What changed in this filing

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Item 1A. Risk Factors

2023-08-09 compared with 2023-05-10 · 51 added, 109 removed, 542 unchanged (23% of the section changed)

18 unchanged sentences

Risks Related to our Operations:

• Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.

• Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.

• If we are unable to maintain sales, marketing and distribution capabilities or maintain arrangements with third parties to sell, market and distribute our products, our business may be harmed.

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• We have a limited operating history in China and we face risks with respect to conducting business in connection with our joint venture in China due to certain legal, political, economic and social uncertainties relating to China.

• The COVID-19 pandemic has adversely affected, and may continue to pose risks to, our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.

• The occurrence of pandemics and epidemics, including potential resurgences, poses risks to our business, results of operations, financial condition, and cash flows.

General Risks:

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We have a history of losses and may continue to incur operating and net losses for the foreseeable future.

We have recorded a net loss of approximately $1.9 million for the three months ended March 31, 2023.

We have recorded a net loss of approximately $4.1 million for the six months ended June 30, 2023.

We incurred net losses of approximately $16.5 million and $27.1 million for the years ended December 31, 2022 and December 31, 2021, respectively.

As of March 31, 2023, our accumulated deficit was approximately $187.4 million.

As of June 30, 2023, our accumulated deficit was approximately $189.6 million.

We have not achieved profitability on an annual basis.

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We expect to continue to incur increasing expenses as we develop our sales, marketing distribution and other commercial infrastructure and continue to develop and commercializing our products, including the cost of obtaining and maintaining regulatory approvals.

As of March 31, 2023, our cash and cash equivalents totaled approximately $23.1 million, of which $23.0 million was unrestricted, and we had no borrowings outstanding under our line of credit up to $10.0 million, subject to certain terms and conditions, with Western Alliance Bank.

As of June 30, 2023, our cash and cash equivalents totaled approximately $26.4 million, of which $26.3 million was unrestricted, and we had no borrowings outstanding under our line of credit up to $10.0 million, subject to certain terms and conditions, with Western Alliance Bank.

However, we may require additional funds, either through additional equity or debt financings, including pursuant to the At Market Issuance Sales Agreement, dated as of June 12, 2020, with B.

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We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all.

Further, in recent years as a result of the COVID-19 pandemic, global instability, increased interest rates, inflationary conditions, the recent failures of regional banks, and other factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability and uncertainty about economic stability.

Further, in recent years as a result of various factors including global instability, increased interest rates, inflationary conditions and failures of regional banks, among other factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability and uncertainty about economic stability.

There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

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Interruptions in our relationships or declines in our business with major customers could materially harm our business and financial results.

Watson Group, a related party, accounted for approximately 16.5% of our sales during the three months ended March 31, 2023.

Watson Group, a related party, accounted for approximately 15.6% of our sales during the six months ended June 30, 2023.

Any interruption in our relationship or decline in our business with this customer or other customers upon whom we become highly dependent could cause harm to our business.

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Concerns over inflation, geopolitical issues, the U.S.

financial markets, higher interest rates, foreign exchange rates, capital and exchange controls, unstable global credit markets and financial conditions and the COVID-19 pandemic, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates.

financial markets, higher interest rates, foreign exchange rates, capital and exchange controls, unstable global credit markets and financial conditions, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending and diminished expectations for the global economy and expectations of slower global economic growth going forward.

Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and unstable or unpredictable economic and market conditions.

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If we cannot raise funds on acceptable terms, we may not be able to develop or enhance our products, obtain the required regulatory clearances or approvals, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.

Any of these events could adversely affect our ability to achieve

our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition.

Any of these events could adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition.

Changes in our business strategy, including entering new consumer product markets, restructuring our businesses or other factors may increase our costs or otherwise affect the profitability of our businesses.

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Unexpected results could cause us to have financial exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to address these liabilities, therefore impacting profits.

Our sales and results of operations for our analytical reference standards and services segment depend on our customers’ research and development efforts and their ability to obtain funding for these efforts.

Our analytical reference standards and services segment customers include researchers at pharmaceutical and biotechnology companies, chemical and related companies, academic institutions, government laboratories and private foundations.

Fluctuations in the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products.

