What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-08 compared with 2022-03-14 · 414 added, 331 removed, 638 unchanged (54% of the section changed)

26 unchanged sentences

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 provides a reasonable basis for our opinion.

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

Critical Audit Matters

33 unchanged sentences

Total liabilities 25,385 26,113

Commitments and Contingencies

Commitments and Contingencies (Notes 10 and 17)

Stockholders' Equity

21 unchanged sentences

Operating loss ( 18,628 ) ( 27,073 )

Interest expense, net ( 55 ) ( 71 )

Nonoperating expenses:

Other income, net - Employee Retention Tax Credit 2,085 —

Interest income (expense), net 3 ( 55 )

Net loss $ ( 16,540 ) $ ( 27,128 )

21 unchanged sentences

6,297 6 7,741 — — 7,747

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

Issuance of restricted stock 144 — — — — —

Share-based compensation — — 5,739 — — 5,739

14 unchanged sentences

Share-based compensation expense 5,739 6,195

Loss on disposal of leasehold improvements and equipment 7 —

Provision for doubtful trade receivables 63 46

Loss from investment in long-term assets — 395

Loss from impairment of intangibles — 4

Non-cash financing costs 67 108

8 unchanged sentences

Customer deposits and other ( 5 ) ( 116 )

Principal payments on operating leases ( 541 ) ( 591 )

Operating lease liabilities ( 463 ) ( 541 )

Net cash used in operating activities ( 15,098 ) ( 24,163 )

1 unchanged sentence

Purchases of leasehold improvements and equipment ( 334 ) ( 409 )

Purchases of intangible assets — ( 18 )

Investment in other long-term assets — ( 23 )

Net cash used in investing activities ( 334 ) ( 409 )

5 unchanged sentences

Net cash provided by financing activities 7,654 36,094

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

Net (decrease) increase in cash and cash equivalents ( 7,778 ) 11,522

Cash and cash equivalents, including restricted cash of $ 0.2 million for both 2022 and 2021 - beginning of year

28,219 16,697

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

Cash and cash equivalents, including restricted cash of $ 0.2 million for both 2022 and 2021 - end of year

$ 20,441 $ 28,219

1 unchanged sentence

Cash payments for interest on finance leases $ 1 $ 1

Cash payments for principal on operating lease liabilities $ 507 $ 541

Supplemental Schedule of Noncash Operating Activity

1 unchanged sentence

Supplemental Schedule of Noncash Investing Activity

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

Financing lease obligation incurred for computer equipment and software $ 34 $ —

See accompanying notes to consolidated financial statements.

2 unchanged sentences

Nature of Business

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®.

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

and ChromaDex Sağlik Ürünleri Anonim Şirketi (collectively, “ChromaDex” or 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 that is a key regulator of cellular metabolism and is found in every cell of the human body.

NAD+ levels in humans have been shown to decline with age, among other factors, and may be increased through supplementation with NAD+ precursors.

ChromaDex is the innovator behind the NAD+ precursor nicotinamide riboside (NR), commercialized as the flagship ingredient Niagen®.

Nicotinamide riboside and other NAD+ precursors are protected by ChromaDex’s patent and/or licensed rights portfolio.

ChromaDex delivers NIAGEN® as the sole active ingredient in its consumer product TRU NIAGEN®.

The Company also has an analytical reference standards and services segment, which focuses on natural product fine chemicals, known as phytochemicals, and related chemistry services.

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 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.

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.

(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

Significant accounting policies are as follows:

The Company delivers Niagen® as the sole active ingredient in its consumer product Tru Niagen®.

The Company further develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw materials to the manufacturers of consumer products.

Additionally, the Company offers natural product fine chemicals, known as phytochemicals, and related research and development services.

Summary of Significant Accounting Policies

Basis of Presentation:

1 unchanged sentence

All significant intercompany balances and transactions have been eliminated from these financial statements.

The Company’s fiscal year ends on December 31.

Reclassifications :

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

Use of Accounting Estimates :

7 unchanged sentences

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

Whenever the Company determines that goods or services promised in a contract should be accounted for as a combined performance obligation over time, the Company determines the period over which the performance obligations will be performed and revenue will be recognized.

If the Company determines that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on its consolidated balance sheets.

Revenue is then recognized utilizing the output method based on an estimated rate to allocate the transaction price for this performance obligation as products are supplied over the duration of the contract.

Certain judgments affect the application of the Company’s revenue recognition policy.

For example, when utilizing the output method, the Company estimates total delivery volume based on the Company’s current operating plan, forecast inputs for expected purchases received from the customer, minimum purchase commitments by the customer and historical experience with similar customer contracts.

Accordingly, the Company may recognize a different amount of deferred revenue over the next 12-month period if the Company’s plan changes in the future or if the customer informs the Company of changes to their expected purchases.

As of December 31, 2022 and 2021, the Company held deferred revenue balances of $ 4.0 million and $ 4.3 million, respectively.

The Company may periodically enter into bill-and-hold arrangements upon request by certain customers according to the terms in the contract.

Under the terms, the customer makes a fixed commitment to purchase the Company’s goods, however the customer delays the physical transfer of the goods until a later date.

In such instances, revenue is recognized when a customer obtains control of the promised goods and the Company has satisfied all of its performance obligations.

