while unpaid
(which percentage ranges from 0% to 0.35% depending upon the duration the invoice remains outstanding). The LSQ Financing will
be effective for one year with automatic one-year renewals thereafter unless terminated by the Company at least 60 and not greater
than 90 days from the end of the then-effective term; a termination fee is due upon early termination by the Company if such termination
is not requested within such 30-day window. LSQ may terminate this agreement with 30 days written notice at which time the LSQ
Financing will be terminated at the earlier of the 30-day period, the end of the current term, or the end of the then renewal
term. The events of default under the LSQ Financing include failure to pay amounts due, failure to turn over amounts due to LSQ
within a cure period, breach of covenants, falsity of representations, and certain insolvency events. The Company incurred $215,000
in financing-related costs as part of the LSQ Financing that were recorded as a debt discount and amortized to interest expenses
over the initial one-year term. The unamortized portion of these financing costs was $0 and $54,000 as of December 31, 2018 and
2017. In April 2017, the Company began receiving advances under the LSQ Financing.

Ban ben
March 2018, the Company and LSQ amended the LSQ Financing agreement and extended the term for an additional 60 days. In June 2018,
the Company amended the LSQ Financing arrangement which effectively (i) decreased the invoice purchase fee from 1.00% to a range
of 0.40% to 1.00%, ii) decreased the funds usage fee from 0.035% to a range of 0.020% to 0.035% and (iii) extended the terms of
the agreement to June 30, 2019.

There
was $2,073,000 and $1,222,000, respectively, net of discount, in outstanding balance under the LSQ Financing as of December 31,
2018 and 2017. Upon sale of the receivable, the Company may elect to set up a reserve where upon the cash for the sale remains
with the third-party and the Company can draw on the available amount on the reserve account at any time. Since April 2017, there
were times when the Company elected to utilize the reserve account, and the Company had $0 and $4,000, respectively in excess
funds available on the reserve account outstanding as of December 31, 2018 and 2017. As of December 31, 2018 and 2017, the Company
had $2,693,000 and $2,931,000, respectively included in accounts receivable that were transferred under this arrangement.

Felszerelés
finanszírozás

On
August 22, 2017, the Company signed an equipment financing agreement (“Equipment Financing Agreement”) to purchase
certain equipment it had leased under a capital lease. This equipment is included in property, plant and equipment, and amortization
of assets under capital leases is included in depreciation expense. The total borrowed under the Equipment Financing Agreement
was $496,000. As of December 31, 2018 and 2017, the Company had no equipment acquired under capital leases and there was no balance
outstanding under the Equipment Financing Agreement.

Secured
Convertible Promissory Note

On
October 12, 2017, the Company and Dwight W. Anderson (“Anderson”) entered into a $1,000,000 convertible promissory
note, which was restated in its entirety by a convertible promissory note entered into on October 23, 2017 (the “October
2017 Convertible Note”). The October 2017 Convertible Note was an unsecured promissory note in the aggregate principal amount
of up to $6,000,000. The Company’s ability to borrow under the October 2017 Convertible Note were subject to Anderson’s
approval and due on October 23, 2020 (the “Maturity Date”). Under the terms of the October 2017 Convertible Note,
from the date of the closing through December 31, 2017, the October 2017 Convertible Note bore interest at a rate of 1% per annum,
payable in arrears on the Maturity Date, unless earlier converted into shares of the Company’s common stock. Thereafter,
beginning January 1, 2018, the October 2017 Convertible Note bore interest at a rate of 10% per annum, payable in arrears on the
Maturity Date, unless earlier converted into shares of the Company’s common stock as described below.

