Niagen Bioscience, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS (unaudited) ChromaDex Corporation and Subsidiaries Unaudited Condensed Consolidated Balance Sheets Sep 30, 2021 Dec 31, 2020 (In thousands except par values, unless otherwise indicated) Assets Current assets Cash, including restricted cash of $ 0.2 million for both periods $ 33,102 $ 16,697 Trade receivables, net of allowances of $ 37 and $ 189 , respectively; Including receivables from Related Party of: $ 2.3 million and $ 0.9 million, respectively. 5,295 2,694 Inventories 12,676 11,683 Prepaid expenses and other assets 1,762 1,145 Total current assets 52,835 32,219 Leasehold improvements and equipment, net 3,084 3,206 Intangible assets, net 908 1,082 Right-of-use assets 3,049 1,226 Other long-term assets 576 625 Total assets $ 60,452 $ 38,358 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 10,804 $ 9,445 Accrued expenses 6,331 6,133 Current maturities of operating lease obligations 447 589 Current maturities of finance lease obligations 13 31 Customer deposits 175 278 Total current liabilities 17,770 16,476 Deferred revenue 4,346 4,441 Operating lease obligations, less current maturities 2,876 997 Finance lease obligations, less current maturities 11 20 Total liabilities 25,003 21,934 Commitments and Contingencies Stockholders' Equity Common stock, $ 0.001 par value; authorized 150,000 shares; 68,094 shares and 61,881 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively. 68 62 Additional paid-in capital 199,011 158,190 Accumulated deficit ( 163,628 ) ( 141,825 ) Cumulative translation adjustments ( 2 ) ( 3 ) Total stockholders' equity 35,449 16,424 Total liabilities and stockholders' equity $ 60,452 $ 38,358 See accompanying notes to consolidated financial statements. 3 Table of Contents ChromaDex Corporation and Subsidiaries Unaudited Condensed Consolidated Statements of Operations Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (In thousands, except per share data) Sales, net $ 17,308 $ 14,180 $ 49,690 $ 43,812 Cost of sales 6,730 5,726 19,068 17,959 Gross profit 10,578 8,454 30,622 25,853 Operating expenses: Sales and marketing 7,221 5,223 19,711 14,629 Research and development 996 841 2,787 2,545 General and administrative 11,202 6,586 29,881 22,452 Total operating expenses 19,419 12,650 52,379 39,626 Operating loss ( 8,841 ) ( 4,196 ) ( 21,757 ) ( 13,773 ) Interest expense, net ( 15 ) ( 19 ) ( 46 ) ( 55 ) Net loss $ ( 8,856 ) $ ( 4,215 ) $ ( 21,803 ) $ ( 13,828 ) Basic and diluted loss per common share $ ( 0.13 ) $ ( 0.07 ) $ ( 0.33 ) $ ( 0.23 ) Basic and diluted weighted average common shares outstanding 68,236 61,695 66,811 60,797 See accompanying notes to consolidated financial statements. 4 Table of Contents ChromaDex Corporation and Subsidiaries Unaudited Condensed Consolidated Statement of Stockholders' Equity (In thousands) Three Months Ended September 30, 2021 Common Stock Additional Paid-in Capital Accumulated Deficit Cumulative Translation Adjustments Total Stockholders' Equity Shares Amount Balance, June 30, 2021 68,009 $ 68 $ 196,848 $ ( 154,772 ) $ ( 2 ) $ 42,142 Exercise of stock options 85 — 341 — — 341 Share-based compensation — — 1,822 — — 1,822 Net loss — — — ( 8,856 ) — ( 8,856 ) Balance, September 30, 2021 68,094 $ 68 $ 199,011 $ ( 163,628 ) $ ( 2 ) $ 35,449 Nine Months Ended September 30, 2021 Common Stock Additional Paid-in Capital Accumulated Deficit Cumulative Translation Adjustments Total Stockholders' Equity Shares Amount Balance, January 1, 2021 61,881 $ 62 $ 158,190 $ ( 141,825 ) $ ( 3 ) $ 16,424 Issuance of common stock, net of offering costs of $ 0.4 million 4,059 4 26,736 — — 26,740 Exercise of stock options 2,154 2 9,363 — — 9,365 Share-based compensation — — 4,722 — — 4,722 Translation adjustment — — — — 1 1 Net loss — — — ( 21,803 ) — ( 21,803 ) Balance, September 30, 2021 68,094 $ 68 $ 199,011 $ ( 163,628 ) $ ( 2 ) $ 35,449 5 Table of Contents ChromaDex Corporation and Subsidiaries Unaudited Condensed Consolidated Statement of Stockholders' Equity - (continued) (In thousands) Three Months Ended September 30, 2020 Common Stock Additional Paid-in Capital Accumulated Deficit Cumulative Translation Adjustments Total Stockholders' Equity Shares Amount Balance, June 30, 2020 61,421 $ 61 $ 153,036 $ ( 131,513 ) $ ( 3 ) $ 21,581 Exercise of stock options 166 1 546 — — 547 Share-based compensation — — 1,574 — — 1,574 Net loss — — — ( 4,215 ) ( 4,215 ) Balance, September 30, 2020 61,587 $ 62 $ 155,156 $ ( 135,728 ) $ ( 3 ) $ 19,487 Nine Months Ended September 30, 2020 Common Stock Additional Paid-in Capital Accumulated Deficit Cumulative Translation Adjustments Total Stockholders' Equity Shares Amount Balance, January 1, 2020 59,562 $ 60 $ 142,285 $ ( 121,900 ) $ — $ 20,445 Issuance of common stock, net of offering costs of $ 0.1 million 1,225 1 4,855 4,856 Exercise of stock options 800 1 2,858 — — 2,859 Share-based compensation — — 5,158 — — 5,158 Translation adjustment — — — — ( 3 ) ( 3 ) Net loss — — — ( 13,828 ) ( 13,828 ) Balance, September 30, 2020 61,587 $ 62 $ 155,156 $ ( 135,728 ) $ ( 3 ) $ 19,487 See accompanying notes to consolidated financial statements. 6 Table of Contents ChromaDex Corporation and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2021 2020 (In thousands) Cash Flows From Operating Activities Net loss $ ( 21,803 ) $ ( 13,828 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of leasehold improvements and equipment 679 652 Amortization of intangibles 174 182 Amortization of right of use assets 385 284 Share-based compensation expense 4,722 5,158 Change in allowance for doubtful trade receivables ( 152 ) ( 2,737 ) Non-cash financing costs 87 75 Changes in operating assets and liabilities: Trade receivables ( 2,448 ) 1,698 Inventories ( 992 ) 504 Implementation costs for cloud computing arrangement ( 150 ) — Prepaid expenses and other assets ( 608 ) ( 185 ) Accounts payable 1,359 ( 2,745 ) Accrued expenses 198 757 Deferred revenue ( 95 ) ( 53 ) Customer deposits and other ( 103 ) 56 Principal payments on operating leases ( 472 ) ( 440 ) Net cash used in operating activities ( 19,219 ) ( 10,622 ) Cash Flows From Investing Activities Purchases of leasehold improvements and equipment ( 407 ) ( 147 ) Purchases of intangible assets — ( 18 ) Investment in other long-term assets — ( 16 ) Net cash used in investing activities ( 407 ) ( 181 ) Cash Flows From Financing Activities Proceeds from issuance of common stock, net 26,740 4,856 Proceeds from exercise of stock options 9,365 2,859 Payment of debt issuance costs ( 47 ) ( 30 ) Principal payments on finance leases ( 27 ) ( 216 ) Net cash provided by financing activities 36,031 7,469 Net increase in cash 16,405 ( 3,334 ) Cash, including restricted cash of $ 0.2 million for both 2021 and 2020 - beginning of period 16,697 18,812 Cash, including restricted cash of $ 0.2 million for both 2021 and 2020 - end of period $ 33,102 $ 15,478 Supplemental Disclosures of Cash Flow Information Cash payments for interest on finance leases $ 1 $ 11 Supplemental Schedule of Noncash Operating Activity Right-of-use assets and operating lease obligations incurred for entering into lease amendment $ 2,209 $ 716 Supplemental Schedule of Noncash Investing Activity Financing lease obligation incurred for purchase of computer equipment and software $ — $ 47 See accompanying notes to consolidated financial statements. 