The Company considers indicators of the transfer of control, which include, but are not limited to, the following:

(i) the Company has a present right to payment for the asset, (ii) the customer has legal title to the asset, (iii) the Company has transferred physical possession of the asset, (iv) the customer has the significant risks and rewards of ownership of the asset and (v) the customer has accepted the asset.

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.

In addition, all of the following criteria in a bill-and-hold arrangement must be met to further indicate a customer has obtained control of the goods:

(i) the reason for the bill-and-hold arrangement must be substantive, (ii) the requested goods must be identified separately as belonging to the customer, (iii) the requested goods must be ready for physical transfer to the customer, and (iv) the Company cannot have the ability to use the goods or direct the goods to another customer.

Revenue under bill-and-hold arrangements totaled $ 1.7 million for the year ended December 31, 2022.

The company recognized no revenue under bill-and-hold arrangements during the year ended December 31, 2021.

Net sales include the revenue related to shipping and handling charges billed to customers.

The related costs associated with shipping and handling is included as a component of cost of goods sold.

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

3 unchanged sentences

Taxes collected from customers and remitted to governmental authorities are excluded from revenue, which is presented on a net basis in the statement of operations.

Restricted cash :

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

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.

Cash, Cash Equivalents and Restricted Cash :

All highly liquid interest-bearing investments with short-terms are classified as cash equivalents.

The Company’s investments primarily include investments in money market funds managed by banks with maturities of three months or less when purchased.

The carrying value of these cash equivalents approximate their fair value.

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

For each of the years ended December 31, 2022 and 2021, there was $ 0.2 million restricted cash held as collateral associated with letters of credit for the Company’s office space in Los Angeles, California.

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

1 unchanged sentence

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.

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

Trade receivables are written off when deemed uncollectible.

1 unchanged sentence

Credit Risk :

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, 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.

Financial instruments that potentially expose the Company to concentration 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 or less when purchased pursuant to the Company’s investment policy.

The Company maintains several bank accounts for its operations primarily at three financial institutions in the U.S.

and one financial institution in Hong Kong.

The Company’s U.S.

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

Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held.

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.

The Company assesses 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.

The Company, however, may from time-to-time incur credit losses due to bankruptcy or other failures from its customers to pay.

Inventories :

Inventories are comprised of work-in-process and finished goods.

They are stated at the lower of cost, determined by the first-in, first-out method, or net realizable value.

Inventories are stated at the lower of cost, determined by the first-in, first-out method, or net realizable value.

The inventory on the balance sheet is recorded net of valuation allowances.

4 unchanged sentences

Any significant unanticipated changes in future product demand or market conditions that vary from current expectations could have an impact on the value of inventories.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Intangible assets :

2 unchanged sentences

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.

1 unchanged sentence

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

Maintenance and repairs are charged to operating expenses as they are incurred.

Maintenance and repairs are charged to operating expenses as incurred.

Improvements and betterments, which extend the lives of the assets, are capitalized.

22 unchanged sentences

Share-based Compensation :

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 Company grants equity awards to recipients through its 2017 Equity Incentive Plan, as amended (the “2017 Plan”), which was approved by stockholders and the Board of Directors.

Under the 2017 Plan, 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.

Share-based compensation cost is recorded for all option grants and awards of non-vested stock based on the grant date fair value of the award, and is recognized over the service period required for the award.

Prior to October 1, 2018, share-based compensation cost for non-employees was remeasured over the vesting term as earned.

The fair value of the Company’s stock options is estimated at the date of grant using the Black-Scholes based option valuation model.

The Company accounts for all share-based compensation costs under the fair value method.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

The fair value of the Company’s stock options is estimated at the date of grant using the Black-Scholes option valuation model.

For the expected term, the Company uses SEC Staff Accounting Bulletin No.

9 unchanged sentences

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.

1 unchanged sentence

The Company considers using other valuation techniques, such as Monte Carlo simulations based on a lattice approach, to value awards with market conditions.

For option grants without performance conditions, the Company recognizes compensation expense over the requisite service period ratably, recognizing expense for each tranche of each grant starting on the grant date.

The fair-value of restricted stock unit awards is determined at the grant date and is based on the market price on the grant date.

For option grants and restricted stock unit awards without performance conditions, the Company recognizes compensation expense over the requisite vesting period ratably, recognizing expense for each tranche of each grant starting on the grant date.

For stock options that have both service and performance conditions, the Company recognizes compensation expense using the graded attribution method.

10 unchanged sentences

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.

As of December 31, 2022 and 2021, the Company did not have any Level 2 or Level 3 assets or liabilities.

Financial instruments :

15 unchanged sentences

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

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

The Company is currently evaluating the impact of ASU 2016-13 and anticipates there will be no material impact on the Company's financial position, results of operations and liquidity.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Evaluation of Ability to Maintain Current Level of Operations

In connection with the preparation of these financial statements for the year ended December 31, 2022, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they became due over the next twelve months from the date of issuance of these financial statements for the fourth quarter of 2022.

Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities and inflationary pressures and the continued impact of the COVID-19 pandemic.

For the year ended December 31, 2022, the Company incurred a net loss of approximately $ 16.5 million and used net cash in operating activities of $ 15.1 million.

As of December 31, 2022, the Company had unrestricted cash and cash equivalents of $ 20.3 million which consists of bank deposits or highly liquid investment-grade debt instruments with an original maturity of three months or less.