Any
or all of the principal or accrued interest under the October 2017 Convertible Note was convertible into shares of the Company’s
common stock at a rate of one share of common stock per $1.00 of converting principal or interest, rounded down to the nearest
share with any fractional amounts cancelled, at the election of Anderson by delivery of written notice to the Company. Továbbá,
upon the consummation of a qualified equity financing of the Company prior to the Maturity Date, the aggregate outstanding principal
balance of the October 2017 Convertible Note and all accrued and unpaid interest thereon may convert, at the option of Anderson,
into that number of the securities issued and sold in such financing, determined by dividing (a) such aggregate principal and
accrued interest amounts, by (b) the purchase price per share or unit paid by the purchasers of the Company’s securities
issued and sold in such financing. Notwithstanding the foregoing, Anderson’s ability to affect any such conversions will
be limited by applicable provisions governing issuances of shares of the Company’s common stock under the rules of The Nasdaq
Capital Market, subject to the Company’s receipt of any applicable waivers thereof, and any amounts not issuable to Anderson
in the Company’s equity securities as a result of this limitation will be payable in cash.

la
Company recognized a discount on the October 2017 Convertible Note in the amount of incurred $578,000 as a result of a derivative
liability associated with the embedded conversion option in this debt to be amortized to interest expenses over the expected remaining
term of the note. The unamortized portion of these financing costs was $367,000 as of December 31, 2017.

On
December 15, 2017, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Anderson,
affiliate of Anderson and certain other accredited investors (collectively, the “Buyers”). In conjunction with the
transaction contemplated in the Purchase Agreement, Anderson was entitled to convert any portion of the balance outstanding under
the October 2017 Convertible Note and any accrued interest into shares of the Company’s common stock at a rate of one share
of common stock per $0.50. Anderson’s ability to affect conversions at the $0.50 rate was subject to, among other things,
approval of the Company’s stockholders, which was received on January 31, 2018.

On
December 22, 2017, the Company and Anderson amended and restated in its entirety the terms of the October 2017 Convertible Note
(“Secured December 2017 Convertible Note”). Under the amendment, the Secured December 2017 Promissory Note
became a secured promissory note and the maturity date was reverted to the original terms, due on October 12, 2020 (the “Maturity
Date”). The interest rate and conversion terms of the Secured December 2017 Convertible Note remain unchanged from the terms
of the October 2017 Convertible Note as described above. As of December 31, 2017, the outstanding principal balance under the
Secured December Convertible Note was $4,000,000, exclusive of a $510,000 discount.

Ban ben
January 2018, the Company borrowed the remaining available principal under the Secured December 2017 Convertible Note of $2,000,000,
exclusive of an additional derivative liability discount of $574,000.

On
February 5, 2018, the holder converted the entire outstanding principal of $6,000,000 under the Secured December 2017 Convertible
Note into 12,000,000 each common stock and warrants units in accordance with the terms of the Securities Purchase Agreement which
provided for conversion of the outstanding balance at a rate of $0.50 per common share. Upon the conversion on February 5, 2018,
the outstanding principal balance under the Secured December 2017 Convertible Note was reduced to zero (See Note 15).

la
Company accounted for the full conversion of the Secured December 2017 Convertible Note using the accounting guidance related
to an induced debt conversion. Under the induced conversion guidance, the Company recognized a loss on conversion in the amount
of $11,634,000 associated with the change between the debt’s original terms and the induced conversion terms. This loss
related to the induced conversion feature was partially offset by a gain on extinguishment of $6,424,000 related to the fair value
of the derivative liability on the date of conversion.

la
following table reflects the accounting for the activities under the Secured December 2017 Convertible Note as follows (in thousands):

Principal (pre-conversion) 6,000
Discount (pre-conversion) (791 )
Consideration of common stock and warrants provided at conversion (16,843 )
Derivative liability extinguished 6,424
Loss on extinguishment 5,210
Balance at December 31, 2018 $

7.
Warrants

la
following table summarizes information about the Company’s common stock warrants outstanding as of December 31, 2018 (in
thousands, except exercise price data):

NUMBER OF
SHARES
SUBJECT TO
EXPIRATION WARRANTS EXERCISE
DESCRIPTION ISSUE DATE DATE ISSUED 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
In connection with October 2012 and April 2013 Secured Promissory Notes (November 2016 Warrants) November 2016 November 2026 125 $ 2.38
In connection with June 2017
Consulting Agreement (November 2017 Warrants)
June 2017 June 2027 80 $ 01h10
In connection with February 2018 Financing Transaction (February 2018 Warrants 1) February 2018 December 2020 43,350 $ 01h00
In connection with February 2018 Financing Transaction (February 2018 Warrants 2) February 2018 December 2020 5,065 $ 1.25
52,647