7 Table of Contents Note 1. Interim Financial Statements The accompanying financial statements of ChromaDex Corporation and its wholly-owned subsidiaries, ChromaDex, Inc., ChromaDex Analytics, Inc., ChromaDex Asia Limited and ChromaDex Europa B.V. (collectively referred to herein as “ChromaDex” or the “Company”) include all adjustments, consisting of normal recurring adjustments and accruals, that, in the opinion of the management of the Company, are necessary for a fair presentation of the Company’s financial position as of September 30, 2021 and results of operations and cash flows for the three and nine months ended September 30, 2021 and September 30, 2020. These unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2020 appearing in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (Commission) on March 12, 2021. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be achieved for the full year ending on December 31, 2021. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The balance sheet at December 31, 2020 has been derived from the audited financial statements at that date. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted. Note 2. Nature of Business ChromaDex is a global bioscience company dedicated to healthy aging. The ChromaDex team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), levels of which decline with age. ChromaDex is the innovator behind NAD+ precursor nicotinamide riboside (NR), commercialized as the flagship ingredient NIAGEN®. Nicotinamide riboside and other NAD+ precursors are protected by ChromaDex’s patent and/or licensed rights portfolio. ChromaDex delivers NIAGEN® as the sole active ingredient in its consumer product TRU NIAGEN®. The Company also has an analytical reference standards and services segment, which focuses on natural product fine chemicals, known as phytochemicals, and related chemistry services. Note 3. Liquidity The Company's net cash outflow from operating activities was approximately $ 19.2 million for the nine months ended September 30, 2021. As of September 30, 2021, cash and cash equivalents totaled approximately $ 33.1 million, which includes restricted cash of approximately $ 0.2 million. The Company anticipates that its current cash, cash equivalents, and available line of credit up to $ 7.0 million from Western Alliance Bank will be sufficient to meet its projected operating plans through at least the next twelve months from the issuance date of these financial statements. The Company’s line of credit currently expires on November 12, 2021. The Company is actively working with Western Alliance Bank to extend this line of credit prior to its expiration. The line of credit is an additional source of liquidity available to the Company, however any inability to access any portion of the amount available under this line will not have an adverse effect on the Company’s ability to satisfy its obligations or support operations. The Company does not believe any delays in or inability to obtain an extension of this line of credit will impact its ability to meet its operating objectives. The Company may, however, seek additional capital within the next twelve months, both to fund its projected operating plans after the next twelve months and/or to fund the Company’s longer-term strategic objectives. In June 2020, the Company filed a $ 125 million registration statement on Form S-3 with the Commission, utilizing a “shelf” registration process. Under this shelf registration process, the Company may sell securities from time to time, including up to $ 50 million pursuant to the At Market Issuance Sales Agreement, dated as of June 12, 2020, with B. Riley FBR, Inc. and Raymond James & Associates, Inc. (ATM Facility). During the second quarter of 2021, the Company sold an aggregate of 0.2 million shares of its common stock under the ATM Facility resulting in proceeds of $ 1.9 million, net of offering costs of $ 0.3 million. The shares sold at an average price of $ 10.56 per share. As of September 30, 2021, approximately $ 47.8 million remains available under the ATM Facility. 8 Table of Contents Note 4. Significant Accounting Policies Basis of Presentation : The financial statements and accompanying notes have been prepared on a consolidated basis and reflect the consolidated financial position of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated from these financial statements. The Company’s fiscal year ends on December 31. Reclassifications: Certain prior period results have been reclassified to be consistent with the current period presentation. Recent Accounting Pronouncements: In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope. The new guidance represents significant changes to accounting for credit losses: (i) full lifetime expected credit losses will be recognized upon initial recognition of an asset in scope; (ii) the current incurred loss impairment model that recognizes losses when a probable threshold is met will be replaced with the expected credit loss impairment method without recognition threshold; and (iii) the expected credit losses estimate will be based upon historical information, current conditions, and reasonable and supportable forecasts. ASU 2016-13 introduces two distinctive credit loss impairment models: (i) current expected credit loss impairment model (Subtopic 326-20) applicable to financial assets measured at amortized cost; and (ii) available-for-sale debt securities impairment model (Subtopic 326-30). ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Public entities that qualify as a smaller reporting company can elect to defer compliance effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements. Note 5. Earnings Per Share Applicable to Common Stockholders The following table sets forth the computations of earnings per share amounts applicable to common stockholders for the three and nine months ended September 30, 2021 and September 30, 2020: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share data) 2021 2020 2021 2020 Net loss $ ( 8,856 ) $ ( 4,215 ) $ ( 21,803 ) $ ( 13,828 ) Basic and diluted loss per common share $ ( 0.13 ) $ ( 0.07 ) $ ( 0.33 ) $ ( 0.23 ) Basic and diluted weighted average common shares outstanding (1): 68,236 61,695 66,811 60,797 Potentially dilutive securities (2): Stock options 10,540 11,466 10,540 11,466 Restricted stock units 116 — 116 — (1) Includes approximately 0.2 million nonvested shares of restricted stock for the three and nine months ended September 30, 2021 and September 30, 2020 which are participating securities that feature voting and dividend rights. (2) Excluded from the computation of loss per share as their impact is antidilutive. 