Management evaluated these conditions and anticipates that its current unrestricted cash and cash equivalents and cash to be generated from net sales will be sufficient to meet its financial obligations as they become due over at least the next twelve months from the issuance date of these financial statements.

The Company has an available line of credit with Western Alliance Bank for up to $ 10.0 million, subject to certain terms and conditions which as of December 31, 2022 allows for $ 6.1 million of borrowing.

There are no outstanding borrowings as of December 31, 2022.

In June 2020, the Company filed a $ 125 million registration statement on Form S-3 with the SEC, utilizing a “shelf” registration process.

Under this shelf registration process, the Company 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.

Riley FBR, Inc.

and Raymond James & Associates, Inc.

(ATM Facility).

As of December 31, 2022, approximately $ 47.8 million remains available under the ATM Facility.

The Company’s potential use of the ATM facility is subject to the satisfaction of various conditions in the ATM Facility agreement as well as market conditions.

As a result, the Company’s ability to rely on the ATM Facility to raise liquidity is limited to a material extent.

Loss Per Share Applicable to Common Stockholders

11 unchanged sentences

(2) Excluded from the computation of loss per share as their impact is antidilutive.

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, 2022 and 2021:

• Consumer Products segment:

provides finished dietary supplement products that contain the Company's proprietary ingredients directly to consumers as well as to distributors;

• Ingredients segment :

develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw materials to the manufacturers of consumer products;

• Analytical Reference Standards and Services segment:

offers the supply of phytochemical reference standards and other research and development services.

The Company’s reportable segments are significant operating segments that offer differentiated services.

This structure reflects the Company’s current operational and financial management and provides the best structure to maximize the Company's objectives and investment strategy, while maintaining financial discipline.

The Company's Chief Executive Officer, who is its chief operating decision maker (CODM), reviews financial information for each operating segment to evaluate performance and allocate resources.

The Company evaluates performance and allocates resources based on reviewing gross margin by reportable segment.

The Company's CODM does not review assets by segment in his evaluation and therefore assets by segment are not disclosed below.

There are no intersegment sales that require elimination.

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

The following tables set forth financial information by segment:

Year Ended December 31, 2022 Consumer Products segment Ingredients segment Analytical Reference Standards and Services segment Corporate and other Total

(In thousands)

Net sales $ 60,110 $ 8,736 $ 3,204 $ — $ 72,050

Cost of sales 21,726 4,465 3,062 — 29,253

Gross profit 38,384 4,271 142 — 42,797

Operating expenses:

Sales and marketing 27,661 51 601 — 28,313

Research and development 4,214 612 — — 4,826

General and administrative — — — 28,286 28,286

Operating expenses 31,875 663 601 28,286 61,425

Operating income (loss) $ 6,509 $ 3,608 $ ( 459 ) $ ( 28,286 ) $ ( 18,628 )

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

(In thousands)

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:

Sales and marketing 27,821 46 485 — 28,352

Research and development 3,427 405 — — 3,832

General and administrative — — — 36,379 36,379

Operating expenses 31,248 451 485 36,379 68,563

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Disaggregation of revenue

The Company disaggregates its revenue from contracts with customers by type of goods or services for each of its segments, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

Disaggregated revenues are as follows:

Year Ended December 31, 2022 Consumer

Segment Ingredients

Segment Analytical Reference

Standards and Services Segment Total

(In thousands)

Tru Niagen®, Consumer Product $ 60,110 $ — $ — $ 60,110

Niagen® Ingredient — 8,280 — 8,280

Subtotal Niagen® Related 60,110 8,280 — 68,390

Other Ingredients — 456 — 456

Reference Standards — — 3,081 3,081

Consulting and Other — — 123 123

Subtotal Other Goods and Services — 456 3,204 3,660

Total Net Sales $ 60,110 $ 8,736 $ 3,204 $ 72,050

Year Ended December 31, 2021 Consumer

Segment Ingredients

Segment Analytical Reference

Standards and Services Segment Total

(In thousands)

Tru Niagen®, Consumer Product $ 56,705 $ — $ — $ 56,705

Niagen® Ingredient — 6,700 — 6,700

Subtotal Niagen® Related 56,705 6,700 — 63,405

Other Ingredients — 707 — 707

Reference Standards — — 3,061 3,061

Consulting and Other — — 276 276

Subtotal Other Goods and Services — 707 3,337 4,044

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

Net sales from international sources *

Year Ended December 31,

(In millions) 2022 2021

Consumer Products Segment $ 18.4 $ 18.0

Ingredients Segment 2.1 $ 0.7

Analytical Reference Standards and Services Segment 1.3 $ 1.1

Total net sales from international sources $ 21.8 $ 19.8

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Long-lived assets

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

Disclosure of major customers

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 2022 2021

Watson Group - Related Party 13.9 % 13.8 %

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 2022 2021

Watson Group - Related Party 36.6 % 39.6 %

Nestlé (NHSc) 23.6 % *

Life Extension * 22.1 %

Persona * 10.3 %

* Represents less than 10%

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 50.1 % 32.1 %

Related Party Transactions

Watson Group is a related party through common ownership of an enterprise that beneficially owns more than 10% of the common stock of the Company.

