Davis, California, USA
November 17, 2015

Marrone Bio Innovations, Inc. (the "Company") (NASDAQ:MBII), a leading provider of bio-based pest management and plant health products for the agriculture, turf and ornamental and water treatment markets, today announced results for the third quarter ended September 30, 2015 and discussed the impact of its recent financial restatement and financial and business highlights for 2014 and the first nine months and third quarter of 2015.

Financial Restatement

On November 10, 2015, the Company filed its 2014 Annual Report on Form 10-K and first and second quarter 2015 Quarterly Reports on Form 10-Q, completing its financial restatement, becoming current in its reporting obligations with the Securities and Exchange Commission (the "SEC").

As previously announced, in September 2014, the Audit Committee of the Company's board of directors commenced an internal investigation after learning of documents calling into question the recognition of revenue in the fourth quarter of 2013. In February 2015, the Company announced that the Audit Committee had concluded its investigation and had principally determined, among other things, that as a result of the failure of certain employees to share with the Company's finance department or the external auditors important transaction terms with distributors, including "inventory protection" arrangements that would permit the distributors to return to the Company certain unsold products, in addition the execution by certain sales personnel of inaccurate "sales representation" letters, the Company inappropriately recognized revenue for certain historical sales transactions prior to satisfying the criteria for revenue recognition required under U.S. generally accepted accounting principles.

In light of the foregoing, the Company, among other things, determined to change its revenue recognition methodology from "sell-in" to "sell-through" for certain sales to certain distributors. In general, under the "sell-in" method, sales by the Company to distributors are recognized at the point at which title was transferred to the distributor; in contrast, under the "sell-through" method, sales by the Company to distributors are not recognized as product revenues until the distributors sell the product through to end-users. Primarily as a result in this change in methodology, which defers product revenues with respect to applicable distributors to later periods, the Company has recognized, in the aggregate, approximately $6.7 million less in product revenues than previously reported for 2013 and the first six months of 2014. Of this amount, an aggregate of approximately $2.0 million in product was returned by certain distributors subsequent to June 30, 2014 pursuant to "inventory protection" rights and will not result in recognition of revenue in future periods. As of December 31, 2013 and 2014 and September 30, 2015, the Company recorded $4.7 million, $3.2 million and $2.0 million, respectively, of current deferred product revenues relating to sales to distributors that were not recognized when title and risk of loss passed to the distributor. As of December 31, 2013 and 2014 and September 30, 2015, the Company recorded $2.9 million, $1.8 million, and $1.1 million, respectively, of current deferred cost of product revenues.

The employees primarily responsible for the foregoing conduct are no longer with the Company, and the Audit Committee concluded that the Company can rely on current management to accurately prepare the Company's financial statements. In addition, the Company has implemented a plan to remediate material weaknesses identified in the Company's control environment including revenue recognition, which focuses on continued training for and communication with employees regarding the Company's enhanced policies and procedures.

"With last week's filings, we have completed the restatement process and regained compliance with our public reporting obligations," said Dr. Pamela G. Marrone, President and Chief Executive Officer of MBI. "We thank our shareholders for their patience and continued support over the past year."

Financial Highlights for 2014 and the First Nine Months and Third Quarter of 2015

• Revenues for 2014 and the first nine months and third quarter of 2015 totaled $9.1 million, $7.9 million and $2.5 million, respectively, compared to $8.4 million, $8.0 million and $2.2 million for 2013 and the first nine months and third quarter of 2014, respectively. This comparison primarily reflects increased grower adoption of our products and the use of our products on an expanded number of crops with a reduction in 2015 of revenues from related parties.
• Net loss for 2014 was $51.7 million, compared to $32.6 million for 2013. The increase in 2014 compared to 2013 is attributable to increased expenses associated with our restatement, the Audit Committee investigation and related matters, as well as increases in employee-related expenses relating to an increase in headcount, startup costs of our manufacturing plant, and a decrease in gross margins. In addition, while 2013 included a gain of $6.7 million relating to the change in estimated fair value of financial instruments, there was no such gain in 2014. This was offset by a decrease in interest expense as a result of the conversion of convertible notes to common stock upon completion of the Company's initial public offering in August 2013.
• Net loss for the first nine months and third quarter of 2015 was $32.7 million and $9.8 million, respectively, compared to $35.4 million and $14.4 million for the first nine months and third quarter of 2014, respectively. Decreased net loss is primarily attributable to increases in gross margins and decreases in employee related expenses relating to a decrease in headcount. This was offset by increased expenses associated with the restatement, the Audit Committee investigation and related matters.
• As of September 30, 2015, the Company had $46.3 million of cash, including $18.4 million of restricted cash, on its balance sheet and approximately $57.6 million in outstanding debt, including debt due to related parties.

Various factors have reduced demand and impeded sales, including: disruption to product launches, including the Venerate launch, and sales due to the departure of our former Chief Operating Officer and members of our sales and marketing staff in the second half of 2014, low commodity prices, extended drought in California and the Western United States, as well as bad weather in other parts of the United States, and lack of anticipated sales internationally, with a long delay in registration of Regalia in Europe.

Dr. Marrone concluded, "Over the last year, we have been addressing business challenges reflected in our recent financial results. We are rebuilding a focused and effective sales and marketing team that shares our values, including hiring highly experienced personnel, training our sales force and hiring a new head of marketing that we expect to join in December 2015 to guide an expanded marketing department. We have also worked diligently to reduce expenses, conserve cash and improve operating efficiencies, to extract greater value from our products and product pipeline and to improve our communication to and connection with the global sustainability movement that is core to our cultural values."

Recent Business Highlights

• Continuing to implement prioritization plan, including advancing product candidates expected to have the greatest impact on near-term growth potential and expanding international presence and commercialization
• Raised $40 million in note and warrant financing
• Completed transition of manufacturing process in-house to our Bangor, Michigan facility
• Hired Brian Ahrens, VP Sales, and five regional territory sales managers, plus a VP Marketing we expect to join in December 2015
• Developed an improved, EPA-approved Regalia biofungicide formulation
• More than doubled treated acres of Regalia in California almonds and grapes from 2014 to 2015
• Regalia® Maxx approved for several new outdoor and greenhouse uses and for emergency use in controlling downy mildew in hops in Canada and received registration in Brazil
• Submitted a new granule formulation of Grandevo® bioinsecticide to the EPA
• More than doubled treated acres of Grandevo in California from 2013 to 2015
• Grandevo received completeness determination from the European Commission, the first microbe of its kind to do so
• Zequanox® biomolluscicide demonstrated high effectiveness in controlling zebra mussel infestations in shallow-water habitats in lakes and 100% effectiveness in Minnesota's Christmas Lake
• Venerate® registered in California with good adoption in strawberries and grapes
• MajesteneTM bionematicide received EPA approval, targeted placement initiated for select customers
• Received patent for use of Chromobacterium to control corn rootworm larvae and nematode infestations and notice of allowance for use several uses on additional pest insects
• Received patents on synergistic combinations of the active ingredients in Regalia with chemical fungicides
• Reduced headcount by nearly half from its highpoint at the beginning of 2014
• Moved to new corporate headquarters and opened new greenhouse to facilitate and expand research and product development capacity

James Boyd, the Company's Chief Financial Officer, stated, "We have committed significant time and resources to completing our restatement, and we are pleased that we are and once again current with our SEC reporting obligations. Going forward, we look forward to focusing on the future and executing our revised strategic plan." 

Website: http://marronebioinnovations.com/

Published: November 17, 2015