9 Table of Contents Note 6. Related Party Transactions The sale of consumer products to related parties during the periods indicated are as follows: Net Sales Trade Receivable as of Three Months Ended September 30, Nine Months Ended September 30, September 30, December 31, 2021 2020 2021 2020 2021 2020 A.S. Watson Group* $ 2.6 million $ 2.5 million $ 7.1 million $ 5.6 million $ 2.3 million $ 0.9 million Horizon Ventures* (1) — — — $ 1.6 million — — Total $ 2.6 million $ 2.5 million $ 7.1 million $ 7.2 million $ 2.3 million $ 0.9 million *A.S. Watson Group and Horizon Ventures are related parties through common ownership of an enterprise that beneficially owns more than 10% of the common stock of the Company. (1) During the nine months ended September 30, 2020, Horizon Ventures made purchases to donate to the healthcare workers in Hong Kong hospitals. Horizon Ventures had insignificant sales during the nine months ended September 30, 2021. Note 7. Inventories The Company's major classes of inventory and corresponding balances as of September 30, 2021 and December 31, 2020 are as follows: (In thousands) Sep 30, 2021 Dec 31, 2020 Consumer Products - Finished Goods $ 5,998 $ 2,358 Consumer Products - Work in Process 4,323 5,718 Bulk ingredients 1,861 3,065 Reference standards 494 542 $ 12,676 $ 11,683 Note 8. Stock Issuance On February 20, 2021, the Company entered into a Securities Purchase Agreement with EverFund (the Financing) pursuant to which the Company agreed to sell and issue approximately 3.8 million shares of common stock at a price of $ 6.50 per share. On February 23, 2021, the Company closed the Financing and received proceeds of $ 24.9 million, net of offering costs of $ 0.1 million . During June 2021, the Company sold an aggregate of 0.2 million shares of common stock under the ATM Facility and received proceeds of $ 1.9 million, net of offering costs and commissions of $ 0.3 million, at an average price of $ 10.56 per share. For additional information related to the ATM facility transaction see Note 3, Liquidity . 10 Table of Contents Note 9. Leases Operating Leases During the second quarter of 2021, the Company amended its existing lease in Los Angeles, California. In accordance with Accounting Standards Codification (ASC) 842, the amended lease agreement is considered to be modified and subject to lease modification guidance. The right-of-use (ROU) asset and lease liability related to the agreement were remeasured based on the change in the lease conditions such as rent payment and lease terms. The fair value of the increase in related lease liability and ROU asset is estimated to be approximately $ 2.2 million. The amended lease now extends through March 31, 2027 and provides one option to extend for an additional five years . As of September 30, 2021, the Company had ROU assets and corresponding operating lease liabilities of approximately $ 3.0 million and $ 3.3 million, respectively. For the three and nine months ended September 30, 2021 and 2020, the components of operating lease expense are as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Operating leases Operating lease expense $ 152 $ 120 $ 458 $ 359 Variable lease expense 51 5 145 139 Operating lease expense 203 125 603 498 Short-term lease rent expense 63 63 188 191 Total expense $ 266 $ 188 $ 791 $ 689 At Sep 30, 2021 Weighted-average remaining lease term (years) operating leases 4.8 Weighted-average discount rate operating leases 6.4 % Future minimum lease payments under operating leases as of September 30, 2021 are as follows: Year (In thousands) 2021 (Remainder) $ 110 2022 669 2023 817 2024 836 2025 808 2026 564 Thereafter 144 Total 3,948 Less present value discount ( 625 ) Present value of total operating lease liabilities 3,323 Less current portion ( 447 ) Long-term obligations under operating leases $ 2,876 11 Table of Contents Note 10. Share-Based Compensation Equity Plans The Company grants awards to recipients through the 2017 Equity Incentive Plan, as amended (the 2017 Plan), which was approved by stockholders and the Board of Directors. The 2017 Plan provided for the issuance of shares that total no more than the sum of (i) 14,500,000 new shares, (ii) approximately 384,000 unallocated shares remaining available for the grant of new awards under the Second Amended and Restated 2007 Equity Incentive Plan, (iii) any returning shares such as forfeited, cancelled, or expired shares and (iv) 500,000 shares pursuant to an inducement award. The number of shares available to be issued under the 2017 Plan will be reduced by (i) one share for each share that relates to an option or stock appreciation right award and (ii) 1.5 shares for each share which relates to an award other than a stock option or stock appreciation right award (a full-value award). As of September 30, 2021, there were approximately 5.0 million remaining shares available for issuance under this plan. Options expire 10 years from the date of grant. General Vesting Conditions The Company’s stock options and restricted stock unit awards are generally subject to a one-year cliff vesting period after which 1/3 of the shares vest with the remaining shares vesting ratably over a two-year period subject to the passage of time. Additionally, certain stock option awards are market or performance based and vest based on certain triggering events established by the Compensation Committee. Stock Options The fair value of the Company’s stock options that are not market based are estimated at the grant date using the Black-Scholes option pricing model. The Company used the following weighted average assumptions for options granted during the nine months ended September 30, 2021: Weighted Average: Nine Months Ended September 30, 2021 Expected term 5.8 years Expected volatility 74.4 % Risk-free rate 1.0 % Expected dividends — % Service Period Based Stock Options The following table summarizes activity of service period-based stock options during the nine months ended September 30, 2021 : Weighted Average (In thousands except per-share data and remaining contractual term) Number of Options Exercise Price Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at December 31, 2020 10,833 $ 3.96 6.8 Options Granted 1,527 9.08 Options Exercised ( 2,114 ) 4.35 $ 13,236 Options Forfeited ( 747 ) 4.49 Outstanding at September 30, 2021 9,499 $ 4.66 6.7 $ 19,690 * Exercisable at September 30, 2021 6,372 $ 3.71 5.5 $ 16,367 * *The aggregate intrinsic values in the table above are based on the Company’s stock price of $ 6.27 , which is the closing price of the Company’s stock on the last day of business for the period ended September 30, 2021. 12 Table of Contents Performance Based Stock Options The Company also grants stock option awards that are performance based and vest based on the achievement of certain criteria established from time to time by the Compensation Committee. If these performance criteria are not met, the compensation expenses are not recognized and the expenses that have been recognized will be reversed. The following table summarizes performance based stock options activity during the nine months ended September 30, 2021 : Weighted Average (In thousands except per share data and remaining contractual term) Number of Options Exercise Price Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at December 31, 2020 81 $ 4.34 3.1 Options Granted — — Options Exercised ( 40 ) 4.34 $ 401 Options Forfeited — — Outstanding at September 30, 2021 41 $ 4.34 2.3 $ 79 * Exercisable at September 30, 2021 41 $ 4.34 2.3 $ 79 * *The aggregate intrinsic values in the table above are based on the Company’s stock price of $ 6.27 , which is the closing price of the Company’s stock on the last day of business for the period ended September 30, 2021. Restricted Stock Units The following table summarizes activity of restricted stock units during the nine months ended September 30, 2021 : (In thousands except per share fair value) Number of RSUs Weighted Average Fair Value Unvested shares at December 31, 2020 — $ — Granted 123 10.94 Vested — — Forfeited ( 7 ) 11.83 Unvested shares at September 30, 2021 116 $ 10.90 Expected to vest at September 30, 2021 116 $ 10.90 Total Share-Based Compensation Total share-based compensation expense was as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Share-based compensation expense Cost of sales $ 58 $ 42 $ 156 $ 117 Sales and marketing 456 336 1,298 810 Research and development 275 133 633 405 General and administrative 1,033 1,063 2,635 3,826 Total $ 1,822 $ 1,574 $ 4,722 $ 5,158 In future periods, the Company expects to recognize approximately $ 10.7 million and $ 1.1 million in share-based compensation expense for unvested options and unvested restricted stock units, respectively, that were outstanding as of September 30, 2021. Future share-based compensation expense will be recognized over 2.1 and 2.6 weighted average years for unvested options and restricted stock units, respectively. 