What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-14 compared with 2021-03-12 · 460 added, 479 removed, 509 unchanged (65% of the section changed)

Financial Statements and Supplementary Data

The financial statements are set forth in the pages listed below.

Reports of Independent Registered Public Accounting Firm

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets at December 31, 2021 and December 31, 2020

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Our audits 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 audits provide a reasonable basis for our opinion.

We believe that our audits provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition – identification of contractual terms in certain customer arrangements

Critical Audit Matter Description

We identified a critical audit matter in the ingredients reportable segment associated with a contract that includes determining the performance obligations and an allocation of consideration as further described in Note 10 to the consolidated financial statements.

The principal considerations for our determination in performing procedures relating to revenue recognition, specifically the identification and evaluation of terms and conditions in the contract, is a critical audit matter as there was significant judgment by management in identifying and evaluating terms and conditions in the contract that impacted revenue recognition.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing such procedures and in evaluating the audit evidence to determine whether the terms and conditions in the contract were appropriately identified and evaluated by management.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluation of audit evidence that included, among others (i) evaluating contract terms and conditions, (ii) reviewing and assessing the methodology applied and testing the reliability and mathematical accuracy of the underlying data and calculations, (iii) testing management’s identification of performance obligations by evaluating whether the promises were both capable of being distinct and distinct within the context of the contract, including reading the selected contracts and inquiring of certain of the Company’s accounting and operations personnel to understand the nature of the promises and how they are delivered to the customer, (iv) evaluating and concluding on the reasonableness of managements judgments and estimates.

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

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Consolidated Balance Sheets

December 31, 2020 and December 31, 2019

(In thousands, except per share data)

(In thousands except par values, unless otherwise indicated)

Current assets

Cash, including restricted cash of $ 0.2 million and $ 0.2 million, respectively

Trade receivables, net of allowances of $ 0.2 million and $ 2.8 million, respectively;

Receivables from Related Party:

$ 0.9 million and $ 0.8 million, respectively

Cash and cash equivalents, including restricted cash of $ 0.2 million for both periods presented

$ 28,219 $ 16,697

Trade receivables, net of allowances of $ 65 and $ 189 , respectively;

Including receivables from Related Party of $ 2.1 million and $ 0.9 million, respectively.

Inventories 13,601 11,683

Prepaid expenses and other assets 1,859 1,145

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Other long-term assets 723 625

Total assets $ 57,840 $ 38,358

Liabilities and Stockholders' Equity

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authorized 150,000 shares;

issued and outstanding December 31, 2020 61,881 shares and December 31, 2019 59,562 shares

68,126 shares and 61,881 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively.

Additional paid-in capital 200,614 158,190

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Total liabilities and stockholders' equity $ 57,840 $ 38,358

See Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

ChromaDex Corporation and Subsidiaries

Consolidated Statements of Operations

Years Ended December 31, 2020 and December 31, 2019

Year Ended December 31,

(In thousands, except per share data)

Sales, net $ 67,449 $ 59,257

Cost of sales 25,959 23,983

Gross profit 41,490 35,274

Operating expenses:

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General and administrative 36,379 30,765

Operating expenses

Total operating expenses 68,563 55,128

Operating loss ( 27,073 ) ( 19,854 )

Nonoperating expense:

Interest expense, net ( 55 ) ( 71 )

Nonoperating expenses

Net loss $ ( 27,128 ) $ ( 19,925 )

Basic and diluted loss per common share $ ( 0.40 ) $ ( 0.33 )

Basic and diluted weighted average common shares outstanding 67,185 61,067

See Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

ChromaDex Corporation and Subsidiaries

Consolidated Statement of Stockholders’ Equity

Years Ended December 31, 2020 and December 31, 2019

(In thousands)

(In thousands, unless otherwise indicated)

Common Stock Additional

Paid-in Capital Accumulated

Deficit Cumulative

Adjustments Total

Stockholders'

Paid-in Capital

Balance, December 31, 2018

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

Issuance of common stock for conversion of debt and accrued interest

Debt discount to covertible notes

1,225 1 4,855 4,856

Exercise of stock options 1,094 1 4,114 — — 4,115

Exercise of of warrants

Share-based compensation — — 6,936 — — 6,936

Translation adjustment — — — — ( 3 ) ( 3 )

Net loss — — — ( 19,925 ) ( 19,925 )

Balance, December 31, 2020 61,881 $ 62 $ 158,190 $ ( 141,825 ) $ ( 3 ) $ 16,424

$ ( 121,900 )

Issuance of common stock, net of offering costs of $ 0.4 million

4,059 4 26,736 — — 26,740

Exercise of stock options 2,186 2 9,493 — — 9,495

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Translation adjustment — — — — 1 1

Net loss — — — ( 27,128 ) — ( 27,128 )

Balance, December 31, 2021 68,126 $ 68 $ 200,614 $ ( 168,953 ) $ ( 2 ) $ 31,727

$ ( 141,828 )

See Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

ChromaDex Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2020 and December 31, 2019

(In thousands)

(In thousands, unless otherwise indicated)

Year Ended December 31,

Cash Flows From Operating Activities

Net loss $ ( 27,128 ) $ ( 19,925 )

Adjustments to reconcile net loss to net cash used in operating activities:

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Amortization of right of use assets 511 399

Share-based compensation

Allowance for doubtful trade receivables

Share-based compensation expense 6,195 6,936

Provision for doubtful trade receivables 46 36

Loss from investment in long-term assets — 395

Loss from impairment of intangibles — 4

Loss from disposal of equipment

Amortization of convertible notes issuance costs and discount

Non-cash financing costs 108 94

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Trade receivables ( 2,578 ) ( 555 )

Inventories ( 1,918 ) ( 148 )

Implementation costs for cloud computing arrangement ( 278 ) ( 142 )

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Customer deposits and other ( 116 ) 106

Payments on operating leases

Principal payments on operating leases ( 541 ) ( 591 )

Net cash used in operating activities ( 24,163 ) ( 10,600 )

Cash Flows From Investing Activities

Proceeds from disposal of assets held at escrow

Purchases of leasehold improvements and equipment ( 409 ) ( 124 )

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Proceeds from issuance of common stock, net 26,740 4,856

Proceeds from sale of convertible notes

Payment of convertible notes issuance costs

Payment of debt issuance costs

Proceeds from exercise of stock options 9,495 4,115

Payment of debt issuance costs ( 110 ) ( 49 )

Principal payments on finance leases ( 31 ) ( 272 )

Net cash provided by financing activities 36,094 8,650

Net decrease in cash

Cash Beginning of Year, including restricted cash of $0.2 million for both 2020 and 2019

Cash Ending of Year, including restricted cash of $0.2 million for both 2020 and 2019

Net increase (decrease) in cash and cash equivalents 11,522 ( 2,115 )

Cash and cash equivalents, including restricted cash of $ 0.2 million for both 2021 and 2020 - beginning of period

16,697 18,812

Cash and cash equivalents, including restricted cash of $ 0.2 million for both 2021 and 2020 - end of period

$ 28,219 $ 16,697

Supplemental Disclosures of Cash Flow Information

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Supplemental Schedule of Noncash Operating Activity

Finance lease obligation incurred on licensing fees

Right of use assets transferred

Operating lease obligation transferred

Operating lease obligation incurred for entering into lease amendment

Right-of-use assets and operating lease obligations incurred for entering into lease amendment $ 3,637 $ 734

Supplemental Schedule of Noncash Investing Activity

Finance lease obligation incurred for purchase of computer equipment and software

Operating lease obligation incurred for tenant improvement credit received

Financing lease obligation incurred for purchase of computer equipment and software $ — $ 47

Retirement of fully depreciated equipment - cost $ — $ 5

Retirement of fully depreciated equipment - accumulated depreciation $ — $ 5

Supplemental Schedule of Noncash Financing Activity

Issuance of common stock for conversion of debt and accrued interest

See Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Nature of Business

ChromaDex Corporation and its wholly owned subsidiaries, ChromaDex, Inc., ChromaDex Analytics, Inc., ChromaDex Asia Limited and ChromaDex Europa B.V.