The sale of consumer products and corresponding trade receivables to related parties during the periods indicated are as follows:

Net Sales Trade Receivable as of

Year Ended December 31, December 31,

2022 2021 2022 2021

Watson Group $ 10.0 million $ 9.3 million $ 3.1 million $ 2.1 million

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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

14 unchanged sentences

For the years ended December 31, 2022 and 2021, amortization expense was approximately $ 186,000 and $ 225,000 , 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:

1 unchanged sentence

Thereafter 15

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Leasehold Improvements and Equipment, Net

12 unchanged sentences

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

During the year ended December 31, 2022, the Company retired or disposed certain leasehold improvements and equipment resulting in a loss of $ 7,000 .

At the time of retirement or disposal, the related cost and accumulated depreciation were removed from the respective accounts.

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, 2022 and 2021, the Company had ROU assets of $ 3.5 million and $ 4.4 million, respectively, and corresponding operating lease liabilities of $ 4.2 million and $ 4.7 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:

8 unchanged sentences

As of December 31, 2022, the weighted average remaining lease term for operating leases is 4.5 years and the weighted average discount rate used to determine the operating lease liabilities is 5.8 %.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Future minimum lease payments under operating leases as of December 31, 2022 are as follows:

5 unchanged sentences

Long-term obligations under operating leases $ 3,539

Line of Credit

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, 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.

The remaining unamortized deferred asset will be amortized over the remaining life of the line of credit arrangement.

Deferred Revenue

In December 2018, the Company entered into a supply agreement with Nestec Ltd.

(Nestlé), pursuant to which Nestlé is the exclusive customer for NIAGEN® for human use in the (i) medical nutritional and (ii) functional food and beverage categories in certain territories.

As consideration for the rights granted to Nestlé, the Company received an upfront fee of $ 4.0 million in January 2019.

In December 2020, the Company also received $ 1.0 million for the launch of product in certain territory pursuant to the supply agreement.

The Company determined that both the $ 4.0 million upfront fee and the $ 1.0 million product launch fee are treated as advance payments for future performance obligations, and utilized output method to recognize the allocated transaction price for this performance obligation as products are supplied over the duration of the exclusivity period.

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 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

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 ) %

State income tax, net of federal benefit ( 4.8 ) ( 5.7 )

Permanent differences ( 1.8 ) 1.4

Change in state tax rate ( 0.1 ) ( 0.1 )

Changes of state net operating losses 2.8 ( 0.3 )

Change in stock options and restricted stock ( 4.9 ) 0.3

Change in valuation allowance 29.8 25.2

Effective tax rate 0.0 % 0.0 %

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

Deferred tax assets:

Net operating loss carryforward $ 36,136 $ 28,496

Stock options and restricted stock 4,805 5,051

Interest expense 244 220

Inventory reserve 399 272

Allowance for doubtful accounts 17 50

Accrued expenses 1,073 1,190

Deferred revenue 880 5

Leasehold improvements and equipment 74 32

Intangibles 95 85

Operating leases 85 96

43,808 35,497

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

Total deferred tax assets 445 253

Deferred tax liabilities:

Prepaid expenses ( 445 ) ( 253 )

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% 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 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

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 — —

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) 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

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 Company grants awards to recipients through the 2017 Equity Incentive Plan, as amended (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.

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General Vesting Conditions

The Company’s stock options and restricted stock unit awards are generally subject to a one-year cliff vesting period after which 1/3 of the shares vest with the remaining shares vesting ratably over a two-year period subject to the passage of time.

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.

The Company’s stock options and restricted stock unit awards are generally subject to a one-year cliff vesting period after which 1/3rd of the shares vest with the remaining shares vesting ratably each month over a two-year period subject to the passage of time.

Beginning in the second quarter of 2022, newly granted restricted stock units are generally subject to a three-year vesting period with 1/3rd vesting per year on the anniversary of the grant date.

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

Certain executive and board member equity awards provide for accelerated vesting if there is a change in control or termination without cause.

Stock Options

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The majority of options granted by the Company are comprised of service based options.

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

These options vest ratably over the requisite service period of the award.

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

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Exercisable at December 31, 2022 6,540 $ 4.46 5.0 $ — *

*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

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $ 1.68 , which is the closing price of the Company’s stock on the last day of business for the year ended December 31, 2022

Performance Based Stock Options

The Company also grants stock option awards that are performance based and vest based on the achievement of certain criteria established from time to time by the Compensation Committee.

If these performance criteria are not met, the compensation expenses are not recognized and the expenses that have been recognized will be reversed.

The Company also grants stock option awards that are performance based and vest based on the achievement of certain criteria established by the Compensation Committee.

The related performance criteria has passed for these performance based stock options and no further stock options are pending performance determinations.

For performance criteria met, the applicable stock options vested and expense was recognized.

For performance criteria not met, the compensation expense was not recognized and the applicable stock options were forfeit.

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

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Outstanding and Exercisable at December 31, 2022 41 $ 4.34 1.1 $ — *

ChromaDex Corporation and Subsidiaries

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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 Company 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 activity of market based stock options during the periods indicated:

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Outstanding and Exercisable at December 31, 2022 1,000 $ 4.24 4.8 $ — *

Restricted Stock Units

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Unvested shares at December 31, 2020 — $ —

Granted 135 10.29

Forfeited ( 20 ) 10.77

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Granted 700 2.16

Vested ( 144 ) 5.05

Forfeited ( 21 ) 7.49

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Total $ 5,739 $ 6,195

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.

On August 10, 2022, the Company entered into a separation agreement with Kevin Farr, the Company’s former Chief Financial Officer.