13 Table of Contents Note 11. Business Segments The Company has the following three reportable segments: • Consumer products segment: provides finished dietary supplement products that contain the Company's proprietary ingredients directly to consumers as well as to distributors. • Ingredients segment: develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw materials to the manufacturers of consumer products. • Analytical reference standards and services segment: includes supply of phytochemical reference standards and other research and development services. The “Corporate and other” classification includes corporate items not allocated by the Company to each reportable segment. Additionally, there are no intersegment sales that require elimination. The Company’s three reportable segments are significant operating segments that offer differentiated services. This structure reflects its current operational and financial management and provides the best structure to maximize the Company's objectives and investment strategy, while maintaining financial discipline. The Company's Chief Executive Officer, who is its chief operating decision maker (CODM), reviews financial information for each operating segment to evaluate performance and allocate resources. The Company evaluates performance and allocates resources based on reviewing gross margin by reportable segment. The Company's CODM does not review assets by segment in his evaluation and therefore assets by segment are not disclosed below. The following tables set forth financial information for the segments: Three months ended September 30, 2021 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total (In thousands) Net sales $ 14,772 $ 1,789 $ 747 $ — $ 17,308 Cost of sales 5,253 732 745 — 6,730 Gross profit 9,519 1,057 2 — 10,578 Operating expenses: Sales and marketing 7,067 10 144 — 7,221 Research and development 895 101 — — 996 General and administrative — — — 11,202 11,202 Operating expenses 7,962 111 144 11,202 19,419 Operating income (loss) $ 1,557 $ 946 $ ( 142 ) $ ( 11,202 ) $ ( 8,841 ) Three months ended September 30, 2020 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total (In thousands) Net sales $ 11,904 $ 1,510 $ 766 $ — $ 14,180 Cost of sales 4,404 599 723 — 5,726 Gross profit 7,500 911 43 — 8,454 Operating expenses: Sales and marketing 5,018 47 158 — 5,223 Research and development 783 58 — — 841 General and administrative — — — 6,586 6,586 Operating expenses 5,801 105 158 6,586 12,650 Operating income (loss) $ 1,699 $ 806 $ ( 115 ) $ ( 6,586 ) $ ( 4,196 ) 14 Table of Contents Nine Months Ended September 30, 2021 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total (In thousands) Net sales $ 42,605 $ 4,608 $ 2,477 $ — $ 49,690 Cost of sales 15,003 1,970 2,095 — 19,068 Gross profit 27,602 2,638 382 — 30,622 Operating expenses: Sales and marketing 19,368 21 322 — 19,711 Research and development 2,539 248 — — 2,787 General and administrative — — — 29,881 29,881 Operating expenses 21,907 269 322 29,881 52,379 Operating income (loss) $ 5,695 $ 2,369 $ 60 $ ( 29,881 ) $ ( 21,757 ) Nine Months Ended September 30, 2020 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total (In thousands) Net sales $ 34,768 $ 6,835 $ 2,209 $ — $ 43,812 Cost of sales 13,045 2,790 2,124 — 17,959 Gross profit 21,723 4,045 85 — 25,853 Operating expenses: Sales and marketing 14,170 39 420 — 14,629 Research and development 2,236 309 — — 2,545 General and administrative — — — 22,452 22,452 Operating expenses 16,406 348 420 22,452 39,626 Operating income (loss) $ 5,317 $ 3,697 $ ( 335 ) $ ( 22,452 ) $ ( 13,773 ) Disaggregation of Revenue The Company disaggregates its revenue from contracts with customers by type of goods or services for each of its segments, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. See details in the tables below. Three Months Ended September 30, 2021 Consumer Products Segment Ingredients Segment Analytical Reference Standards and Services Segment Total (In thousands) TRU NIAGEN®, Consumer Product $ 14,772 $ — $ — $ 14,772 NIAGEN® Ingredient — 1,665 — 1,665 Subtotal NIAGEN® Related $ 14,772 $ 1,665 $ — $ 16,437 Other Ingredients — 124 — 124 Reference Standards — — 735 735 Consulting and Other — — 12 12 Subtotal Other Goods and Services $ — $ 124 $ 747 $ 871 Total Net Sales $ 14,772 $ 1,789 $ 747 $ 17,308 15 Table of Contents Three Months Ended September 30, 2020 Consumer Products Segment Ingredients Segment Analytical Reference Standards and Services Segment Total (In thousands) TRU NIAGEN®, Consumer Product $ 11,904 $ — $ — $ 11,904 NIAGEN® Ingredient — 879 — 879 Subtotal NIAGEN® Related $ 11,904 $ 879 $ — $ 12,783 Other Ingredients — 631 — 631 Reference Standards — — 695 695 Consulting and Other — — 71 71 Subtotal Other Goods and Services $ — $ 631 $ 766 $ 1,397 Total Net Sales $ 11,904 $ 1,510 $ 766 $ 14,180 Nine Months Ended September 30, 2021 Consumer Products Segment Ingredients Segment Analytical Reference Standards and Services Segment Total (In thousands) TRU NIAGEN®, Consumer Product $ 42,605 $ — $ — $ 42,605 NIAGEN® Ingredient — 4,149 — 4,149 Subtotal NIAGEN® Related $ 42,605 $ 4,149 $ — $ 46,754 Other Ingredients — 459 — 459 Reference Standards — — 2,230 2,230 Consulting and Other — — 247 247 Subtotal Other Goods and Services $ — $ 459 $ 2,477 $ 2,936 Total Net Sales $ 42,605 $ 4,608 $ 2,477 $ 49,690 Nine Months Ended September 30, 2020 Consumer Products Segment Ingredients Segment Analytical Reference Standards and Services Segment Total (In thousands) TRU NIAGEN®, Consumer Product $ 34,768 $ — $ — $ 34,768 NIAGEN® Ingredient — 4,835 — 4,835 Subtotal NIAGEN® Related $ 34,768 $ 4,835 $ — $ 39,603 Other Ingredients — 2,000 — 2,000 Reference Standards — — 2,054 2,054 Consulting and Other — — 155 155 Subtotal Other Goods and Services $ — $ 2,000 $ 2,209 $ 4,209 Total Net Sales $ 34,768 $ 6,835 $ 2,209 $ 43,812 16 Table of Contents Disclosure of Major Customers Major customers are defined as customers whose sales or accounts receivables individually consist of more than ten percent of total sales or total trade receivables, respectively. Percentage of revenues from major customers of the Company’s consumer products segment for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, Major Customers 2021 2020 2021 2020 A.S. Watson Group - Related Party 15.2 % 17.7 % 14.3 % 12.9 % The percentage of the amounts due from major customers to total accounts receivable, net for the periods indicated were as follows: Major Customers At Sep 30, 2021 At Dec 31, 2020 A.S. Watson Group - Related Party 43.6 % 31.9 % Matakana Health 13.1 % 11.1 % Life Extension 11.0 % 17.7 % Amazon Marketplaces 12.5 % 12.0 % Note 12. Commitments and Contingencies Legal proceedings 1. Elysium Health, LLC (A) California Action On December 29, 2016, ChromaDex filed a complaint in the United States District Court for the Central District of California, naming Elysium Health, Inc. (together