(collectively, “ChromaDex”, the “Company” or, in the first person as “we” “us” and “our”) are 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 Corporation and its wholly owned subsidiaries, ChromaDex, Inc., ChromaDex Analytics, Inc., ChromaDex Asia Limited, ChromaDex Europa B.V.

and ChromaDex Sağlik Ürünleri Anonim Şirketi (collectively, “ChromaDex”, the “Company”) are a global bioscience company dedicated to healthy aging.

The ChromaDex team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), an essential coenzyme which is found in every cell of human bodies and 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 portfolio.

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 analytical reference standards and services segment, which focuses on natural product fine chemicals (known as “phytochemicals”) and related chemistry services.

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.

On January 15, 2021, Healthspan Research, LLC was dissolved.

Prior to its dissolution, Healthspan Research, LLC contributed its assets and liabilities to ChromaDex Inc.

The Company has incurred a net loss of approximately $ 19.9 million for the year ended December 31, 2020.

The Company incurred a net loss of approximately $ 27.1 million for the year ended December 31, 2021.

As of December 31, 2021, cash and cash equivalents totaled approximately $ 28.2 million which includes restricted cash of approximately $ 0.2 million.

Subsequent to the year ended December 31, 2020, the Company entered into a Securities Purchase Agreement with an investor, pursuant to which the Company sold and issued an aggregate of $ 25.0 million of the Company’s common stock (the “Financing”).

Please refer to Note 17.

Subsequent Events for more details.

The Company anticipates that its current cash, cash equivalents and cash to be generated from operations, $ 25.0 million received from the Financing described above 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 this report.

The Company may, however, seek additional capital within the next twelve months, both to meet its projected operating plans within the next twelve months and/or to fund its longer term strategic objectives.

In June 2020, we filed a $ 125.0 million registration statement on Form S-3 with the Commission, utilizing a “shelf” registration process.

Under this shelf registration process, we may sell securities from time to time, including up to $ 50.0 million pursuant to the At Market Issuance Sales Agreement, dated as of June 12, 2020, with B.

On December 11, 2021, the Company amended its financing agreement with Western Alliance Bank increasing the aggregate principal amount available under the line of credit from $ 7.0 million to $ 10.0 million, subject to the terms and conditions of the agreement, and extended the maturity date to November 12, 2023, among other amendments.

For more information, see Note 9, Line of Credit.

The Company anticipates that its current cash, cash equivalents and cash to be generated from net sales will be sufficient to meet its projected operating plans through at least the next twelve months from the issuance date of these financial statements.

Additionally, the Company has an available line of credit up to $ 10.0 million from Western Alliance Bank.

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.

Additionally, in June 2020, the Company filed a $ 125.0 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 up to $ 50.0 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.

(the “ATM Facility”).

As of December 31, 2020, we have not sold any securities pursuant to the ATM Facility.

(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 December 31, 2021, approximately $ 47.8 million remains available under the ATM Facility.

Significant Accounting Policies

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The Company’s fiscal year ends on December 31.

Adopted Accounting Standards in Fiscal 2020 :

Effective the first day of fiscal year 2020, the Company adopted Accounting Standards Update (“ASU”) No.

2018-15, “Intangibles - Goodwill and Other - Internal-Use Software:

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” Under the new standard, implementation costs related to a cloud computing arrangement will be deferred or expensed as incurred, in accordance with the existing internal-use software guidance for similar costs.

The new standard also prescribes the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense.

The Company adopted this guidance on a prospective basis in 2020.

The implementation costs the Company capitalized during 2020 are included in “Leasehold Improvements and Equipment, net” in the Company’s Consolidated Balance Sheets.

The corresponding cash flows related to these arrangements are included in “Net cash used in operating activities” in the Company’s Consolidated Statements of Cash Flows.

Reclassifications :

Certain prior period results have been reclassified to be consistent with the current period presentation.

Use of accounting estimates :

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Discounts, returns and allowances related to sales, including an estimated reserve for the returns and allowances, are recorded as reduction of revenue.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

The Company accounts for shipping and handling activities performed as cost of sales under a fulfillment cost and any fee received for shipping and handling as part of the transaction price and recognize revenue when control of the good transfers.

Shipping and handling fees billed to customers included in net sales for the years ending December 31, 2020 and December 31, 2019 are as follows:

Shipping and handling fees billed to customers included in net sales for the periods indicated are as follows:

Year Ended December 31,

(In thousands) 2021 2020

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The Company classifies cash as restricted if the withdrawal or its usage is restricted for more than three months.

In connection with a lease amendment entered on November 9, 2018 to lease additional office space located in Los Angeles, California through October 2021, the Company delivered a letter of credit issued by a bank to the landlord in the amount of $ 0.2 million.

The issuing bank required a collateral for the letter of credit and the Company made a deposit covering the letter of credit amount with the issuing bank.

The letter of credit expires on October 18, 2021.

Trade accounts receivable, net :

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on monthly and quarterly reviews of all outstanding amounts.

In connection with the lease agreement for office space located in Los Angeles, California, the Company delivered a letter of credit issued by a bank to the landlord in the amount of $ 0.2 million.

The issuing bank required collateral for the letter of credit and the Company made a deposit covering the letter of credit amount with the issuing bank.

The letter of credit was renewed on October 18, 2021 and currently expires on October 18, 2022.

The Los Angeles, California office lease currently expires in March 2027.

Trade receivables, net :

Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on monthly and quarterly reviews of all outstanding amounts.

Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts.

The allowance amounts for the periods ended December 31, 2020 and December 31, 2019 are as follows:

(In thousands)

Allowances Related to

Elysium Health

Other Allowances

Trade accounts receivable are written off when deemed uncollectible.

Recoveries of trade accounts receivable previously written off are recorded when received.

Trade receivables are written off when deemed uncollectible.

Recoveries of trade receivables previously written off are recorded when received.

Credit risk :

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables.

For cash and cash equivalents, the Company has them either in a form of bank deposits or highly liquid debt instruments in investment-grade pursuant to the Company’s investment policy.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables.

Cash and cash equivalents, consist of bank deposits or highly liquid investment-grade debt instruments with an original maturity of three months of less when purchased pursuant to the Company’s investment policy.

bank accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.

As of December 31, 2020, we held a total deposit of approximately $ 14.7 million with one institution and $ 1.8 million with another institution which exceeded the FDIC limit.

We, however, believe we have very little credit risk exposure for our cash and cash equivalents.

Our trade receivables are derived from sales to our customers.

We assess credit risk of our customers through quantitative and qualitative analysis.

From this analysis, we establish credit limits and manage the risk exposure.

We, however, incur credit losses due to bankruptcy or other failure of the customer to pay.

As of December 31, 2021, the Company had approximately $ 26.0 million in uninsured cash deposits in U.S.

bank accounts.

The Company, however, believes it has very little credit risk exposure for its cash and cash equivalents.

All uninsured U.S.

bank deposits are held at high quality credit institutions.

The Company’s trade receivables are derived from sales to its customers.

The Company assess credit risk of its customers through quantitative and qualitative analysis.

From this analysis, the Company establishes credit limits and manages the risk exposure.

The Company, however, incurs credit losses due to bankruptcy or other failure of the customer to pay.

Inventories :

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Labor and overhead has been added to inventory that was manufactured or characterized by the Company.

Our normal operating cycle for reference standards is currently longer than one year.

The Company’s normal operating cycle for reference standards is currently longer than one year.

The Company regularly reviews inventories on hand and reduces the carrying value for slow-moving and obsolete inventory, inventory not meeting quality standards and inventory subject to expiration.