Pursuant to the terms of the agreement, Mr.

Farr received an equity grant of 89,189 restricted stock units vesting fully in 90 days, accelerated vesting of 88,480 stock options that would have otherwise become vested by the one-year anniversary of the termination date and a period of three years after the termination date to exercise any vested stock options, among other terms.

The related expense from these awards has been included during the year ended December 31, 2022.

In future periods, the Company expects to recognize approximately $ 5.4 million and $ 1.4 million in share-based compensation expense for unvested options and unvested restricted stock units, respectively, that were outstanding as of December 31, 2022.

Future share-based compensation expense will be recognized over 1.6 and 1.7 weighted average years for unvested options and restricted stock units, respectively.

Stock Issuance

On February 20, 2021, the Company entered into a Securities Purchase Agreement with EverFund (the Financing) pursuant to which the Company agreed to sell and issue approximately 3.8 million shares of common stock at a price of $ 6.50 per share.

On February 23, 2021, the Company closed the Financing and received proceeds of $ 24.9 million, net of offering costs of $ 0.1 million .

During June 2021, the Company sold an aggregate of 0.2 million shares of common stock under the ATM Facility and received proceeds of $ 1.9 million, net of offering costs and commissions of $ 0.3 million, at an average price of $ 10.56 per share.

For additional information related to the ATM facility and transaction see Note 2, Liquidity .

The Company also has total unrecognized share-based compensation expense of $ 1.0 million pertaining to the Joint Venture.

Such expense will only be recognized if Blue Hat Registration is achieved, the timing of which is uncertain as of December 31, 2022.

See Note 12, Joint Venture for further discussion.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Joint Venture

On September 30, 2022, Asia Pacific Scientific, Inc., an indirect wholly owned subsidiary of the Company, and Hong Kong (China) Taikuk Group Ltd (Taikuk) entered into a shareholders agreement (the “Shareholders Agreement”) pursuant to which Taikuk has agreed to contribute $ 1.0 million (the “Subscription Price”) in exchange for an 11 % non-voting equity interest in ChromaDex Asia Pacific Ventures Limited, a subsidiary of Asia Pacific Scientific, Inc.

(the “Joint Venture” or “JV”).

Additionally, the Company shall pay $ 1.0 million in cash to Taikuk (the “Taikuk Fee”) upon the closing of the Shareholders Agreement (the “Closing”).

The Company and Taikuk have mutually agreed that no exchange of funds for the Taikuk Fee and Subscription Price was necessary and, accordingly, no cash has or will exchange hands related to these provisions of the Shareholders Agreement.

The articles of association of the JV were amended and restated simultaneously with the Closing.

The purpose of the JV is to commercialize Tru Niagen® and other products containing nicotinamide riboside to be developed by the Company in the ordinary course (the “Products”) in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan (the “Territory”).

The Shareholders Agreement has an initial term of 20 years, unless earlier terminated.

The Company indirectly owns an 89 % equity interest (and all of the voting interests) in the JV and has the right to elect all three directors of the JV.

Prior to being able to commercialize the Products in the Territory, the JV will have to obtain all applicable regulatory approvals, including “Blue Hat” or health food registration with the Peoples Republic of China State Administration for Market Regulation for Products in the name of the Company or its designee (collectively, the “Blue Hat Registration”).

Upon completion of Blue Hat Registration, the Company shall make a payment of $ 1.0 million in cash to Taikuk (the “Blue Hat Registration Fee”).

If the Blue Hat Registration is not obtained within 24 months of the Closing (which may be extended by an additional 12 months upon mutual consent of the parties), the JV may repurchase the 11 % non-voting interest purchased by Taikuk for $ 1 (the “Right of Repurchase”).

The Right of Repurchase functions as a performance vesting condition under ASC 718 and the 11 % non-voting equity interest is accounted for as nonemployee share-based compensation.

The equity interest will only vest if Blue Hat Registration is achieved, at which time the minority interest will be recorded.

As of December 31, 2022, it is uncertain when Blue Hat Registration will be achieved.

Consequently, no amounts related to the Blue Hat Registration Fee or the 11 % non-voting interest have been recognized in the Consolidated Statements of Operations for the year ended December 31, 2022.

The fair value of the 11 % non-voting interest and corresponding share-based compensation expense of $ 1.0 million was determined as of the grant date of September 30, 2022 and based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs.

The most significant of these inputs were the combined weighted averages of the a) discount rate at 27.5 %, b) present value of estimated future cash flows of $ 3.9 million and c) the present value of the terminal value at $ 5.6 million.

Once Blue Hat Registration is complete and certain distribution agreements relating to the commercialization of the Products in the Territory are assigned and entered into (the “Distribution Agreements”), Taikuk would be entitled to certain royalty payments based on the Company’s and the JV’s net revenue for sales of the Products in the Territory under the Distribution Agreements.

Operating activity under the JV was not material during the year ended December 31, 2022.

Line of Credit

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.

As of December 31, 2022, the interest rate was 9.00 % and the Company had no outstanding debt under this line of credit arrangement.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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 was in compliance with all covenants as of December 31, 2022.

Debt Issuance Costs

For the years ended December 31, 2022 and 2021, the Company incurred debt issuance costs of approximately $ 77,000 and $ 110,000 , respectively, in connection with this line of credit arrangement and had an unamortized balance of approximately $ 69,000 as of December 31, 2022.

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.