with Elysium Health, LLC, “Elysium”) as defendant (Complaint). On January 25, 2017, Elysium filed an answer and counterclaims in response to the Complaint (together with the Complaint, the “California Action”). Over the course of the California Action, the parties have each filed amended pleadings several times and have each engaged in several rounds of motions to dismiss and one round of motion for judgment on the pleadings with respect to various claims. Most recently, on November 27, 2018, ChromaDex filed a fifth amended complaint that added an individual, Mark Morris, as a defendant. Elysium and Morris (Defendants) moved to dismiss on December 21, 2018. The court denied Defendants’ motion on February 4, 2019. Defendants filed their answer to ChromaDex’s fifth amended complaint on February 19, 2019. ChromaDex filed an answer to Elysium’s restated counterclaims on March 5, 2019. Discovery closed on August 9, 2019. On August 16, 2019, the parties filed motions for partial summary judgment as to certain claims and counterclaims. The parties filed opposition briefs on August 28, 2019, and reply briefs on September 4, 2019. On October 9, 2019, among other things, the court vacated the previously scheduled trial date, ordered supplemental briefing with respect to certain issues related to summary judgment. Elysium filed its opening supplemental brief on October 30, 2019, ChromaDex filed its opening supplemental brief on November 18, 2019, and Elysium filed a reply brief on November 27, 2019, and the court heard argument on January 13, 2020. On January 16, 2020, the court granted both parties’ motions for summary judgment in part and denied both in part. On ChromaDex’s motion, the court granted summary judgment in favor of ChromaDex on Elysium’s counterclaims for (i) breach of contract related to manufacturing NIAGEN® according to the defined standard, selling NIAGEN and ingredients that are substantially similar to pterostilbene to other customers, distributing the NIAGEN® product specifications, and failing to provide information concerning the quality and identity of NIAGEN®, and (ii) breach of the implied covenant of good faith and fair dealing. The court denied summary judgment on Elysium’s counterclaims for (i) fraudulent inducement of the Trademark License and Royalty Agreement, dated February 3, 2014, by and between ChromaDex and Elysium (License Agreement), (ii) patent misuse, and (iii) unjust enrichment. On Elysium’s motion, the court granted summary judgment in favor of Elysium on ChromaDex’s claim for damages related to $ 110,000 in avoided costs arising from documents that Elysium used in violation of the Supply Agreement, dated February 3, 2014, by and between ChromaDex and Elysium, as amended (NIAGEN® Supply Agreement). The court denied summary judgment on Elysium’s counterclaim for breach of contract related to certain refunds or credits to Elysium. The court also denied summary judgment on ChromaDex’s breach of contract claim against Morris and claims for disgorgement of $ 8.3 million in Elysium’s resale profits, $ 600,000 for a price discount received by Elysium, and $ 684,781 in Morris’s compensation. 17 Table of Contents Following the court’s January 16, 2020 order, ChromaDex’s claims asserted in the California Action, among other allegations, were that (i) Elysium breached the Supply Agreement, dated June 26, 2014, by and between ChromaDex and Elysium (pTeroPure® Supply Agreement), by failing to make payments to ChromaDex for purchases of pTeroPure® and by improper disclosure of confidential ChromaDex information pursuant to the pTeroPure® Supply Agreement, (ii) Elysium breached the NIAGEN® Supply Agreement, by failing to make payments to ChromaDex for purchases of NIAGEN®, (iii) Defendants willfully and maliciously misappropriated ChromaDex trade secrets concerning its ingredient sales business under both the California Uniform Trade Secrets Act and the Federal Defend Trade Secrets Act, (iv) Morris breached two confidentiality agreements he signed by improperly stealing confidential ChromaDex documents and information, (v) Morris breached his fiduciary duty to ChromaDex by lying to and competing with ChromaDex while still employed there, and (vi) Elysium aided and abetted Morris’s breach of fiduciary duty. ChromaDex sought damages and interest for Elysium’s alleged breaches of the NIAGEN® Supply Agreement and pTeroPure® Supply Agreement and Morris’s alleged breaches of his confidentiality agreements, compensatory damages and interest, punitive damages, injunctive relief, and attorney’s fees for Defendants’ alleged willful and malicious misappropriation of ChromaDex’s trade secrets, and compensatory damages and interest, disgorgement of all benefits received, and punitive damages for Morris’s alleged breach of his fiduciary duty and Elysium’s aiding and abetting of that alleged breach. Elysium’s claims alleged in the California Action were that (i) ChromaDex breached the NIAGEN® Supply Agreement by not issuing certain refunds or credits to Elysium, (ii) ChromaDex fraudulently induced Elysium into entering into the License Agreement, (iv) ChromaDex’s conduct constitutes misuse of its patent rights, and (v) ChromaDex was unjustly enriched by the royalties Elysium paid pursuant to the License Agreement. Elysium sought damages for ChromaDex’s alleged breaches of the NIAGEN® Supply Agreement, and compensatory damages, punitive damages, and/or rescission of the License Agreement and restitution of any royalty payments conveyed by Elysium pursuant to the License Agreement, and a declaratory judgment that ChromaDex has engaged in patent misuse. On January 17, 2020, Elysium moved to substitute its counsel. The same day, the court ordered hearing on that motion for January 21, 2020, and granted Elysium’s motion at the hearing. On January 23, 2020, the court issued a scheduling order that, among other things, set trial on the remaining claims to begin on May 12, 2020. On March 19, 2020, in light of the global 2019 coronavirus disease ("COVID-19" or "COVID") pandemic and ongoing private mediation efforts, the parties jointly stipulated to adjourn the trial date. The court vacated the trial date on March 20, 2020. The court held a telephonic status conference on June 9, 2020, during which the court indicated that it will reschedule the jury trial as soon as conditions permit. On November 4, 2020, the parties submitted a joint status report indicating that they will propose a new trial date as soon as the court announces that it will resume jury trials. On November 18, 2020, the court set trial to begin on September 21, 2021. On December 11, 2020, Elysium filed a “Notice of Correction of Depositions” related to the depositions of its chief executive officer, Eric Marcotulli, and chief operating officer, Daniel Alminana, both taken in March 2019. On March 8, 2021, based in part on information that Elysium submitted under seal with that notice, ChromaDex filed a motion for sanctions or, in the alternative, reconsideration of the court’s January 16, 2020 order regarding summary judgment, in which ChromaDex moved to dismiss Elysium’s third, fourth, and fifth counterclaims. Elysium’s opposition brief was filed on March 22, 2021. ChromaDex filed its reply brief on March 29, 2021. On April 27, 2021, the court denied ChromaDex, Inc’s motion for terminating sanctions, but concluded that the evidence at issue in the motion will be admissible at trial. The jury trial portion of the case commenced on September 21, 2021. The jury returned a verdict on September 27, 2021. The verdict found (i) Elysium liable for breaches of the NIAGEN® and pTeroPure® Supply Agreements for failing to pay for purchases of the ingredients totaling approximately $ 3.0 million, (ii) Mark Morris liable for breach of a confidentiality agreement, requiring him to disgorge approximately $ 17,307 , (iii) ChromaDex liable for breaching the NIAGEN® Supply Agreement for not issuing certain refunds or credits to Elysium in the amount of $ 625,000 , and (iv) ChromaDex liable for fraudulent inducement of the Licensing Agreement in the amount of $ 250,000 , along with $ 1,025,000 in punitive damages arising from the same counterclaim. On October 25, 2021, ChromaDex informed the court that it would request prejudgment interest on the approximately $ 3.0 million in damages awarded by the jury for Elysium’s breaches of the NIAGEN® and pTeroPure® Supply Agreements. As a result of the outcome of this litigation, the Company may be subject to a contingent payment to counsel. The Company is currently evaluating the potential payment amount. 