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The useful lives of subsequent milestone payments that are capitalized are the remaining useful life of the initial licensing payment that was capitalized.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Leasehold improvements and equipment, net :

Leasehold improvements and equipment are comprised of leasehold improvements, laboratory equipment, furniture and fixtures, computer equipment, construction in progress and implementations costs for cloud computing arrangement.

Leasehold improvements and equipment are carried at cost and depreciated on the straight-line method over the lesser of the estimated useful life of each asset or lease term.

Leasehold improvements and equipment are comprised of leasehold improvements, laboratory equipment, furniture and fixtures, computer equipment and implementations costs for cloud computing arrangement.

Implementation costs related to a cloud computing arrangement are deferred or expensed as incurred, in accordance with the Accounting Standards Update (ASU) 2018-15.

Depreciation on equipment under finance lease is included with depreciation on owned assets.

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Research and development costs:

Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies.

Research and development costs consist of direct and indirect costs associated with clinical trials, product development and process development expenses.

These costs are expensed as incurred.

The Company expenses the production costs of advertising the first time the advertising takes place.

Advertising expense for the years ended December 31, 2020 and December 31, 2019 were approximately $ 7,417,000 and $ 6,689,000 , respectively.

Advertising expense for the years ended December 31, 2021 and 2020 were approximately $ 12.5 million and $ 7.4 million, respectively.

Share-based compensation :

The Company has an Equity Incentive Plan under which the Board of Directors may grant restricted stock or stock options to employees and non-employees.

The Company has a 2017 Equity Incentive Plan under which the Board of Directors may grant restricted stock or stock options to employees and non-employees.

The accounting treatment for share-based payments to employees and non-employees is substantially equivalent.

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treasury zero-coupon issues with an equivalent remaining expected term.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Market conditions that affect vesting of stock options are considered in the grant-date fair value.

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The Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure.

Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy is described below:

Fair value measurements are based on a three-tier hierarchy that prioritizes the use of observable inputs and minimizes the use on unobservable inputs.

These tiers include:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

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The fair value hierarchy gives the lowest priority to Level 3 inputs.

The fair value of cash and cash equivalents of $ 28.2 million and $ 16.7 million as of December 31, 2021 and 2020, respectively, is derived using Level 1 inputs.

Financial instruments :

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The carrying amounts reported in the balance sheet for capital lease obligations are present values of the obligations, excluding the interest portion.

Recent accounting standards :

In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Accounting Standards Recently Issued but Not Yet Adopted by the Company:

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.

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Public entities that qualify as a smaller reporting company can elect to defer compliance effective for fiscal years beginning after December 15, 2022.

We are currently evaluating the impact of our pending adoption of ASU 2016-13 on our consolidated financial statements.

The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements .

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Loss Per Share Applicable to Common Stockholders

The following table sets forth the computations of loss per share amounts applicable to common stockholders for the years ended December 31, 2020 and December 31, 2019.

The following table sets forth the computations of loss per share amounts applicable to common stockholders for the periods indicated.

Year Ended December 31,

(In thousands, except per share data) 2021 2020

Net loss $ ( 27,128 ) $ ( 19,925 )

Basic and diluted loss per common share $ ( 0.40 ) $ ( 0.33 )

Basic and diluted weighted average common shares outstanding (1):

67,185 61,067

Potentially dilutive securities (2):

Stock options 10,536 11,914

(1) Includes approximately 0.2 million shares of restricted stock for each of the years 2020 and 2019, which are participating securities that feature voting and dividend rights.

Restricted stock units 115 —

(1) Includes approximately 0.2 million nonvested shares of restricted stock for the years ended December 31, 2021 and 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.

The amounts of major classes of inventory for the periods ended December 31, 2020 and December 31, 2019 are as follows:

The Company's major classes of inventory and corresponding balances for the periods indicated are as follows:

(In thousands) 2021 2020

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Reference standards 516 542

Intangible Assets

Intangible assets consisted of the following:

(In thousands)

Weighted Average

Total Amortization

Inventories $ 13,601 $ 11,683

Intangible Assets, Net

Intangible assets for the periods indicated consisted of the following:

(In thousands, except years) Weighted Average

Life (Years) 2021 2020

Healthspan Research LLC Acquisition 10 $ 1,346 $ 1,346

License agreements and other 9 1,643 1,643

Less accumulated depreciation

Amortization expenses on amortizable intangible assets included in the consolidated statement of operations for the years ended December 31, 2020 and December 31, 2019 were approximately $0.2 million per year.

Estimated aggregate amortization expense for each of the next five years is as follows:

Accumulated amortization ( 2,132 ) ( 1,907 )

Intangible assets, net $ 857 $ 1,082

For the years ended December 31, 2021 and 2020, amortization expense was approximately $ 225,000 and $ 243,000 , respectively.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Estimated amortization expense for each of the years ending December 31 is as follows:

(In thousands)

Years ending December:

Thereafter 57

Leasehold Improvements and Equipment, Net

Leasehold improvements and equipment consisted of the following:

Leasehold improvements and equipment for the periods indicated consisted of the following:

(In thousands) 2021 2020

1 unchanged sentence

Leasehold improvements 2,387 2,357

Lesser of lease term or estimated useful life

Computer equipment 814 751

Implementation costs -

Cloud computing arrangements

Implementation costs - cloud computing arrangements 771 582

Furniture and fixtures 203 201

7 to 10 years

Construction in progress 91 2

Less accumulated depreciation

Depreciation expenses on leasehold improvements and equipment included in the consolidated statement of operations for the years ended December 31, 2020 and December 31, 2019 were approximately $ 0.9 million and $ 0.8 million, respectively.

Accumulated depreciation ( 4,544 ) ( 3,654 )

Leasehold improvements and equipment, net $ 3,003 $ 3,206

Depreciation expense on leasehold improvements and equipment for the years ended December 31, 2021 and 2020 was approximately $ 890,000 and $ 871,000 , respectively.

Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets (ranging from three to ten years ).

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term.

Operating Leases

On August 3, 2020, the Company entered into a lease amendment to lease additional space located in Longmont, Colorado.

The lease amendment extends the expiration of the lease period from February 2024 to December 2025.

Pursuant to the lease amendment, the Company will make additional total lease payments of approximately $ 0.9 million during the term of the lease.

As of December 31, 2020 and December 31, 2019 the Company had operating lease assets in right of use assets of approximately $ 1.2 million and $ 0.9 million, respectively, and corresponding operating lease liabilities of approximately $ 1.6 million and $ 1.4 million, respectively.

For the years ended December 31, 2020 and December 31, 2019, the following were expenses incurred in connection with 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 .

During the fourth quarter of 2021, the Company entered into a new lease agreement to lease office space in Tustin, California.

The Tustin office space will replace the Company’s current office space located in Irvine, California.

The lease extends through June 30, 2028, providing one option to extend for an additional five years .

The fair value of the increase in related lease liability and ROU asset is estimated to be approximately $ 1.4 million.

As of December 31, 2021 and 2020, the Company had ROU assets of $ 4.4 million and $ 1.2 million, respectively, and corresponding operating lease liabilities of $ 4.7 million and $ 1.6 million, respectively.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

The components of operating lease expense for the periods indicated are as follows:

Year Ended December 31,

(In thousands) 2021 2020

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Total expense $ 1,069 $ 936

Weighted-average remaining lease term (years) - operating leases

Weighted-average discount rate - operating leases

Minimum future lease payments under operating leases as of December 31, 2020 are as follows:

As of December 31, 2021, the weighted average remaining lease term for operating leases is 5.2 years and the weighted average discount rate used to determine the operating lease liabilities is 5.9 %.