The remaining unamortized deferred asset will be amortized over the remaining life of the line of credit arrangement.

On October 10, 2022, the Company and Société des Produits Nestlé SA, a société anonyme organized under the laws of Switzerland (NHSc), as successor-in-interest to NESTEC Ltd., entered into an amended and restated supply agreement (the “Supply Agreement”), which amends and restates the supply agreement, dated December 19, 2018, entered into by the Company and NESTEC Ltd.

Pursuant to the Supply Agreement, NHSc and its affiliates will exclusively purchase nicotinamide riboside chloride (NRCL) from the Company and NHSc and its affiliates will have the non-exclusive right to manufacture, market, distribute, and sell products using NRCL for human use in the (i) medical nutritional, (ii) functional food and beverage and (iii) multi-ingredient dietary supplements categories sold under one of the NHSc brands (the “Approved Products”) world-wide, but excluding certain countries and ingredient combinations.

The term of the Supply Agreement is five years , unless earlier terminated, and is subject to automatic extensions provided certain minimum purchases by NHSc are met.

As consideration for the rights granted to NHSc under the Supply Agreement, NHSc agreed to an initial purchase commitment of NRCL equal to approximately $ 2.0 million.

During the fourth quarter of 2022, NHSc purchased the full consideration under this commitment, of which $ 1.7 million relates to a bill-and-hold arrangement .

The Supply Agreement also provides for NHSc to pay a royalty to the Company at tiered percentage rates in the low-single digits based on worldwide annual net sales of the Approved Products, subject to certain deductions.

Furthermore, the Supply Agreement provides for NHSc to pay the Company two separate one-time milestone payments in the low seven figures depending on whether NHSc achieves certain net sales targets in any contract year.

No royalty or milestone payments were received during the year ended December 31, 2022.

Under the Supply Agreement, the Company will continue to recognize the deferred revenue balance received in connection with the original Nestec Ltd.

agreement utilizing the output method.

Deferred revenue will be recognized by the Company based on the percentage of NRCL kilograms delivered to-date compared to the total forecasted NRCL kilograms to be delivered for the duration of the contract term including renewal options as estimated by the Company.

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

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

2022 2021 2022 2021

Revenue recognized from deferred revenue $ 391 $ 432

Deferred revenue balance $ 3,955 $ 4,346

In addition, in connection with the entry into the Supply Agreement, the Company entered into a Securities Purchase Agreement with NHSc.

For further discussion regarding the Securities Purchase Agreement see Note 16, Stock Issuances .

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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 ) %

State income tax, net of federal benefit ( 5.5 ) ( 4.8 )

Permanent differences 3.2 ( 1.8 )

Change in state tax rate 0.3 ( 0.1 )

Changes of state net operating losses ( 1.6 ) 2.8

Change in stock options and restricted stock 7.8 ( 4.9 )

Change in valuation allowance 17.7 29.8

Other ( 0.9 ) —

Effective tax rate 0.0 % 0.0 %

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

(In thousands) 2022 2021

Deferred tax assets:

Net operating loss carryforward $ 37,308 $ 36,136

Stock options and restricted stock 4,528 4,805

Interest expense 258 244

Inventory reserve 410 399

Allowance for doubtful accounts 32 17

Accrued expenses 1,654 1,073

Research and development expense 922 —

Deferred revenue 1,050 880

Leasehold improvements and equipment 60 74

Intangibles 104 95

Operating leases 185 85

46,511 43,808

Valuation allowance ( 46,254 ) ( 43,363 )

Total deferred tax assets 257 445

Deferred tax liabilities:

Prepaid expenses ( 257 ) ( 445 )

Total deferred tax liabilities ( 257 ) ( 445 )

Net deferred tax assets (liabilities) $ — $ —

As of December 31, 2022 and 2021, 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, 2022, and 2021.

The Company increased its valuation allowance by approximately $ 2.9 million to $ 46.2 million as of December 31, 2022 from $ 43.3 million as of December 31, 2021.

For fiscal year 2022, the Company identified no U.S.

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2022, the Company’s net operating loss (NOL) carryforwards for federal and state income tax purposes are approximately $ 141.9 million and $ 116.8 million, respectively, portions of which begin to expire in the years ending December 31, 2023 and 2022, respectively.

During the year ended December 31, 2022, $ 46 thousand and $ 0.5 million of state NOL carryforwards expired and was written-off, respectively.

The write-off of state NOL carryforwards was due to the fact the Company no longer has employees in such state.

The Company’s federal NOL carryforward of $ 101.9 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.

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 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 2022 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, 2022 or December 31, 2021.

Stock Issuances

On September 30, 2022, the Company entered into a Securities Purchase Agreement with Pioneer Step Holdings Limited (Pioneer Step), Champion River Ventures Limited (Champion) and Robert Fried (collectively, the “Purchasers”) pursuant to which the Company agreed to sell and issue approximately 2.5 million shares of common stock at a price of $ 1.25 per share (the “2022 Financing”).

Champion is indirectly owned by Li Ka-Shing and Pioneer Step is indirectly owned by Solina Chau, and each of Mr.

Ka-Shing and Ms.

Chau own through affiliated entities more than 5 % of the Company’s common stock.

Pursuant to previous agreements, each of Pioneer Step and Champion have appointed a member of the Company’s Board.

Fried is the Company’s Chief Executive Officer.