Our customers determine their research and development budgets based on several factors, including the need to develop new products, the availability of governmental and other funding, competition and the general availability of resources.

As we continue to expand our international operations, we expect research and development spending levels in markets outside of the United States will become increasingly important to us.

Research and development budgets fluctuate due to changes in available resources, spending priorities, general economic conditions, institutional and governmental budgetary limitations and mergers of pharmaceutical and biotechnology companies.

Our business could be harmed by any significant decrease in life science and high technology research and development expenditures by our customers.

In particular, a small portion of our sales has been to researchers whose funding is dependent on grants from government agencies such as the United States National Institute of Health, the National Science Foundation, the National Cancer Institute and similar agencies or organizations.

Government funding of research and development is subject to the political process, which is often unpredictable.

Other departments, such as Homeland Security or Defense, or general efforts to reduce the United States federal budget deficit could be viewed by the government as a higher priority.

Any shift away from funding of life science and high technology research and development or delays surrounding the approval of governmental budget proposals may cause our customers to delay or forego purchases of our products and services, which could seriously damage our business.

Some of our customers receive funds from approved grants at a particular time of year, many times set by government budget cycles.

In the past, such grants have been frozen for extended periods or have otherwise become unavailable to various institutions without notice.

The timing of the receipt of grant funds may affect the timing of purchase decisions by our customers and, as a result, cause fluctuations in our sales and operating results.

Risks Related to our Operations

Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.

We are subject to the following factors, among others, that may negatively affect our operating results:

• the announcement or introduction of new products by our competitors;

Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.

Our operating results may fluctuate due to a variety of factors, a portion of which are outside of our control.

Factors that are difficult to predict and that could cause our operating results to fluctuate include:

• the timing and magnitude of orders, shipments and acceptance of our products, including product returns, order rescheduling and cancellations by our customers;

• our ability to control the costs of the components we use or to timely adopt subsequent generations of components;

• our ability to control the costs of the development, sales and distribution of our products;

• disruption in our supply chains, shipping logistics, component availability and related procurement costs;

• our ability to develop, introduce and distribute new products or product enhancements that meet customer requirements and to effectively manage product transitions;

• changes in the competitive dynamics of our markets, including new entrants, new products, or discounting of product prices;

• our ability to control or mitigate costs, including our operating expenses, to support business growth and our continued expansion;

• our ability to upgrade and develop our systems and infrastructure to accommodate growth;

• the decision by significant customers to reduce purchases;

• increased costs of our raw materials or the development, sales and distribution of our products;

• the impact of inflation on labor and other costs, other adverse economic conditions including the impact of public health epidemics or pandemics;

• disputes and litigation;

• our ability to attract and retain key personnel in a timely and cost-effective manner;

• technical difficulties;

• the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure;

• regulation by federal, state or local governments;

• information technology related disruptions and hindrances;

• future regulation by federal, state or local governments;

• general economic conditions as well as economic conditions specific to the dietary supplement industry.

As a result of our limited operating history and the nature of the markets in which we compete, it is extremely difficult for us to make accurate forecasts.

We have based our current and future expense levels largely on our investment plans and estimates of future events although certain of our expense levels are, to a large extent, fixed.

Assuming our products reach the market, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall.

Accordingly, any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition.

Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have a material and adverse effect on our business, results of operations and financial condition.

Due to the foregoing factors, our revenues and operating results are and will remain difficult to forecast.

Our revenues and operating results are and will remain difficult to forecast due to the foregoing factors as the occurrence of any one of these factors could negatively affect our operating results in any particular quarter.

If we are unable to maintain sales, marketing and distribution capabilities or maintain arrangements with third parties to sell, market and distribute our products, our business may be harmed.

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Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third-parties and infrastructure in our supply chain or our third-party partners’ supply-chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products/services) or the third-party information technology systems that support us and our services.

Th ere may be additional cyber security threats as most of our employees work from home, utilizing network connections outside of the Company premises.

Th ere may be additional cyber security threats as our employees have the ability to work from home, utilizing network connections outside of the Company premises.

Any of the previously identified or similar threats could cause a security incident or other interruption and could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to data.