Future minimum lease payments under operating leases as of December 31, 2021 are as follows:

(In thousands)

Year Ending December 31, 2021

Year Ending December 31, 2022

Year Ending December 31, 2023

Year Ending December 31, 2024

Year Ending December 31, 2025

Less present value discount

Operating lease liabilities

Less current portion

Thereafter 677

Present value discount ( 844 )

Present value of total operating lease liabilities 4,682

Current portion ( 528 )

Long-term obligations under operating leases $ 4,154

Finance Leases

As of December 31, 2020 and December 31, 2019, the Company had finance lease assets in equipment assets of approximately $ 0.2 million and $ 0.7 million, respectively and corresponding finance lease liabilities of approximately $ 0.1 million and $ 0.3 million, respectively.

For the years ended December 31, 2020 and December 31, 2019, following were expenses incurred in connection with finance leases:

(In thousands)

Finance leases

Amortization of equipment assets

Interest on lease liabilities

Total expenses

Weighted-average remaining lease term (years) - finance leases

Weighted-average discount rate - finance leases

Minimum future lease payments under finance leases as of December 31, 2020 are as follows:

(In thousands)

Year Ending December 31, 2021

Year Ending December 31, 2022

Less present value discount

Finance lease liabilities

Less current portion

Long-term obligations under finance leases

Line of Credit

On November 12, 2019, the Company entered into a business financing agreement with Western Alliance Bank (the “Credit Agreement”), in order to establish a formula based revolving credit line pursuant to which the Company may borrow an aggregate principal amount of up to $ 7.0 million, subject to the terms and conditions of the Credit Agreement.

As of December 31, 2020, the Company did not have any outstanding balance from this line of credit arrangement.

The interest rate as of December 31, 2020 was 6.25 %.

The interest rate is calculated at a floating rate per month equal to (a) the greater of (i) 4.75% per year or (ii) the Prime Rate published by The Wall Street Journal, plus (b) 1.50 percentage points, plus an additional 5.00 percentage points during any period that an event of default has occurred and is continuing.

The Company’s obligations under the Credit Agreement are secured by a security interest in substantially all of the Company’s current and future personal property assets, including intellectual property.

Any borrowings, interest or other fees or obligations that the Company owes will become due and payable on November 12, 2021.

On November 12, 2019, the Company entered into a business financing agreement with Western Alliance Bank (Credit Agreement), to establish a formula based revolving credit line.

On December 11, 2021, the Company amended the Credit Agreement to increase the aggregate principal amount available to the Company from $ 7.0 million to $ 10.0 million subject to the terms and conditions of the agreement, as amended, and extended the maturity date to November 12, 2023.

The amendment also reduced the interest rate to be calculated at a floating rate per month equal to (a) the greater of 3.25 % per year (previously 4.75 % per year) or (ii) the Prime Rate published by The Wall Street Journal, plus (b) 1.50 percentage points, plus an additional 5.00 percentage points during any period that an event of default has occurred and is continuing.

As of December 31, 2021 the interest rate was 4.75 % and the Company had no outstanding debt under this line of credit arrangement.

If the Company draws from the line of credit, the Company’s obligations under the Credit Agreement are secured by a security interest in substantially all of the Company’s current and future personal property assets, including intellectual property.

Any borrowings, interest or other fees or obligations that the Company owes will become due and payable on the maturity date.

The Credit Agreement includes quick ratio and minimum liquidity financial covenants.

The Company is also subject to a number of affirmative and restrictive covenants, including covenants regarding delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, dispositions of property, business combinations or acquisitions and incurrence of additional indebtedness, among other customary covenants.

The Company was in compliance with all covenants as of December 31, 2021.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Debt Issuance Costs

For the years ended December 31, 2020 and December 31, 2019, The Company incurred debt issuance costs of approximately $ 113,000 and $ 49,000 , respectively, in connection with this line of credit arrangement and had an unamortized balance of approximately $ 57,000 as of December 31, 2020.

For the years ended December 31, 2021 and 2020, the Company incurred debt issuance costs of approximately $ 110,000 and $ 49,000 , respectively, in connection with this line of credit arrangement and had an unamortized balance of approximately $ 59,000 as of December 31, 2021.

For the line of credit arrangement, the Company elected a policy to keep the debt issuance costs as an asset, regardless of whether an amount is drawn.

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In utilizing output method, the Company estimated total delivery volume based on forecast inputs received from Nestlé on expected purchases of NIAGEN® over the course of the supply agreement.

Revenue recognized from deferred revenue were as follows:

(In thousands)

Revenue recognized from deferred revenue and the corresponding deferred revenue balance for the periods indicated is as follows:

(In thousands) Year Ended December 31, At December 31,

2021 2020 2021 2020

Revenue recognized from deferred revenue $ 95 $ 432

Deferred revenue balance $ 4,346 $ 4,441

At December 31, 2020 and December 31, 2019, the Company maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rates of 0% for both years 2020 and 2019.

At December 31, 2020 and December 31, 2019, we recorded a valuation allowance of $ 35.2 million and $ 30.3 million, respectively.

The valuation allowance increased by $ 4.9 million during 2020.

A reconciliation of income taxes computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is summarized as follows:

Year Ended December 31,

Federal income tax expense at statutory rate ( 21.0 ) % ( 21.0 ) %

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Effective tax rate 0.0 % 0.0 %

The deferred income tax assets and liabilities consisted of the following components as of December 31, 2020 and December 31, 2019:

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

The Company's deferred tax assets and liabilities for the periods indicated are summarized below:

(In thousands) 2021 2020

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Leasehold improvements and equipment 74 32

Intangibles 95 85

Operating leases 85 96

Less valuation allowance

43,808 35,497

Valuation allowance ( 43,363 ) ( 35,244 )

Total deferred tax assets 445 253

Deferred tax liabilities:

Prepaid expenses ( 445 ) ( 253 )

As of December 31, 2020, the Company has tax net operating loss carryforwards for federal and state income tax purposes of approximately $ 106.6 million and $ 92.7 million, respectively, portions of which begin to expire in the year ending December 31, 2023 and 2022, respectively.

The federal net operating loss carryforward of $ 66.6 million generated in tax years beginning after December 31, 2017 can be carried forward indefinitely but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

Under the Internal Revenue Code of 1986, as amended (the “Code”), certain ownership changes may subject the Company to annual limitations on the utilization of its net operating loss carryforwards.

The Company has determined that the stock issued in the year of 2020 did not create a change in control under the Section 382 of the Code.

The Company will continue to analyze the potential impact of any additional transactions undertaken upon the utilization of the net operating losses on a go forward basis.

The Tax Cuts and Jobs Act created new Section 951A, which set forth a new set of tax rules affecting U.S.

shareholders of controlled foreign corporations (“CFCs”).

Section 951A defined a new category of income, global intangible low-taxed income (“GILTI”), which must be included on the U.S.

shareholder’s tax return as it is earned, regardless of when it is distributed (similar to subpart F income).

This provision is effective for CFC tax years beginning after December 31, 2017.

The Company has prepared the GILTI calculation for 2020 and there is no U.S.

tax on GILTI for 2020 due to a loss.

Total deferred tax liabilities ( 445 ) ( 253 )

Net deferred tax assets (liabilities) $ — $ —

As of December 31, 2021 and 2020, the Company maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rate of 0 % for both of the years ended December 31, 2021, and 2020.

The Company increased its valuation allowance by approximately $ 8.1 million to $ 43.3 million as of December 31, 2021 from $ 35.2 million as of December 31, 2020.

For fiscal year 2021, the Company identified no U.S.

tax on global intangible low-taxed income (GILTI) due to a loss.

As of December 31, 2021, the Company’s net operating loss (NOL) carryforwards for federal and state income tax purposes are approximately $ 138.1 million and $ 106.6 million, respectively, portions of which begin to expire in the years ending December 31, 2023 and 2022, respectively.

The Company’s federal NOL carryforward of $ 98.1 million generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but the deductibility of such NOL carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other provisions, increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020 and allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018.