The transaction and related agreements were approved by the Audit Committee of the Board in accordance with the Company’s Related-Persons Transaction Policy.

On October 7, 2022, the Company closed the 2022 Financing and received proceeds of approximately $ 2.9 million, net of offering costs of $ 0.2 million.

In connection with the 2022 Financing, on September 30, 2022, the Company also entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), pursuant to which the Company agreed to (i) file one or more registration statements with the SEC to cover the resale of the shares of Common Stock issued to the Purchasers, (ii) use reasonable best efforts to have all such registration statements declared effective within the timeframes set forth in the Registration Rights Agreement, and (iii) use commercially reasonable efforts to keep such registration statements effective during the timeframes set forth in the Registration Rights Agreement.

The Company filed a Registration Statement registering the resale of Common Stock in November 2022.

In the event that such registration statement subsequently becomes unavailable, or the Purchasers are unable to sell the shares of Common Stock issued pursuant to the Financing due to failure by the Company to satisfy the current public information requirement of Rule 144 under the Securities Act, the Company would be required to pay liquidated damages to the Purchasers equal to 1.0 % of the aggregate purchase price per month for each default (up to a maximum of 5.0 % of such aggregate purchase price).

On October 10, 2022, in connection with the entry into the NHSc Supply Agreement, the Company also entered into a Securities Purchase Agreement with NHSc pursuant to which NHSc agreed to purchase 3.8 million shares of common stock at a price of $ 1.31 which is equal to the volume weighted average price of the Company’s common stock for the 10 trading days preceding October 10, 2022 (the “Securities Purchase Agreement”).

On October 17, 2022, the Company closed the Securities Purchase Agreement and received proceeds of approximately $ 4.8 million , net of offering costs of $ 0.2 million.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Commitments and Contingencies

Purchase obligations

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:

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

Future minimum payments under inventory purchase obligations as of December 31, 2022 are as follows:

(In thousands)

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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.

These agreements afford for royalty payments based on contractual minimums and expire at various dates.

These agreements afford for royalty payments based on contractual minimums and expire at various dates ranging from 2025 through 2037, often correlated to the expiration date of each patent.

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

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(In thousands)

Legal proceedings

L egal proceedings

Elysium Health, LLC

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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.

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

and Elysium that ChromaDex, Inc.

asserts would materially affect the California Action.

On April 22, 2022, ChromaDex, Inc.

and Elysium jointly filed a notice informing the court that the SDNY Court had granted ChromaDex, Inc.’s motion to enforce the settlement agreement.

On April 29, 2022, ChromaDex, Inc.

filed a notice informing the court that the SDNY Court had dismissed the SDNY action with prejudice pursuant to the settlement agreement.

On August 22, 2022, ChromaDex, Inc.

filed a motion for entry of judgment pursuant to Federal Rule of Civil Procedure 54(b) on the basis that the settlement agreement was enforceable and resolved the claims and counterclaims tried to the jury in the California Action.

Elysium’s opposition brief was filed on August 29, 2022, and ChromaDex, Inc.’s reply brief was filed on September 2, 2022.

On September 13, 2022, the court denied ChromaDex, Inc.’s motion for entry of judgment pursuant to Rule 54(b).

On September 28, 2022, ChromaDex, Inc., Elysium, and Mark Morris filed a joint stipulation requesting that the court stay the California Action pending the final resolution of ChromaDex, Inc.’s appeal in the U.S.

Court of Appeals for the Federal Circuit captioned ChromaDex, Inc.

Elysium Health, Inc., No.

2022-1116 (the “Federal Circuit Appeal”).

On September 28, 2022, the court issued an order staying the California Action pending the final resolution of the Federal Circuit Appeal.

(B) Southern District of New York Action

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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 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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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”).

On February 3, 2022, ChromaDex reached a settlement 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.

Elysium then asserted that a settlement had not been reached.

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.

On April 19, 2022, the Court concluded that a settlement had been reached and granted ChromaDex’s motion to enforce the Settlement Agreement.

On April 28, 2022, pursuant to the Settlement Agreement, the Court dismissed the entire action with prejudice.

On May 11, 2022, Elysium filed a notice of appeal.

On May 25, 2022, ChromaDex filed a notice of cross-appeal.

Elysium filed its opening brief on August 24, 2022.

ChromaDex filed its opening and response brief on November 22, 2022.

Elysium filed its reply and response brief on January 20, 2023.

ChromaDex filed its reply brief on February 10, 2023.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2022, 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.

39 unchanged sentences

Both parties filed dispositive and Daubert motions on April 27, 2021.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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.

1 unchanged sentence

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

Elysium’s response brief was filed on April 11, 2022.

ChromaDex’s reply brief was filed on May 9, 2022.

Oral argument occurred on December 6, 2022.

On February 13, 2023, the court of appeals issued a decision affirming the district court’s decision.

The deadline to file a petition for a panel rehearing and/or rehearing en banc is March 15, 2023.

The Company does not believe that this decision will have a material impact on the Company’s NR business.

Thorne Research, Inc .

9 unchanged sentences

On December 21, 2021, Thorne filed its reply.

Oral argument was held on March 15, 2022.

On May 31, 2022, the PTAB issued a final written decision holding that the challenged claim was unpatentable.

On August 2, 2022, Dartmouth filed a notice of appeal.

On December 29, 2022, the parties filed a joint stipulation to dismiss the appeal.