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As a result of the expansion of our operations and the anticipated increase in our operating expenses, as well as the difficulty in forecasting revenue levels, we expect to continue to experience significant fluctuations in our results of operations.

The insurance industry has become more selective in offering some types of coverage and we may not be able to obtain insurance coverage in the future.

The insurance industry has become more selective in offering some types of insurance in recent years, such as product liability, product recall, property and directors’ and officers’ liability insurance.

Our current insurance program is consistent with both our past level of coverage and our risk management policies.

However, we cannot assure you that we will be able to obtain comparable insurance coverage on favorable terms, or at all, in the future.

Certain of our customers as well as prospective customers require that we maintain minimum levels of coverage for our products.

Lack of coverage or coverage below these minimum required levels could cause these customers to materially change business terms or to cease doing business with us entirely.

The insurance industry has previously and may again become more selective in offering some types of coverage and we may not be able to obtain insurance coverage in the future.

The insurance industry has previously experienced periods of increased selectivity in providing certain types of coverage, including product liability, cyber, property, and directors' and officers' liability insurance.

It is possible that such trends may recur in the future.

We currently maintain insurance coverage that aligns with our historical levels and risk management policies.

However, we cannot guarantee the availability of comparable insurance coverage on favorable terms, or at all, in the future.

Furthermore, some of our customers, as well as prospective customers, stipulate that we maintain specific minimum levels of coverage for our products.

Failure to meet these required coverage levels could lead to material changes in business terms or the potential loss of business relationships.

We may bear financial risk if we underprice our contracts or overrun cost estimates.

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We depend on information systems throughout our company, as well as those of our contractors, consultants, vendors and other third parties, to control our manufacturing processes, process orders, manage inventory, process and bill shipments and collect cash from our customers, respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment, and record and pay amounts due vendors and other creditors.

Most of our employees have been working remotely from home and we have depended on communication tools and remote connections to our information technology systems to conduct business virtually.

If we were to experience a prolonged disruption in our information systems that involve interactions amongst employees as well as with customers and suppliers, it could result in the loss of sales and customers and/or increased costs, which could adversely affect our overall business operation.

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Legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the European Economic Area, or EEA, to the United States.

On July 16, 2020, in a case known as Schrems II, the Court of Justice of the European Union, or CJEU, invalidated the EU-US Privacy Shield Framework under which personal data could be transferred from the EEA to U.S.

entities who had self-certified under the Privacy Shield scheme.

While the CJEU upheld the adequacy of the Standard Contractual Clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.

Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place.

Additionally, new Standard Contractual Clauses that repealed the Standard Contractual Clauses adopted under the Data Protection Directive were adopted on June 4, 2021 by the European Commission.

We continue to execute contracts involving the transfer of personal data outside of the European Economic Area with the new Standard Contractual Clauses.

As supervisory authorities issue further guidance on personal data export mechanisms, including on the new Standard Contractual Clauses, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we or third parties we work with are otherwise unable to transfer personal data between and among countries and regions in which clinical trials of our products are conducted, it could affect our business.

The President of the United States and the President of the European Commission announced on March 25, 2022 that they had reached an agreement in principle for a Trans-Atlantic Data Privacy Framework, which would allow personal data to flow freely and safely between the EU and participating U.S.

On October 7, 2022, the President of the United States signed an Executive Order directing the steps that the United States will take to implement the U.S.

commitments under the European Union-U.S.

Data Privacy Framework (EU-U.S.

The Executive Order includes the adoption, by the United States, of a new set of rules and binding safeguards to limit access to data by U.S.

intelligence authorities and procedures to ensure effective oversight of new privacy and civil liberties standards, as well as the implementation of a new two-tier redress system to investigate and resolve complaints by European citizens on access of data by U.S.

Intelligence authorities.

The Executive Order further calls on the Privacy and Civil Liberties Oversight Board to review Intelligence Community policies and procedures to ensure that they are consistent with the Executive Order and to conduct an annual review of the redress process.

In connection with the signing of this Executive Order and the directives contained therein, the European Commission has the basis to adopt an adequacy decision, which involves a proposal from the European Commission, an opinion of the European Data Protection Board, an approval from representatives of EU countries, and the adoption of the decision by the European Commission.