Additionally, the CARES Act permits net operating loss carryovers (“NOLs”) and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

The CARES Act, among other provisions, increases the limitation on the allowed business interest expense deduction from 30% to 50% of adjusted taxable income for tax years beginning January 1, 2019 and 2020 and allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018 .

Additionally, the CARES Act permits NOL carryforwards and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company is currently evaluating the impact of the CARES Act, but at present does not expect it to have a material impact on the income tax provision.

The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years for income taxes.

The Company has not identified any material uncertain tax positions requiring a reserve as of December 31, 2020 and December 31, 2019.

The CARES Act has not materially impacted the Company’s income tax provision.

Under the Internal Revenue Code of 1986, as amended (the Code), certain ownership changes may subject the Company to annual limitations on the utilization of its net operating loss carryforwards.

The Company determined that stock issued during fiscal year 2021 did not create a change in control under the Section 382 of the Code.

The Company will continue to analyze the potential impact of any additional transactions undertaken upon the utilization of the net operating losses on a go forward basis.

The Company is currently not under examination by the Internal Revenue Service or any other major income tax jurisdiction.

The Company has not identified any material uncertain tax positions requiring a reserve as of December 31, 2021 or December 31, 2020.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Related Party Transactions

Sale of consumer products

Trade receivable at

$ 7.7 million

$ 7.3 million

$ 0.9 million

$ 0.8 million

The sale of consumer products to related parties and corresponding receivable balances for the periods indicated are as follows:

Net Sales Trade Receivable as of

Year Ended December 31, December 31,

2021 2020 2021 2020

Watson Group* $ 9.3 million $ 7.7 million $ 2.1 million $ 0.9 million

Horizon Ventures* (1)

— $ 1.6 million — —

$ 9.3 million

$ 7.3 million

$ 0.9 million

$ 0.8 million

Total $ 9.3 million $ 9.3 million $ 2.1 million $ 0.9 million

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) For the year ended December 31, 2020, Horizon Ventures made purchases to donate to the healthcare workers in Hong Kong hospitals.

(1) During the year ended December 31, 2020, Horizon Ventures made purchases to donate to the healthcare workers in Hong Kong hospitals.

Horizon Ventures had insignificant sales during the year ended December 31, 2021.

Share-Based Compensation

Stock Option Plans

At the discretion of the compensation committee of the Board of Directors (the “Compensation Committee”), the Company may grant options to purchase the Company’s common stock to certain individuals from time to time.

Management and the Compensation Committee determine the terms of awards which include the exercise price, vesting conditions and expiration dates at the time of grant.

Expiration dates for stock options are not to exceed 10 years from their date of issuance.

The Company grant awards to recipients through the 2017 Equity Incentive Plan, as amended (the “2017 Plan”), which is approved by the stockholders and Board of Directors.

As of December 31, 2020, under the 2017 Plan, the Company is authorized to issue shares subject to awards 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 2007 Plan, (iii) any returning shares such as forfeited, cancelled, or expired shares and (iv) 500,000 shares pursuant to an inducement award.

The remaining number of shares available for issuance under the 2017 Plan totaled approximately 5.9 million shares at December 31, 2020.

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 December 31, 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 stock option awards generally vest ratably over a three-year period following grant date after a passage of time.

However, some stock option awards are market or performance based and vest based on certain triggering events established by the Compensation Committee.

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.

Restricted stock awards granted by the Company to employees have vesting conditions that are unique to each award.

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 or performance based was estimated at the date of grant using the Black-Scholes based option valuation model.

The table below outlines the weighted average assumptions for options granted during the years ended December 31, 2020 and December 31, 2019.

The table below outlines the weighted average assumptions for options granted during the periods indicated:

Year Ended December 31,

Expected term

Weighted Average:

Expected term (years) 5.8 5.8

Volatility 75 % 67 %

Risk-free rate 1 % 1 %

Dividend Yield 0 % 0 %

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Service Period Based Stock Options

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These options vest ratably over a defined period following grant date after a passage of a service period.

The following table summarizes service period based stock options activity (in thousands except per share data and remaining contractual term):

Weighted Average

The following table summarizes activity of service period-based stock options during the periods indicated:

(In thousands except per-share data and remaining contractual term) Number of Options Weighted Average Aggregate Intrinsic Value

Exercise Price Remaining Contractual Term (Years)

Outstanding at December 31, 2019 9,509 $ 3.86 6.9 $ 6,315

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Options Exercised ( 1,052 ) 3.84 1,271

Options Expired

Options Forfeited

Options Forfeited / Expired ( 1,233 ) 3.98

Outstanding at December 31, 2020 10,833 $ 3.96 6.8 $ 10,472

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Options Exercised ( 2,146 ) 4.34 13,301

Options Expired

Options Forfeited

Options Forfeited / Expired ( 916 ) 4.83

Outstanding at December 31, 2021 9,495 $ 4.65 6.5 $ 2,452 *

Exercisable at December 31, 2021 6,828 $ 3.77 5.5 $ 2,256 *

*The aggregate intrinsic values in the table above are based on the Company’s closing stock price of $ 4.80 on the last day of business for the year ended December 31, 2020.

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $ 3.74 , which is the closing price of the Company’s stock on the last day of business for the period ended December 31, 2021

Performance Based Stock Options

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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 (in thousands except per share data and remaining contractual term):

Weighted Average

The following table summarizes activity of performance based stock options during the periods indicated:

(In thousands except per-share data and remaining contractual term) Number of Shares Weighted Average Aggregate Intrinsic Value

Exercise Price Remaining Contractual Term (Years)

Outstanding at December 31, 2019 42 $ 1.89 3.1 $ 101

6 unchanged sentences

Options Forfeited — —

Outstanding at December 31, 2020

Exercisable at December 31, 2020

*The aggregate intrinsic value in the table above are, based on the Company’s closing stock price of $4.80 on the last day of business for the period ended December 31, 2020.

Outstanding and Exercisable at December 31, 2021 41 $ 4.34 2.1 $ — *

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Market Based Stock Options

The Company also grants stock option awards that are market based which have vesting conditions associated with a service condition as well as performance of the Company’s stock price.

The following table summarizes market based stock options activity (in thousands except per share data and remaining contractual term):

Weighted Average

The following table summarizes activity of market based stock options during the periods indicated:

(In thousands except per-share data and remaining contractual term) Number of Shares Weighted Average Aggregate Intrinsic Value

Exercise Price Remaining Contractual Term (Years)

Outstanding at December 31, 2019 1,000 $ 4.24 7.8 $ 70

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Outstanding and Exercisable at December 31, 2021 1,000 $ 4.24 5.8 $ — *

*The aggregate intrinsic value in the table above are, based on the Company’s closing stock price of $4.80 on the last day of business for the period ended December 31, 2020.

Total Remaining Unamortized Compensation for Stock Options

As of December 31, 2020, there was approximately $ 8.3 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans for stock options.

That cost is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock Units

The following table summarizes activity of restricted stock units during the periods indicated:

(In thousands except per share fair value) Number of Units Weighted Average Fair Value

Unvested shares at December 31, 2019 — $ —

Forfeited — —

Unvested shares at December 31, 2020 — $ —

Granted 135 10.29

Forfeited ( 20 ) 10.77

Unvested shares at December 31, 2021 115 $ 10.21

Expected to vest as of December 31, 2021 115 $ 10.21

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Restricted Stock Awards

Restricted stock awards granted by the Company to employees have vesting conditions that are unique to each award.