(1) la
    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.

la
June 2013 Warrants became exercisable on the date of the IPO. The August 2015 and November 2016 were immediately exercisable and
remain exercisable subject to certain exceptions. The November 2017 Warrants vested over a period of six months and remain exercisable.
The February 2018 Warrants were immediately exercisable and remain exercisable subject to certain exceptions. Refer to Notes
2 and 16 of these consolidated financial statements for the valuation of these warrants and their impact to these consolidated
financial statements.

Mint
of December 31, 2018, the total warrants exercised was 78,000. The weighted average remaining contractual life and exercise price
for the above warrants is 2.23 years and $1.10, respectively. The intrinsic value of the warrants on December 31, 2018 was $21,519,000.

8.
Common Stock

Ban ben
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, 2018, 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 6,175
Stock options outstanding 7,136
Warrants to purchase common stock 52,647
Restricted stock units 1,146
Common shares to be issued in lieu of agent fees 498
67,602

9.
Stock Option Plans

Ban ben
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.

la
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, 2018 and 2017, 34,987 and 0 options, respectively had been exercised that was subject to repurchase.

Mint
of December 31, 2018, options to purchase 127,000 shares of the Company’s common stock at a weighted-average exercise price
of $1.19 per share were outstanding under the 2006 Plan, of which 127,000 were vested. During the year ended December 31, 2018,
57,353 and 30,000 options were exercised and cancelled, respectively, under the 2006 Plan.

Ban ben
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.

Mint
of December 31, 2018, options to purchase 285,000 shares of the Company’s common stock at a weighted-average exercise price
of $7.57 per share were outstanding under the 2011 Plan, of which 285,000 were vested. During the year ended December 31, 2018,
13,000 and 6,000 options were exercised and cancelled, respectively, under the 2011 Plan.

Ban ben
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.

Mint
of December 31, 2018, options to purchase 6,724,000 shares of the Company’s common stock at a weighted-average exercise
price of $3.17 per share were outstanding under the 2013 Plan, of which 1,880,000 were vested. During the year ended December
31, 2018, 9,000 and 419,000 options were exercised and cancelled, respectively, under the 2013 Plan.

Generally,
options vest 25% on the first anniversary from the date of grant and 1/48 per month thereafter (“Standard Vesting Terms”);
however, options may be granted with different vesting terms as determined by the Company’s board of directors. During the
year ended December 31, 2018, the Company granted 4,549,000 options with Standard Vesting Terms. During the year ended December
31, 2018, the Company granted restricted stock units under the 2013 Plan. The vesting periods for the restricted stock are subject
to board approval and during the year ended December 31, 2018 varied from immediate to 36 months. During the year ended December
31, 2018, the Company granted restricted stock units under the 2013 Plan. On the date of grant, the restricted stock units can
vest immediately or over a stated period of time as stated within 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 in the case of non-employee
directors, or in the case of employees the board can decide to provide for the immediate issuance of common stock once vesting
has occurred. As of December 31, 2018, there were 1,146,000 restricted stock units outstanding under the 2013 Plan. The following
table reflects the activity of restricted stock units for the year ended December 31, 2018:

SHARES
OUTSTANDING
Outstanding at December 31, 2017 822
Granted 707
Exercised (337 )
Forfeited (46 )
Outstanding at December 31, 2018 1,146

la
following table summarizes the activity under the Company’s stock option plans for the year ended December 31, 2018 (in
thousands, except exercise price and remaining contractual life data):

WEIGHTED-
AVERAGE
WEIGHTED- REMAINING
AVERAGE CONTRACTUAL AGGREGATE
SHARES EXERCISE LIFE INTRINSIC
OUTSTANDING PRICE (IN YEARS) VALUE
Balances at December 31, 2017 3,121 $ 5.45 6.9 $ 114
Options granted 4,549 1.78
Options exercised (79 ) 01h22
Options cancelled (455 ) 3.11
Balances at December 31, 2018 7,136 3.31 8.1 469
Vested and expected to vest at December 31, 2018 5,912 3.63 7.8 430
Exercisable at December 31, 2018 2,292 6.61 5.8 316

la
total intrinsic value of options exercised during the years ended December 31, 2018 and 2017 was $53,000 and $12,000, respectively.