On January 3, 2023, the appeal was dismissed.

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

3 unchanged sentences

On February 15, 2022, Thorne filed its reply.

Oral argument was held on May 17, 2022.

On August 10, 2022, the PTAB issued a final written decision holding that the challenged claims were not unpatentable.

On October 12, 2022, Thorne filed a notice of appeal.

Thorne’s opening brief is currently due on March 16, 2023.

(B) Southern District of New York – Patent Infringement Action

8 unchanged sentences

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.

On August 24, 2022, the parties filed a status report agreeing to continue to stay until fourteen days after the deadline to appeal the final written notice decision in the ‘807 Patent IPR.

On October 26, 2022, the parties filed a further status report agreeing to continue the stay through resolution of the appeals.

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

14 unchanged sentences

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.

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:

provides finished dietary supplement products that contain the Company's proprietary ingredients directly to consumers as well as to distributors.

• Ingredients segment:

develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw materials to the manufacturers of consumer products.

• Analytical reference standards and services segment:

includes supply of phytochemical reference standards and other research and development services.

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

Additionally, there are no intersegment sales that require elimination.

The Company’s three reportable segments are significant operating segments that offer differentiated services.

This structure reflects its current operational and financial management and provides the best structure to maximize the Company's objectives and investment strategy, while maintaining financial discipline.

The Company's Chief Executive Officer, who is its chief operating decision maker (CODM), reviews financial information for each operating segment to evaluate performance and allocate resources.

The Company evaluates performance and allocates resources based on reviewing gross margin by reportable segment.

The Company's CODM does not review assets by segment in his evaluation and therefore assets by segment are not disclosed below.

The following tables set forth financial information by segment:

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

(In thousands)

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:

Sales and marketing 27,821 46 485 — 28,352

Research and development 3,427 405 — — 3,832

General and administrative — — — 36,379 36,379

Operating expenses 31,248 451 485 36,379 68,563

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

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

(In thousands)

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:

Sales and marketing 20,323 41 584 — 20,948

Research and development 2,972 443 — — 3,415

General and administrative — — — 30,765 30,765

Operating expenses 23,295 484 584 30,765 55,128

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Disaggregation of revenue

The Company disaggregates its revenue from contracts with customers by type of goods or services for each of its segments, as the Company believes 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, 2021 Consumer

Segment Ingredients

Segment Analytical Reference

Standards and Services Segment Total

(In thousands)

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

NIAGEN® Ingredient — 6,700 — 6,700

Subtotal NIAGEN® Related 56,705 6,700 — 63,405

Other Ingredients — 707 — 707

Reference Standards — — 3,061 3,061

Consulting and Other — — 276 276

Subtotal Other Goods and Services — 707 3,337 4,044

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

Year Ended December 31, 2020 Consumer

Segment Ingredients

Segment Analytical Reference

Standards and Services Segment Total

(In thousands)

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

NIAGEN® Ingredient — 7,070 — 7,070

Subtotal NIAGEN® Related 47,090 7,070 — 54,160

Other Ingredients — 2,128 — 2,128

Reference Standards — — 2,925 2,925

Consulting and Other — — 44 44

Subtotal Other Goods and Services — 2,128 2,969 5,097

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

Net sales from international sources *

Year Ended December 31,

(In millions) 2021 2020

Consumer Products Segment $ 18.0 $ 16.9

Ingredients Segment 0.7 $ 1.8

Analytical Reference Standards and Services Segment 1.1 $ 1.3

Total net sales from international sources $ 19.8 $ 20.0

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

Long-lived assets

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 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 %

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 %

Matakana Health * 11.1 %

* Represents less than 10%

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 %

Employee Retention Tax Credit

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (ERTC):

a refundable tax credit against certain employment taxes for qualifying businesses keeping employees on their payroll during the COVID-19 pandemic.

The ERTC was subsequently amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Consolidated Appropriation Act of 2021, and the American Rescue Plan Act of 2021, all of which amended and extended the ERTC availability and guidelines under the CARES Act.

During the third quarter of 2022, the Company evaluated its eligibility for the ERTC and is eligible to claim a refundable tax credit against the employer share of Social Security taxes equal to fifty percent (50%) of the qualified wages paid to employees between March 27, 2020 and December 31, 2020 and seventy percent (70%) of the qualified wages paid to employees between January 1, 2021 and September 30, 2021.

For fiscal year 2020, qualified wages are limited to $10,000 annually per employee for a maximum allowable ERTC per employee of $5,000 annually and qualified wages are limited to $10,000 per calendar quarter in 2021 for a maximum allowable ERTC per employee of $7,000 for each calendar quarter in 2021.

The Company qualified for the ERTC in the last three quarters of 2020 and all three quarters of 2021 and filed a claim for the credit in August 2022.

During the third quarter of 2022, the Company recorded an aggregate benefit of approximately $ 2.1 million in Other income, net - Employee Retention Tax Credit in its Consolidated Statements of Operations to reflect the ERTC for all eligible quarters.

During the fourth quarter of 2022, the Company received $ 0.6 million related to the ERTC.

As of December 31, 2022, the Company's Consolidated Balance Sheets include an ERTC benefit of $ 1.8 million and associated commissions payable of $ 0.3 million recorded within prepaid expenses and other current assets and accrued expenses, respectively.

Subsequent to December 31, 2022, the Company received an additional $ 0.8 million related to the ERTC.

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