The following table summarizes activity of restricted stock awards granted (in thousands except per share fair value):

Weighted Average

The following table summarizes activity of restricted stock awards during the periods indicated:

(In thousands except per share fair value) Number of Awards Weighted Average Fair Value

Unvested shares at December 31, 2019 183 $ 3.25

Forfeited — —

Unvested shares at December 31, 2020 183 $ 3.25

Forfeited — —

Unvested shares at December 31, 2021 183 $ 3.25

Expected to vest as of December 31, 2021 183 $ 3.25

Performance Stock Awards

During the fiscal year 2019, the Compensation Committee approved a grant of 166,666 shares of fully-vested restricted stock to Robert Fried, the Company’s Chief Executive Officer.

The shares were granted pursuant to his employment agreement, which provided for the stock grants upon the achievement of certain performance goals.

The expense recognized in the fiscal year 2019 for the awarded shares were approximately $ 0.7 million.

Share-based Compensation

Share-based compensation expenses for the years ended December 31, 2021 and December 31, 2020 were as follows:

Year Ended December 31,

(In thousands) 2021 2020

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General and administrative 3,425 4,961

Stock Issuance and Conversion of Convertible Notes

Total $ 6,195 $ 6,936

In future periods, the Company expects to recognize approximately $ 9.4 million and $ 0.9 million in share-based compensation expense in future periods for unvested options and unvested restricted stock units, respectively, that were outstanding as of December 31, 2021.

Future share-based compensation expense will be recognized over 2.0 and 2.3 weighted average years for unvested options and restricted stock units, respectively.

Stock Issuance

On April 27, 2020, the Company entered into a Securities Purchase Agreement with related parties pursuant to which the Company agreed to sell and issue approximately 1.2 million shares for $ 5.0 million, or $ 4.08 per share.

The selling price was determined by the average closing price over the ten trading days immediately preceding the date of Securities Purchase Agreement.

On May 7, 2020, the Company closed the transaction and received proceeds of $ 4.9 million, net of offering costs.

On August 13, 2019, the Company entered into a Securities Purchase Agreement with certain purchasers, pursuant to which the Company agreed to sell and issue an aggregate of $ 7.0 million of the Company’s common stock at a purchase price of $ 4.465 per share (the “Financing”).

On August 15, 2019, the Company closed the Financing and issued approximately 1.6 million shares of its Common Stock.

The Company received proceeds of $ 6.8 million, net of offering costs.

Conversion of Convertible Notes

On May 17, 2019, the Company closed a financing transaction and issued convertible promissory notes (the “Notes”) in the aggregate principal amount of $ 10.0 million to Winsave Resources Limited and Pioneer Step Holdings Limited.

The maturity date of the Notes was originally July 1, 2019 and was subsequently extended to August 15, 2019.

The Notes accrued interest at a rate of 5.0 % per annum for a total of approximately $ 123,000 through the maturity date.

On the maturity date, the Notes automatically converted into approximately 2.3 million shares of the Company’s common stock at a price of $4.465 per share.

Summary of Convertible Notes

Maturity Date

(In thousands)

August 15, 2019

Interest at a rate of 5.0% per annum

Total Amount Converted for 2.3 million shares

Debt Discount - Issuance costs

Debt Discount - Down round feature

Total Debt Discount recognized as Interest Expense

* The conversion price has a down round feature.

The original conversion price of $4.59 was lowered to $4.465 due to the Financing.

Debt Issuance Costs

In connection with the issuance of the Notes, the Company incurred issuance costs of approximately $ 565,000 .

The issuance costs were recorded as a debt discount and were amortized as interest expense using the effective interest method over the original term of 45 days.

Down Round Feature

The Notes had adjustments which meet the definition of a down round feature per ASU 2017-11.

Pursuant to the terms of the Notes, the conversion price per share was adjusted downward from $4.59 to $4.465 as the Company closed the Financing on the Maturity Date.

As allowed under ASU 2017-11, the Company excluded such down round feature when determining whether the instrument is indexed to the entity’s own stock and did not bifurcate the down round feature from the loan host.

In accordance with ASU 2017-11, the Company recognized the value of the triggered down round as a beneficial conversion discount to earnings.

The Note purchasers obtained approximately additional 62,000 shares of the Company’s common stock due to the down round feature with an incremental intrinsic value of approximately $ 281,000 .

This amount was initially recognized as debt discount and was amortized as interest expense.

Along with the issuance cost of the Notes, the Company recorded a total of approximately $ 0.8 million as interest expense in amortization of debt discounts during the year ended December 31, 2019.

Debt Modification

On June 30, 2019, the Company and the Purchasers entered into an Omnibus Amendment to the Purchase Agreement and the Notes to (i) remove the restriction on the Company issuing common stock during a certain restricted period and (ii) amend the Notes to extend the maturity date by 45 days from July 1, 2019 to August 15, 2019.

The amendment to extend the maturity date for another 45 days to August 15, 2019 was recognized as a modification of the Notes.

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 and transaction see Note 2, Liquidity .

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Commitments and Contingencies

Purchase obligations

The Company enters into purchase obligations with various vendors for goods and services that we need for our operations.

The purchase obligations for goods and services include inventory, research and development, and laboratory supplies.

Minimum future payments under purchase obligations as of December 31, 2020 are as follows:

Fiscal year ending:

$ 17.3 Million

From time to time, the Company enters into purchase obligations with vendors for goods and services required in its operations.

The Company’s purchase obligations for good and services primarily consist of inventory.

Future minimum payments under purchase obligations as of December 31, 2021 are as follows:

(In thousands)

2022 $ 19,710

The Company has various licensing agreements with leading research universities and other patent holders, pursuant to which the Company acquired patents related to certain products the Company offers to its customers.

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In addition, the Company is required to pay a range of 1 % to 5 % of sales related to the licensed products under these agreements.

Total royalty expenses including license maintenance fees for the years ended December 31, 2020 and December 31, 2019 were approximately $ 1.9 million and $ 2.7 million, respectively under these agreements.

Minimum royalties including license maintenance fees for the next five years are as follows:

Total royalty expenses including license maintenance fees for the years ended December 31, 2021 and 2020 were approximately $ 1.8 million and $ 1.9 million, respectively, under these agreements.

As of December 31, 2021, future minimum royalties including license maintenance fees for the next five years are as follows:

(In thousands)

Fiscal years ending:

Legal proceedings

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(A) California Action

On December 29, 2016, ChromaDex, Inc.

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 (the “Complaint”).

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, Inc.

filed a fifth amended complaint that added an individual, Mark Morris, as a defendant.

Elysium and Morris (“the Defendants”) moved to dismiss on December 21, 2018.

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, Inc.’s fifth amended complaint on February 19, 2019.

ChromaDex, Inc.

filed an answer to Elysium’s restated counterclaims on March 5, 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.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

On August 16, 2019, the parties filed motions for partial summary judgment as to certain claims and counterclaims.

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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, Inc.

and Elysium (the “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, Inc.

and Elysium, as amended (the “NIAGEN® Supply Agreement”).

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.

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.

Following the court’s January 16, 2020 order, the claims that ChromaDex, Inc.

presently asserts in the California Action, among other allegations, are that (i) Elysium breached the Supply Agreement, dated June 26, 2014, by and between ChromaDex, Inc.

and Elysium (the “pTeroPure® Supply Agreement”), by failing to make payments to ChromaDex, Inc.

for purchases of pTeroPure® and by improper disclosure of confidential ChromaDex, Inc.

information pursuant to the pTeroPure® Supply Agreement, (ii) Elysium breached the NIAGEN® Supply Agreement, by failing to make payments to ChromaDex, Inc.

for purchases of NIAGEN®, (iii) Defendants willfully and maliciously misappropriated ChromaDex, Inc.

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, Inc.

documents and information, (v) Morris breached his fiduciary duty to ChromaDex, Inc.

by lying to and competing with ChromaDex, Inc.

while still employed there, and (vi) Elysium aided and abetted Morris’s breach of fiduciary duty.

ChromaDex, Inc.

is seeking 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, Inc.’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.