la
estimated fair value of options vested during the years ended December 31, 2018 and 2017 was $496,000 and $2,066,000, respectively.
The weighted-average estimated fair value of options granted during the years ended December 31, 2018 and 2017 was $0.97 per share
and $0.63 per share, respectively.

During
the years ended December 31, 2018 and 2017, the Company recorded share-based compensation expense related to stock options of
$1,040,000 and $1,937,000, respectively. During the years ended December 31, 2018 and 2017, 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 11).

Mint
of December 31, 2018, 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 $2,780,000. This expense will be recognized on a straight-line basis over a weighted-average
remaining term of 3.02 years. The following table summarizes shares available for grant under the Company’s stock incentive
plans for the year ended December 31, 2018 (in thousands):

SHARES
AVAILABLE
FOR
GRANT
Balances at December 31, 2017 2,340
Shares authorized 8,597
Options granted (4,549 )
Options cancelled 448
Restricted stock units granted (707 )
Restricted stock units cancelled 46
Balances at December 31, 2018 6,175

la
following table summarizes the activity of restricted stock units for the year ended December 31, 2018 (in thousands, except weighted
average grant date fair value):

WEIGHTED
AVERAGE
GRANT
SHARES DATE FAIR
OUTSTANDING VALUE
Non-vested at December 31, 2017 335 $ 0.94
Granted 707 1.68
Vested (592 ) 1.50
Forfeited (46 ) 01h24
Non-vested at June 30, 2018 404 $ 1.40

la
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 years ended December 31, 2018 and 2017, the Company recognized $810,000 and $123,000, respectively,
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, 2018 was $429,000, which is expected to be recognized over a weighted average
period of .94 years.

Mint
of December 31, 2018, the Company granted 105,000 restricted stock units, respectively, in partial satisfaction of incentive compensation
due to certain executives as of December 31, 2017. These grants resulted in the reclassification of $205,000 from accrued liabilities
to additional paid in capital as of December 31, 2018.

10.
Commitments and Contingencies

Operating
Leases

la
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 terminated in October 2016. The lease includes negotiated annual increases in the monthly rental payments.

Ban ben
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.

In November 2018, the Company elected to
exercise the first extension option under the lease, extending the lease term for another 60 months. As of the date of the issuance
of these consolidated financial statements an executed agreement has not been executed by the Company.

la
Company recognizes expense under its operating leases on a straight-line basis over the terms of the leases. As of December 31,
2018, 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,
2019
1,030
2020
1,167
2021
1,202
2022 1,238
2023
    és tovább
2,141
Teljes
    minimum payments required
$ 6,778

la
Company incurred rent expense of $609,000 and $625,000, during the years ended December 31, 2018 and 2017, respectively.

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. The Company recognized $60,000 from the sublease which offset
the rental expense for the years ended December 31, 2018 and 2017.

Litigation

On
April 3, 2018, the Company was named as a defendant in a complaint filed by Piper Jaffray, Inc. (“Piper”) with the
Superior Court of the State of Delaware. The Company was informed of and received Piper’s complaint and related documents
on April 5, 2018, following the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Piper’s complaint alleges one breach of contract claim, specifically, that the Company breached an engagement letter with
Piper by failure to pay a $2,000,000 transaction fee, which Piper alleges is due under the engagement letter as a result of the
Company’s consummation of its private placement and debt refinancing transactions in February 2018. Piper’s complaint
includes a demand for payment the foregoing transaction fee, in addition to interest and costs and expenses incurred in pursuing
the action, including reasonable attorneys’ fees. While the Company believes Piper’s complaint is without merit, this
matter is at an early stage, and the outcome of this matter is not presently determinable. As of December 31, 2018, a trial date
for the matter has been scheduled for July of 2020.