18 Table of Contents (B) Southern District of New York Action On September 27, 2017, Elysium Health Inc. (Elysium Health) filed a complaint in the United States District Court for the Southern District of New York, against ChromaDex (Elysium SDNY Complaint). Elysium Health alleged in the Elysium SDNY Complaint that ChromaDex made false and misleading statements in a citizen petition to the Food and Drug Administration it filed on or about August 18, 2017. Among other allegations, Elysium Health averred that the citizen petition made Elysium Health’s product appear dangerous, while casting ChromaDex’s own product as safe. The Elysium SDNY Complaint asserted four claims for relief: (i) false advertising under the Lanham Act, 15 U.S.C. § 1125(a); (ii) trade libel; (iii) deceptive business practices under New York General Business Law § 349; and (iv) tortious interference with prospective economic relations. On October 26, 2017, ChromaDex moved to dismiss the Elysium SDNY Complaint on the grounds that, inter alia, its statements in the citizen petition are immune from liability under the Noerr-Pennington Doctrine, the litigation privilege, and New York’s Anti-SLAPP statute, and that the Elysium SDNY Complaint failed to state a claim. Elysium Health opposed the motion on November 2, 2017. ChromaDex filed its reply on November 9, 2017. On October 26, 2017, ChromaDex filed a complaint in the United States District Court for the Southern District of New York against Elysium Health (ChromaDex SDNY Complaint). ChromaDex alleges that Elysium Health made material false and misleading statements to consumers in the promotion, marketing, and sale of its health supplement product, Basis, and asserts five claims for relief: (i) false advertising under the Lanham Act, 15 U.S.C. §1125(a); (ii) unfair competition under 15 U.S.C. § 1125(a); (iii) deceptive practices under New York General Business Law § 349; (iv) deceptive practices under New York General Business Law § 350; and (v) tortious interference with prospective economic advantage. On November 16, 2017, Elysium Health moved to dismiss for failure to state a claim. ChromaDex opposed the motion on November 30, 2017 and Elysium Health filed a reply on December 7, 2017. On November 3, 2017, the Court consolidated the Elysium SDNY Complaint and the ChromaDex SDNY Complaint actions under the caption In re Elysium Health-ChromaDex Litigation, 17-cv-7394, and stayed discovery in the consolidated action pending a Court-ordered mediation. The mediation was unsuccessful. On September 27, 2018, the Court issued a combined ruling on both parties’ motions to dismiss. For ChromaDex’s motion to dismiss, the Court converted the part of the motion on the issue of whether the citizen petition is immune under the Noerr-Pennington Doctrine into a motion for summary judgment, and requested supplemental evidence from both parties, which were submitted on October 29, 2018. The Court otherwise denied the motion to dismiss. On January 3, 2019, the Court granted ChromaDex’s motion for summary judgment under the Noerr-Pennington Doctrine and dismissed all claims in the Elysium SDNY Complaint. Elysium moved for reconsideration on January 17, 2019. The Court denied Elysium’s motion for reconsideration on February 6, 2019, and issued an amended final order granting ChromaDex’s motion for summary judgment on February 7, 2019. The Court granted in part and denied in part Elysium’s motion to dismiss, sustaining three grounds for ChromaDex’s Lanham Act claims while dismissing two others, sustaining the claim under New York General Business Law § 349, and dismissing the claims under New York General Business Law § 350 and for tortious interference. Elysium filed an answer and counterclaims on October 10, 2018, alleging claims for (i) false advertising under the Lanham Act, 15 U.S.C. §1125(a); (ii) unfair competition under 15 U.S.C. § 1125(a); and (iii) deceptive practices under New York General Business Law § 349. ChromaDex answered Elysium’s counterclaims on November 2, 2018. ChromaDex filed an amended complaint on March 27, 2019, adding new claims against Elysium Health for false advertising and unfair competition under the Lanham Act, 15 U.S.C. § 1125(a). On April 10, 2019, Elysium Health answered the amended complaint and filed amended counterclaims, also adding new claims against ChromaDex for false advertising and unfair competition under the Lanham Act, 15 U.S.C. § 1125(a). On July 1, 2019, Elysium Health filed further amended counterclaims, adding new claims under the Copyright Act §§ 106 & 501. On February 9, 2020, ChromaDex filed a motion for leave to amend its complaint to add additional claims against Elysium Health for false advertising and unfair competition. On February 10, 2020, Elysium Health filed a motion for leave to amend its counterclaims to identify allegedly false and misleading statements in ChromaDex’s advertising. Those motions were both granted after respective stipulations. On March 12, 2020, Elysium Health answered the second amended complaint. On March 13, 2020, ChromaDex filed an answer and objection to Elysium Health’s third amended counterclaims. 19 Table of Contents On December 14, 2020, Elysium Health filed a motion to supplement and amend its counterclaims to add claims regarding alleged advertising related to COVID, to add an allegation about a change to the ChromaDex website, and to remove its copyright infringement claim under the Copyright Act. On January 19, 2021, the Court denied Elysium Health’s motion to add claims regarding alleged advertising related to COVID. The Court granted the unopposed requests to add an allegation about a change to ChromaDex’s website and to remove Elysium’s Copyright Act claim. Pursuant to the Court’s order, Elysium filed fourth amended counterclaims on April 21, 2021. All discovery closed on April 23, 2021. The Court vacated a previously scheduled joint pretrial order and trial date because of COVID-19, and the Court has informed the Parties that trial date will be rescheduled in November or December 2021. Both parties filed dispositive and Daubert motions on June 4, 2021. Opposition papers were filed by both parties on June 25, 2021, and reply papers were filed on July 9, 2021. The Company is unable to predict the outcome of the Elysium SDNY Complaint and, at this time, cannot reasonably estimate the possible