The claims that Elysium presently alleges in the California Action are that (i) ChromaDex, Inc.

breached the NIAGEN® Supply Agreement by not issuing certain refunds or credits to Elysium, (ii) ChromaDex, Inc.

fraudulently induced Elysium into entering into the License Agreement, (iv) ChromaDex, Inc.’s conduct constitutes misuse of its patent rights, and (v) ChromaDex, Inc.

was unjustly enriched by the royalties Elysium paid pursuant to the License Agreement.

Elysium is seeking damages for ChromaDex, Inc.’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, Inc.

has engaged in patent misuse.

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.

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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 COVID-19 pandemic and ongoing private mediation efforts, the parties jointly stipulated to adjourn the trial date.

On March 19, 2020, in light of the global 2019 coronavirus disease (COVID-19) 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.

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On November 18, 2020, the court set trial to begin on September 21, 2021.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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 is due March 22, 2021, and ChromaDex’s reply brief is due March 29, 2021.

The court set the hearing on the motion for May 3, 2021.

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 January 17, 2022, ChromaDex filed a motion for 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.

Elysium’s opposition brief was filed on January 24, 2022, and ChromaDex, Inc.’s reply brief was filed on January 31, 2022.

On February 10, 2022, the court denied ChromaDex Inc.’s motion for prejudgment interest.

On February 18, 2022, ChromaDex, Inc.

and Elysium jointly filed a notice informing the court that ChromaDex, Inc.

had filed in the U.S.

District Court for the Southern District of New York a motion to enforce a settlement agreement between ChromaDex, Inc.

and Elysium that ChromaDex, Inc.

asserts would materially affect the California Action.

(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, Inc.

(the “Elysium SDNY Complaint”).

Elysium Health alleges in the Elysium SDNY Complaint that ChromaDex, Inc.

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 avers that the citizen petition made Elysium Health’s product appear dangerous, while casting ChromaDex, Inc.’s own product as safe.

The Elysium SDNY Complaint asserts four claims for relief:

(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.

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and (iv) tortious interference with prospective economic relations.

ChromaDex, Inc.

denies the claims in the Elysium SDNY Complaint and intends to defend against them vigorously.

On October 26, 2017, ChromaDex, Inc.

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.

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, Inc.

filed its reply on November 9, 2017.

On October 26, 2017, ChromaDex, Inc.

filed a complaint in the United States District Court for the Southern District of New York against Elysium Health (the “ChromaDex SDNY Complaint”).

ChromaDex, Inc.

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:

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.

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On November 16, 2017, Elysium Health moved to dismiss for failure to state a claim.

ChromaDex, Inc.

opposed the motion on November 30, 2017 and Elysium Health filed a reply on December 7, 2017.

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.

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The Court otherwise denied the motion to dismiss.

On January 3, 2019, the Court granted ChromaDex, Inc.’s motion for summary judgment under the Noerr-Pennington Doctrine and dismissed all claims in the Elysium SDNY Complaint.

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, Inc.’s motion for summary judgment on February 7, 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.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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.

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ChromaDex answered Elysium’s counterclaims on November 2, 2018.

ChromaDex, Inc.

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.

On April 10, 2019, Elysium Health answered the amended complaint and filed amended counterclaims, also adding new claims against ChromaDex, Inc.

for false advertising and unfair competition under the Lanham Act, 15 U.S.C.

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.

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.

On July 1, 2019, Elysium Health filed further amended counterclaims, adding new claims under the Copyright Act §§ 106 & 501.

On February 9, 2020, ChromaDex, Inc.

filed a motion for leave to amend its complaint to add additional claims against Elysium Health for false advertising and unfair competition.

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.

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On March 12, 2020, Elysium Health answered the second amended complaint.

On March 13, 2020, ChromaDex, Inc.

filed an answer and objection to Elysium Health’s third amended counterclaims.

On December 14, 2020, Elysium Health filed a motion to supplement and amend its counterclaims to add claims regarding alleged advertising related to COVID.

On January 19, 2021, the court denied Elysium Health’s motion.

The completion of all discovery is set for April 23, 2021 and the deadline to submit the Joint Pretrial Report is June 22, 2021.

The court has ordered the parties to be ready for trial on 48 hours’ notice by August 9, 2021.

The Company is unable to predict the outcome of these matters and, at this time, cannot reasonably estimate the possible loss or range of loss with respect to the legal proceedings discussed herein.

As of December 31, 2020, ChromaDex, Inc.

did not accrue a potential loss for the California Action or the Elysium SDNY Complaint because ChromaDex, Inc.

believes that the allegations are without merit and thus it is not probable that a liability has been incurred.

On March 13, 2020, ChromaDex filed an answer and objection to Elysium Health’s third amended counterclaims.

On December 14, 2020, Elysium Health filed a motion to supplement and amend its counterclaims to add claims regarding alleged advertising related to COVID-19, 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-19.

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.

On January 10, 2022, both parties appeared for oral argument on the dispositive and Daubert motions.

On February 3, 2022, ChromaDex reached a settlement agreement with Elysium in order to resolve the SDNY action in its entirety as well as the claims tried to the jury in the Central District of California (the “Settlement Agreement”).

Shortly thereafter, before the parties could notify the Court, the Court issued a ruling on the pending dispositive and Daubert motions, dismissing ChromaDex’s SDNY complaint in its entirety on the grounds that ChromaDex’s damages were uncertain, and dismissing some of Elysium’s claims.

Elysium then attempted to renege on the Settlement Agreement.

ChromaDex thereafter filed a motion to enforce the Settlement Agreement in its entirety on February 16, 2022.

Elysium’s opposition to that motion was filed on March 2, 2022, and ChromaDex’s reply was filed on March 9, 2022.

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 December 31, 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.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

On September 17, 2018, ChromaDex, Inc.

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 violates U.S.

Patents 8,197,807 (the “‘807 Patent”) and 8,383,086 (the “‘086 Patent”) that comprise compositions containing isolated nicotinamide riboside held by Dartmouth and licensed exclusively to ChromaDex, Inc.

On October 23, 2018, Elysium filed an answer to the complaint.

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.

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, Inc.

filed an opposition brief on November 21, 2018 detailing the issues with Elysium’s motion to stay.

In particular, ChromaDex, Inc.

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, Inc.

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, Inc.’s prediction, ChromaDex, Inc.

informed the Delaware court of the PTAB’s decision on January 17, 2019.

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, Inc.

filed a motion to lift the stay due to changed circumstances in the California Action, among other reasons.

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.

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The joint status report was submitted on January 30, 2020.

On February 4, 2020, the Delaware court issued an order granting ChromaDex, Inc.’s motion to lift the stay and setting a scheduling conference for March 10, 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, Inc.

served infringement contentions.

On April 17, 2020, ChromaDex served infringement contentions.

Elysium filed a Second Amended Answer on July 10, 2020.

On April 24, 2020, ChromaDex, Inc.

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, Inc.’s motion for leave to amend and moved to dismiss ChromaDex, Inc.

for alleged lack of standing.

ChromaDex, Inc.

filed its opposition to Elysium’s motion to dismiss and reply in support of its motion to amend on May 19, 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, Inc.

for alleged lack of standing;

and (ii) denying ChromaDex, Inc.’s motion for leave to amend.

ChromaDex, Inc.

filed a motion for reargument on December 29, 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, Inc.

filed a motion for leave to file a sur-reply on February 8, 2021.

Elysium filed a response to the motion for leave to file a sur-reply on February 12, 2021.

ChromaDex, Inc.

filed a reply to the motion for leave to file a sur-reply on February 19, 2021.

The Court has not yet ruled on the motion for reargument.

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.

On July 22, 2020 the parties filed a Joint Claim Construction Chart and respective motions for claim construction.

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Responsive expert reports were served on March 9, 2021.

Reply expert reports are due to be served on March 30, 2021.

Trial is scheduled for September 27-30, 2021.