11.
Income Taxes

The TCJA was
enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%. As of December 31, 2018, the
Company completed the accounting for the tax effects of enactment of the TCJA. The most significant impact of the legislation
for the Company was a $27,971,000 reduction of the value of the Company’s net deferred tax assets (which represent future
tax benefits) as a result of lowered tax rate. As all deferred tax assets were fully offset by a valuation allowance, the impact
of the TCJA also reduced the Company’s valuation allowance by $27,971,000.

As of December 31, 2018, the Company had net
operating loss carryforwards prior to 2018 for federal income tax reporting purposes of $215,966,000, which begin to expire in
2026, and California and various other state net operating loss carryforwards of $150,443,000 and $49,171,000, respectively,
which will expire from 2028 through 2037. The federal net operating loss generated in 2018 in the amount of $28,760,000
will never expire. In addition, as of December 31, 2018, the Company had federal research and development tax credit carryforwards
of $2,631,000, which begin to expire in 2026, and state research and development tax credit carryforwards of $2,761,000, which
have no expiration date.

la
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.

As of December 31, 2018, deferred tax assets
of $70,986,000, 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 $6,455,000
for the year ended December 31, 2018 and decreased by $15,473,000 during the years ended December 31, 2017.

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

DECEMBER 31,
2018 2017
Components of deferred taxes
Net operating loss carryforwards $ 64,319 $ 56,945
Research and development tax credits 3,609 3,202
Other, net 3,058 4,384
Net deferred tax assets 70,986 64,531
Less valuation allowance (70,986 ) (64,531 )
Net deferred tax assets $ $

la
Company had no deferred tax liabilities as of December 31, 2018 and 2017.

la
Company recognized no income tax expense and received no benefit from income taxes during the years ended December 31, 2018 and
2017. 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,
2018 2017
Federal tax benefit at statutory rate 21 % 34 %
State tax benefit, net of federal benefit 5 3
Interest Expense (1 ) (2 )
Share-based compensation expense (1 ) 5
Más 2
Debt-related 2
Change in accounting method 4
Change in federal deferred tax rate (90 )
Adjustment due to change in valuation allowance (32 ) 50
Provision for income taxes % %

On January 1, 2018, as discussed in Note
2, the Company adopted ASC 606 and all the related amendments. For purposes of the Company’s income tax, the adoption was
considered a change in accounting method, the impact of which was a favorable adjustment in the Company’s provision of $3,058,000
and as disclosed in the tax rate table above.

Mint
of December 31, 2018, the Company had unrecognized tax benefits of $1,348,000. 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.

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

DECEMBER 31,
2018 2017
Balance at January 1 $ 1,201 $ 1,083
Research and development tax credits 147
Other, net 118
Balance at December 31 $ 1,348 $ 1,201

la
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 2007 through 2018 due to unutilized net operating loss carryforwards and research
and development tax credit carryforwards.

12.
Employee Benefit Plan

la
Company offers a defined contribution plan to all eligible employees, which is qualified under Section 401(k) of the IRC. la
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, 2018 and 2017 of
$335,000 and $317,000, respectively.

13.
Related Party Transactions

août
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. Until February 5, 2018, 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. Ban ben
connection with the note, the Company incurred $302,000 in financing-related costs. These costs were recorded as deferred financing
costs as a component of current and non-current other assets to amortized to interest expense over the term of the note.

la
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, 2018, the Company was in compliance
with its covenants under the August 2015 Senior Secured Promissory Notes.

Ban ben
addition, from the date of the agreement through May 31, 2016, these notes contained the contractual obligation to maintain cash
and cash equivalents of at least $15,000,000. The Company recorded the $15,000,000 as restricted cash and included the amount
in non-current assets. On May 31, 2016, the terms of the August 2015 Secured Promissory Notes were amended to remove this minimum
cash balance requirement.

la
August 2015 Senior Secured Promissory Notes are secured by substantially all the Company’s personal property assets. la
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.

Ban ben
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 amortized to interest
expense to related parties over the term of the arrangement.