loss or range of loss with respect to the legal proceeding discussed herein. As of September 30, 2021, ChromaDex did not accrue a potential loss for the Elysium SDNY Complaint because ChromaDex believes that the allegations are without merit and thus it is not probable that a liability has been incurred. (C) Delaware - Patent Infringement Action On September 17, 2018, ChromaDex and Trustees of Dartmouth College filed a patent infringement complaint in the United States District Court for the District of Delaware against Elysium Health, Inc. The complaint alleges that Elysium’s BASIS® dietary supplement infringes U.S. Patent Nos. 8,197,807 (‘807 Patent) and 8,383,086 (‘086 Patent) that comprise compositions containing isolated nicotinamide riboside held by Dartmouth and licensed exclusively to ChromaDex On October 23, 2018, Elysium filed an answer to the complaint. The answer asserts various affirmative defenses and denies that Plaintiffs are entitled to any relief. On November 7, 2018, Elysium filed a motion to stay the patent infringement proceedings pending resolution of (1) the inter partes review of the ‘807 Patent and the ‘086 Patent before the Patent Trial and Appeal Board (PTAB) and (2) the outcome of the litigation in the California Action. ChromaDex filed an opposition brief on November 21, 2018 detailing the issues with Elysium’s motion to stay. In particular, ChromaDex argued that given claim 2 of the ‘086 Patent was only included in the PTAB’s inter partes review for procedural reasons the PTAB was unlikely to invalidate claim 2 and therefore litigation in Delaware would continue regardless. In addition, ChromaDex argued that the litigation in the California Action is unlikely to have a significant effect on the ongoing patent litigation. After the PTAB released its written decision upholding claim 2 of the ‘086 Patent, proving right ChromaDex’s prediction, ChromaDex informed the Delaware court of the PTAB’s decision on January 17, 2019. On June 19, 2019, the Delaware court granted in part and denied in part Elysium’s motion, ordering that the case was stayed pending the resolution of Elysium’s patent misuse counterclaim in the California Action. On November 1, 2019, ChromaDex filed a motion to lift the stay due to changed circumstances in the California Action, among other reasons. Briefing on the motion was completed on November 22, 2019. On January 6, 2020, the Delaware court issued an oral order instructing the parties to submit a joint status report after the January 13, 2020 motions hearing in the California Action. The joint status report was submitted on January 30, 2020. On February 4, 2020, the Delaware court issued an order granting ChromaDex’s motion to lift the stay and setting a scheduling conference for March 10, 2020. On March 19, 2020, the Delaware court entered a scheduling order, which, among other things, set the claim-construction hearing for December 17, 2020 and trial for the week of September 27, 2021. On April 17, 2020, ChromaDex served infringement contentions. Elysium filed a Second Amended Answer on July 10, 2020. On April 24, 2020, ChromaDex moved for leave to amend the complaint to add Healthspan Research, LLC as a plaintiff. On May 5, 2020, Elysium filed its opposition to ChromaDex’s motion for leave to amend and moved to dismiss ChromaDex for alleged lack of standing. ChromaDex filed its opposition to Elysium’s motion to dismiss and reply in support of its motion to amend on May 19, 2020. Elysium filed its reply in support of its motion to dismiss on May 26, 2020. The Court held a hearing on the motion for leave to amend the complaint and Elysium’s motion to dismiss on September 16, 2020. On December 15, 2020, the Court entered orders (i) granting in part and denying in part Elysium’s motion to dismiss ChromaDex for alleged lack of standing; and (ii) denying ChromaDex’s motion for leave to amend. ChromaDex filed a motion for reargument on December 29, 2020. Elysium filed a response to the motion for reargument on January 28, 2021. ChromaDex filed a motion for leave to file a reply on February 8, 2021. Elysium filed a response to the motion for leave to file a reply on February 12, 2021. ChromaDex filed a reply to the motion for leave to file a reply on February 19, 2021. The Court granted the motion for leave to file the reply on April 26, 2021, and denied the motion for reargument on April 27, 2021. 20 Table of Contents On July 22, 2020 the parties filed a Joint Claim Construction Chart and respective motions for claim construction. The parties filed a Joint Claim Construction Brief on November 5, 2020. The Court held a Markman hearing on claim-construction issues on December 17, 2020. The Court entered a claim-construction ruling on January 5, 2021. Fact discovery closed on January 26, 2021. Opening expert reports were served on February 9, 2021. Responsive expert reports were served on March 9, 2021. Reply expert reports were served on March 30, 2021. Both parties filed dispositive and Daubert motions on April 27, 2021. On September 21, 2021, the Court granted Elysium’s motion for summary judgment that the claims of the ‘807 and ‘086 patents are invalid based on patent-ineligible subject matter. ChromaDex filed a notice of appeal on November 2, 2021. If the appeal is unsuccessful or if on remand the Court dismisses ChromaDexs’ claims for some other reason, that could reduce or eliminate any competitive advantage the Company may otherwise have had. 2. Thorne Research, Inc . (A) Inter Partes Review Proceedings On or around September 28, 2020, Thorne Research, Inc. (Thorne) provided notice to ChromaDex that it intended to terminate its March 25, 2019 Supply Agreement and subsequent amendments with ChromaDex, effective as of December 31, 2020. A discussion between ChromaDex and Thorne followed, and Thorne asserted that it could challenge the ‘086 Patent in an inter partes review (IPR) proceeding on the basis of prior art, but would be willing to enter into a mutual existence agreement that would permit Thorne to source NR from a third party. Thorne did not offer substantive information supporting a prior art claim or about the nature of the threatened IPR. On December 1, 2020, Thorne filed a petition for IPR of the ‘086 Patent. Dartmouth’s preliminary response to the petition was filed on March 15, 2021. On June 10, 2021, the Patent Trial and Appeal Board (PTAB) issued a decision instituting an IPR on the ‘086 Patent. On September 21, 2021, Dartmouth filed its Patent Owner Response. On February 1, 2021, Thorne filed a petition for IPR of the ‘807 Patent. Dartmouth’s preliminary response to the petition was filed on May 18, 2021. On August 12, 2021, the Patent Trial and Appeal Board (PTAB) issued a decision instituting an IPR on the ‘807 Patent. Dartmouth’s Patent Owner Response is presently due on November 9, 2021. (B) Southern District of New York – Patent Infringement Action On May 12, 2021, ChromaDex and Trustees of Dartmouth College filed a patent infringement complaint in the United States District Court for the Southern District of New York. The complaint alleges that certain of Thorne’s dietary supplements containing isolated NR infringe the ‘807 and ‘086 Patents, which claim compositions containing isolated nicotinamide riboside and are held by Dartmouth and licensed exclusively to ChromaDex On July 6, 2021, Thorne filed an answer and counterclaims to the complaint. The answer asserts various affirmative defenses and denies that Plaintiffs