(A) Employee Dispute

On September 25, 2020, the Company received a demand letter from a former employee, alleging a series of employment-related claims against the Company after the employee was laid off as part of a company restructuring.

The employee alleges she was harassed and, ultimately, terminated in retaliation for taking intermittent leave, under the Family and Medical Leave Act.

No lawsuit has been filed to date.

The Company believes these claims are without merit and is seeking to amicably resolve the matter pre-lawsuit.

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.

(B) 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.

The Company believes these claims are without merit and is seeking to amicably resolve the matter pre-lawsuit.

As of December 31, 2020, the Company has recorded a return liability of approximately $0.5 million, which the Company has offered to settle in good faith.

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.

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.

ChromaDex’s opening brief was filed on February 2, 2022.

Elysium’s response brief is due on March 14, 2022, absent extension.

If the appeal is unsuccessful or if on remand the Court dismisses ChromaDex’s claims for some other reason, that could reduce or eliminate any competitive advantage the Company may otherwise have had.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Thorne Research, Inc .

(A) Inter Partes Review Proceedings

On or around September 28, 2020, Thorne Research, Inc.

(“Thorne”) provided notice to ChromaDex, Inc.

that it intended to terminate its March 25, 2019 Supply Agreement and subsequent amendments with ChromaDex, Inc., effective as of December 31, 2020.

A discussion between ChromaDex, Inc.

and Thorne followed, and Thorne asserted that it could challenge the ‘086 Patent in an 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) 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 is due on March 15, 2021.

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 December 21, 2021, Thorne filed its reply.

On February 1, 2021, Thorne filed a petition for IPR of the ‘807 Patent.

Dartmouth’s preliminary response to the petition is due on May 18, 2021.

From time to time we are involved in legal proceedings arising in the ordinary course of our business.

We believe that there is no other litigation pending that is likely to have, individually or in the aggregate, a material adverse effect on our financial condition or results of operations.

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.

On November 9, 2021, Dartmouth filed its Patent Owner Response.

On February 15, 2022, Thorne filed its reply.

(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.

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.

The parties have settled this matter and the request for dismissal, with prejudice, of Martinez’s claims was entered on January 25, 2022.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(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 December 31, 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.

On February 1, 2022, the Court sustained ChromaDex’s demurrer in its entirety with leave to amend as to the claims for Concealment and Negligent Misrepresentation, and without leave to amend as to the claim for Declaratory Relief.

On February 16, 2022, Rejuvenation filed a Second Amended Complaint, asserting causes of action for Fraud and Negligent Misrepresentation.

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.

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 of sublicense fees as a result of the Company entering into the supply agreement with a customer.

(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.

3 unchanged sentences

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 FD&C Act and the FTC Act, but rather accurately reflected the results of scientific research.

Nonetheless, the Company also responded that is had deleted social media references to the studies and removed related press releases from its website.

No further action has been taken by the FDA or the FTC to date.

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 media 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.

Business Segmentation and Geographical Distribution

The Company has the following three reportable segments for the years ended December 31, 2020 and December 31, 2019:

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Business Segments and Geographical Distribution

The Company has the following three reportable segments for the years ended December 31, 2021 and 2020:

• Consumer products segment:

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The “Corporate and other” classification includes corporate items not allocated by the Company to each reportable segment.

Further, there are no intersegment sales that require elimination.

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 discontinued operations are not included in following statement of operations for business segments.

Analytical Reference

December 31, 2020

Standards and

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 by segment:

Year Ended December 31, 2021 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total

(In thousands)

Services segment

Net sales $ 56,705 $ 7,407 $ 3,337 $ — $ 67,449

Cost of sales 19,864 3,233 2,862 — 25,959

Gross profit 36,841 4,174 475 — 41,490

Operating expenses:

4 unchanged sentences

Operating income (loss) $ 5,593 $ 3,723 $ ( 10 ) $ ( 36,379 ) $ ( 27,073 )

Analytical Reference

December 31, 2019

Standards and

Year Ended December 31, 2020 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total

(In thousands)

Services segment

Net sales $ 47,090 $ 9,198 $ 2,969 $ — $ 59,257

Cost of sales 17,541 3,593 2,849 — 23,983

Gross profit 29,549 5,605 120 — 35,274

Operating expenses:

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Operating income (loss) $ 6,254 $ 5,121 $ ( 464 ) $ ( 30,765 ) $ ( 19,854 )

Analytical Reference

At December 31, 2020

Standards and

(In thousands)

Services segment

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Disaggregation of revenue

We disaggregate our revenue from contracts with customers by type of goods or services for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

The Company disaggregates its revenue from contracts with customers by type of goods or services for each of its segments, as the Company believes this 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.

Year Ended December 31, 2020

Year Ended December 31, 2021 Consumer

Segment Ingredients

Segment Analytical Reference

Standards and Services Segment Total

(In thousands)

Analytical Reference Standards

TRU NIAGEN®, Consumer Product $ 56,705 $ — $ — $ 56,705

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Total Net Sales $ 56,705 $ 7,407 $ 3,337 $ 67,449

Analytical Reference

At December 31, 2019

Standards and

(In thousands)

Services segment

Year Ended December 31, 2019

Year Ended December 31, 2020 Consumer

Segment Ingredients

Segment Analytical Reference

Standards and Services Segment Total

(In thousands)

Analytical Reference Standards

TRU NIAGEN®, Consumer Product $ 47,090 $ — $ — $ 47,090

6 unchanged sentences

Total Net Sales $ 47,090 $ 9,198 $ 2,969 $ 59,257

Revenues from international sources

Revenues from International Sources

Net sales from international sources *

Year Ended December 31,

(In millions) 2021 2020

Consumer Products Segment $ 18.0 $ 16.9

$ 16.9 million

$ 10.8 million

Ingredients Segment 0.7 $ 1.8

$ 1.8 million

$ 0.6 million

Analytical Reference Standards and Services Segment 1.1 $ 1.3

$ 1.3 million

$ 1.8 million

$ 20.0 million

$ 13.2 million

Total net sales from international sources $ 19.8 $ 20.0

*International sources include Europe, North America, South America, Asia and Oceania.

1 unchanged sentence

The Company’s long-lived assets are located within the United States.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Disclosure of major customers

Major customers who accounted for more than 10% of the Company’s total sales were as follows:

Years Ended December 31

Major customers are defined as customers whose sales or accounts receivables individually consist of more than 10% 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:

Year Ended December 31,

Major Customers 2021 2020

Watson Group - Related Party 13.8 % 13.0 %

Major customers who accounted for more than 10% of the Company’s total trade receivables were as follows:

Percentage of the Company’s

Total Trade Receivables

Major Customers

At December 31, 2020

The percentage of the amounts due from major customers to total accounts receivable, net for the periods indicated were as follows:

At December 31,

Major Customers 2021 2020

Watson Group - Related Party 39.6 % 31.9 %

Life Extension 22.1 % 17.7 %

Persona 10.3 % *

Amazon Marketplaces * 12.0 %

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* Represents less than 10%

Disclosure of major vendors

Major vendors who accounted for more than 10% of the Company’s total accounts payable were as follows:

Percentage of the Company’s

Total Accounts Payable

Major Vendors

At December 31, 2020

At December 31, 2019

Subsequent Events

Subsequent to the year ended December 31, 2020, the Company entered into a Securities Purchase Agreement with an investor, pursuant to which the Company sold and issued approximately 3.8 million shares for $ 25.0 million, $ 6.50 per share.

From January 1, 2021 through March 5, 2021, approximately 0.8 million stock options have been exercised at weighted average exercise price of $ 4.09 per share and the Company received proceeds of approximately $ 3.4 million.

Disclosure of major vendor

The Company’s major vendor who accounted for more than 10% of the Company’s total accounts payable is as follows:

Major Vendor At December 31,

Vendor A 32.1 % 39.7 %

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data