Mint
of December 31, 2017 the total amount outstanding under the note was $37,822,000, net of unamortized debt discount of $2,178,000.

On
February 5, 2018, the holders of the August 2015 Senior Secured Promissory Notes, pursuant to an amendment, converted $35,000,000
of the then outstanding debt into 20,000,000 shares of common stock and warrants to purchase 4,000,000 shares of common stock
(such conversion, the “Waddell Debt Conversion”). After the conversion, $5,000,000 in principal remained outstanding.
Simultaneously with the Waddell Debt Conversion, the maturity of the August 2015 Senior Secured Promissory Notes was extended
to December 31, 2022, and payment of all future interest was deferred to maturity on December 31, 2022 (See Note 15 for further
discussion).

Ban ben
conjunction with the Waddell Debt Conversion, the Company accounted for the partial debt extinguishment under the troubled debt
restructuring accounting guidance, including consideration for the treatment of the transaction as a gain given the terms of the
agreement. The Company recognized a gain of $9,183,000, including $2,171,000 related to debt discount and other cost, on partial
extinguishment of the August 2015 Senior Secured Promissory Notes as of December 31, 2018. Because the Company recognized a gain
on the partial extinguishment of debt, the Company was required to include all future interest and additional consideration, which
included accrued interest, under the terms of this agreement as a reduction of the gain. As a result, the amount of the debt on
the Company’s balance sheet related to the August 2015 Senior Secured Promissory Notes is $7,300,000, as compared to $5,000,000
of contractual principal amount outstanding thereunder. Going forward, subject to future amendments to debt agreement or costs,
the Company will not recognize future interest expense on the August 2015 Senior Secured Promissory Notes.

la
accounting for the change due to the August 2015 Senior Secured Promissory Notes is as follows (in thousands):

Principal (pre-conversion) $ 40,000
Accrued interest to be paid at maturity 339
Discount (pre-conversion) (2,171 )
Consideration of common stock and warrants provided at conversion (21,685 )
Gain on extinguishment (9,183 )
Principal and future interest at December 31, 2018 $ 7,300

14.
Common Stock Offering

In April 2017, using a shelf registration
statement, the Company completed an underwritten public offering of 6,571,000 registered
shares of the Company’s common stock
. The public offering price of the shares sold in the offering was $1.40 per
share and after deducting underwriting discounts and commissions and other offering expenses
payable by the Company, the aggregate net proceeds to the Company from the offering totaled $8,200,000 million. As of December
31, 2017, the Company had sold 104,000 shares of common stock under at-the-market program at a weighted average exercise price
of $2.22 per share for proceeds (net of commission) of $0.2 million, and $14.8 million remained available for sale under the agreement
with H.C. Wainwright.

Ban ben
April 2018, the Company completed an underwritten public offering of 8,366,250 registered shares of its common stock. The public
offering price of the shares sold in the offering was $1.65 per share. The total gross proceeds to the Company from the offerings
were $13,804,000. The aggregate net proceeds to the Company from common stock sold in the offering totaled approximately $12,665,000.

15.
Equity Financing and Debt Conversion to Equity

On
December 15, 2017, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain
investors named therein, including Ospraie Ag Science LLC (“Ospraie”). On February 5, 2018, pursuant to the Purchase
Agreement, the Company issued to these investors, an aggregate of 44,000,001 units, with each unit purchased consisting of one
share of the Company’s common stock and one warrant to purchase one share of common stock, and each unit purchased by the
investors consisting of one share of common stock and one warrant to purchase 0.8 shares of Common Stock, for an aggregate purchase
price of $30,000,000, including the conversion to units of all aggregate principal amounts outstanding under the Purchase Agreement.
Also on February 5, 2018, the Company converted, pursuant to an amendment, dated December 15, 2017, to the senior August 2015
Senior Secured Promissory Notes $35,000,000 aggregate principal amount of the August 2015 Senior Secured Promissory Notes into
an aggregate of 20,000,000 shares of common stock and warrants to purchase 4,000,000 shares of common stock (such conversion,
the “Waddell Debt Conversion”), such that $5,000,000 of principal under the August 2015 Senior Secured Promissory
Notes now remains outstanding.