are entitled to any relief. The counterclaims seek declaratory judgment of patent invalidity for the ‘807 and ‘086 Patents. On July 8, 2021, the parties filed a proposed stipulation and order staying the matter pending issuance of the institution decision in the ‘807 Patent IPR. On July 9, 2021, the Court granted the stipulation and order to stay. On August 19, 2021, the parties filed a proposed stipulation and order staying the matter pending issuance of final written decisions in the IPRs. On August 20, 2021, the Court granted the stipulation and order to stay. 3. Erica Martinez (A) California Action On October 1, 2021, Erica Martinez, a former employee of ChromaDex, filed a complaint in the Orange County Superior Court alleging claims against ChromaDex for: (1) disability discrimination, (2) failure to accommodate a disability, (3) failure to engage in the interactive process, (4) retaliation for taking California Family Rights Act leave, and (5) failure to prevent discrimination and harassment. Martinez’s allegations are based primarily upon Martinez’s claim that her son was allegedly diagnosed with Autism Spectrum Disorder in or around July 17, 2019, and ChromaDex allegedly retaliated against, and ultimately terminated, her for taking time off to care for her son and attend his doctors’ appointments. ChromaDex has not been served with the Summons and Complaint. ChromaDex is attempting to engage in informal settlement discussions with Martinez before service is effectuated and a responsive pleading is due. The Company believes these claims are without merit and will aggressively defend itself if a reasonable settlement cannot be reached. The Company does not anticipate that the ultimate resolution of this matter will be material to the Company’s operations, financial condition or cash flows. 21 Table of Contents 4. Other (A) Rejuvenation Therapeutics On September 15, 2020, the Company received a letter from a customer, Rejuvenation Therapeutics Corp. (Rejuvenation), and has received subsequent correspondence, requesting a full refund of approximately $ 1.6 million of NIAGEN® it purchased, alleging breaches of the supply agreement between the parties. As of September 30, 2021, the Company has recorded a return liability of approximately $ 0.5 million, which the Company offered to settle in good faith. On May 13, 2021, Rejuvenation filed a complaint in the Superior Court of the State of California, County of Orange, asserting causes of action for Concealment and Negligent Misrepresentation. On July 20, 2021, Rejuvenation filed an amended complaint adding a claim for Declaratory Relief. The Company filed a demurrer on September 3, 2021, which is set for hearing on February 1, 2022. Rejuvenation’s current counsel, Matthew V. Herron, filed a motion to be relieved as counsel, which is scheduled for hearing on November 9, 2021, however, Mr. Herron has moved to withdraw that motion because Rejuvenation has substituted in new counsel. The Company believes these claims are without merit and will aggressively defend itself if a reasonable settlement cannot be reached. The Company does not anticipate that the ultimate resolution of this matter will be material to the Company’s operations, financial condition or cash flows. 5. Contingencies (A) In September 2019, the Company received a letter from a licensor stating that the Company owed the licensor $ 1.6 million plus interest for sublicense fees as a result of the Company entering into a supply agreement with a customer. After reviewing the relevant facts and circumstances, the Company believes that the Company does not owe any sublicense fees to the licensor and has corresponded with the licensor to resolve the matter. The Company does not believe that the ultimate resolution of this matter will be material to the Company’s results of operations, financial condition or cash flows. (B) On November 17, 2020, the Company received a warning letter (the Letter) from the United States Food and Drug Administration (FDA) and Federal Trade Commission (FTC). The Letter references statements issued by the Company relating to preclinical and clinical research results involving nicotinamide riboside and COVID-19. The statements were included in press releases and referenced in social media posts. On November 18, 2020, the Company provided a response to the Letter stating that the Company disagrees with the assertion in the Letter that the Company’s products are intended to mitigate, prevent, treat, diagnose or cure COVID-19 in violation of certain sections of the Federal Food, Drug, and Cosmetic Act or that they were unsubstantiated under the FTC Act, but rather accurately reflected the state of the science and the results of scientific research. Nonetheless, the Company also responded that it had deleted social media references to the studies and removed related press releases from its website. On April 30, 2021, the Company received an additional warning letter (the Second Letter) from only the FTC. The Second Letter references the original Letter, and cites additional statements issued by the Company and certain officers and advisors of the Company relating to nicotinamide riboside and scientific studies related to COVID-19. The Second Letter asserts that such statements contain coronavirus-related prevention or treatment claims and are deceptive in violation of the Federal Trade Commission Act. On May 4, 2021, the Company provided a response to the Second Letter stating that it had removed the social posts from its accounts identified in the Second Letter and requested that third parties remove the post from their accounts that were identified in the Second Letter. The Company stated that the press release identified in the Second Letter is appropriate and not a deceptive act or practice under applicable law. The Company affirmed its belief in the need to accurately report on the scientific results of its studies to its investors and welcomed the opportunity to discuss its research and development program with the FTC and receive guidance on future releases. The Company does not believe that the ultimate resolution of this matter will be material to the Company’s results of operations, financial condition or cash flows. 22 Table of Contents Commitments Effective as of August 2, 2021, the Company entered into a Seventh Amendment (Seventh Amendment) to the Manufacturing and Supply Agreement (such agreement as amended, the “Grace Manufacturing Agreement” or “Agreement”), originally effective in January 2016 with W.R. Grace & Co. –Conn. (Grace). In January 2019, Grace was issued patents related to the manufacturing of the crystalline form of NR (Grace Patents). Pursuant to the Seventh Amendment, the Company is obligated to purchase approximately $ 18.0 million of total inventory between January 1, 2022 and December 31, 2022 and $ 3.5 million of inventory from January 1, 2023 through June 30, 2023. The Grace Manufacturing Agreement will expire on June 30, 2023, subject to further renewal of the Agreement to be negotiated by the parties. Note 13. Subsequent Events On October 19, 2021, Tony Lau notified the Company of his intention to resign from the board of directors of the Company (the “Board”) and as a member of the Compensation Committee of the Board. His resignation will be effective November 2, 2021. Mr. Lau indicated that his resignation is not due to any disagreement with the Company on any matter relating to its operations, policies or practices.