Is
on February 5, 2018, the Company converted, pursuant to an amendment, dated December 15, 2017, to the October 2012 and April 2013
Secured Promissory Notes, $10,000,000 aggregate principal amount of indebtedness outstanding under the October 2012 and April
2013 Secured Promissory Notes to an aggregate of 5,714,285 shares of common stock and warrants to purchase 1,142,856 shares of
common stock (such conversion, the “Snyder Debt Conversion”), such that $2,450,000 of principal under the October
2012 and April 2013 Secured Promissory Notes now remains outstanding.

Ban ben
addition, in connection with its role as exclusive placement agent and financial adviser with respect to the transactions contemplated
by the Purchase Agreement, National Securities Corporation (the “Placement Agent”) received warrants to purchase 2,017,143
shares of Common Stock, as well as 800,000 shares of Common Stock.

la
estimated net proceeds from this private placement, inclusive of the cash received from the December 2017 Convertible Note, was
$27,300,000. The Company incurred $2,700,000 in expenses associated with the private placement and debt conversion of which $2,180,000
was related to the equity component of these transactions.

la
Company classified the warrants issued in connection with the Securities Purchase Agreement and conversion of debt into equity
as equity. As a result of the financing transaction discussed above, the Company’s additional paid in capital and common
stock increased by $66,644,000 and $1,000, respectively. The Company allocated the value of the financing transaction to
the common shares issued in the amount of $52,439,000 and to the warrants issued in the amount of $14,206,000 based on the relative
fair values of each on the transaction date. See Note 16 for further discussion.

16.
Revisions

During
the fourth quarter ended December 31, 2018, the Company identified errors related to the volatility assumption used in the fair
 value of warrants issued in the February 2018 Financing Transactions, and the accounting treatment for certain deferred
debt issuance costs, which resulted in the Company revising certain amounts previously reported during the three, six and nine
months ended March 31, June 30 and September 30, 2018, respectively, related to Other, Income (Expense), Additional paid in capital
and the related captions in the balance sheet, income statement, and statement of cash flows. Management concluded that the errors
are not material to the condensed financial statement for the interim periods and that the Form 10-Q filed for those periods can
continue to be relied upon.

PREVIOUSLY REPORTED REVISED
YEAR TO DATE YEAR TO DATE
Interim period ending March 31, 2018
Loss on extinguishment of debt $ (303 ) $ (2,196 )
Gain on extinguishment of debt, related party 9,622 9,183
Net Loss (2,918 ) (5,257 )
Basic and diluted net loss per common share: (0.04 ) (0.07 )
Interim period ending June 30, 2018
Loss on extinguishment of debt $ (303 ) $ (2,196 )
Gain on extinguishment of debt, related party 9,622 9,183
Net Loss (7,762 ) (10,127 )
Basic and diluted net loss per common share: (0.08 ) (0.11 )
Interim period ending September 30, 2018
Loss on extinguishment of debt $ (303 ) $ (2,196 )
Gain on extinguishment of debt, related party 9,622 9,183
Net Loss (12,201 ) (14,610 )
Basic and diluted net loss per common share: (0.12 ) (0.15 )

17.
Subsequent Event

la
Company has evaluated its subsequent events from December 31, 2018 through the date these consolidated financial statements were
issued, and has determined that there are no subsequent events required to be disclosed in these consolidated financial statements.

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, we carried out an evaluation under the supervision and with the participation of our management, including our
Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure
controls and procedures in ensuring that material information required to be disclosed in our reports filed or submitted under
the Exchange Act, has been made known to them in a timely fashion. Based on this evaluation, our CEO and CFO concluded that the
Company’s disclosure controls and procedures were effective as of December 31, 2018.

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, 2018. In making this assessment, management used the criteria
established in 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, 2018.

The effectiveness of our internal controls
over financial reporting as of December 31, 2018, has been audited by Marcum LLP, our independent registered public accounting
firm. Their report appears in Item 8 of this Form 10-K.

Changes
in Internal Control

parce que
the quarter ending
December 31,