Accordingly, the new Trans-Atlantic Data Privacy Framework may not be adopted in a near future and thus, the transfer of personal data from the EU to the United States still entail in-depth legal analysis and heavy paperwork requirements until then.

Relatedly, following the United Kingdom’s withdrawal from the EEA and the EU, we also have to comply with the UK-specific requirements related to data protection, including with respect to transfer of personal data outside of the UK, which increases our regulatory compliance burden.

The UK updated its transfer mechanism and we continue to execute contracts involving the transfer of personal data outside of the United Kingdom with the new UK-specific transfer tools.

We continue to execute contracts involving the transfer of personal data outside of the European Economic Area with the Standard Contractual Clauses in the ordinary course.

As supervisory authorities issue further guidance on personal data export mechanisms, including updates to the Standard Contractual Clauses, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we or third parties we work with are otherwise unable to transfer personal data between and among countries and regions in which clinical trials of our products are conducted, it could affect our business.

Following the United Kingdom’s withdrawal from the EEA and the EU, we also have to comply with the UK-specific requirements related to data protection, including with respect to transfer of personal data outside of the UK, which increases our regulatory compliance burden.

The UK updated its transfer mechanism and we continue to execute contracts involving the transfer of personal data outside of the United Kingdom with the new UK-specific transfer tools in the ordinary course.

If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal data from Europe or elsewhere.

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and imprisonment of company officials.

Further, individuals or other relevant stakeholders could sue us for our actual or perceived failure to comply with our data privacy and security obligations, including, without limitation, in class action litigation.

Further, individuals or other relevant stakeholders could sue us for our actual or perceived failure to comply with our data privacy and security obligations, including, without limitation, in class

action litigation.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, and could lead to a loss of actual or prospective customers, collaborators or partners;

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Future sales of these shares could adversely affect the market price of our common stock.

As of March 31, 2023, we had outstanding options for an aggregate of approximately 12.5 million shares of common stock at a weighted average exercise price of $3.79 per share and unvested restricted stock units of approximately 0.9 million shares.

As of June 30, 2023, we had outstanding options for an aggregate of approximately 12.3 million shares of common stock at a weighted average exercise price of $3.79 per share and unvested restricted stock units of approximately 0.8 million shares.

The holders may sell many of these shares in the public markets from time to time, without limitations on the timing, amount or method of sale.

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During fiscal year 2022, we entered into an agreement to form a joint venture to expand the Company’s market strategy to include opportunities in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan.

Operating activity under the joint venture was not material during the three months ended March 31, 2023.

Operating activity under the joint venture was not material during the three and six months ended June 30, 2023.

Our participation in the joint venture in China is subject to general, as well as industry-specific, economic, political and legal developments and risks in China.

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There is no guarantee that we will be able to successfully launch our joint venture.

The COVID-19 pandemic has adversely affected, and may continue to pose risks to, our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.

The COVID-19 pandemic has previously adversely affected portions of our business and could have a material adverse effect on our financial condition and results of operations.

Authorities in jurisdictions where we operate, or in which our suppliers, customers, or others operate, have imposed, and businesses and individuals have implemented, varied measures to try to manage or contain the virus or treat its impact, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, shutdowns, and vaccine requirements.

These measures have impacted and may further impact our workforce and operations, the operations and demands of our customers, and those of our respective suppliers and partners.

Restrictions on our operations or workforce, similar limitations for our suppliers, and transportation restrictions or disruptions can limit our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations.

We have experienced, and may in the future experience, delays due to global components and packaging shortages for our consumer products across our supply chain which can result in delayed, reduced, or cancelled orders and which may adversely affect our results of operations.

The pandemic caused us to modify our business practices, including with respect to flexible work and social distancing measures.

These and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our day-to-day activities, which could have a material adverse effect on our operations.

The pandemic has also previously resulted in substantial economic uncertainty, volatility and instability in the credit and financial markets.

This economic environment may result in reduced consumer and investor confidence and reduced business and consumer spending.

The result of which could adversely affect our results of operations by limiting our ability to secure future financing and reduce our sales, margins and/or net income.

Further, any reduced demand for our products due to potential declines in consumer spending could lead to declines in our production volumes which may negatively impact any economies of scale we previously benefited from.

Additional impacts and risks may arise that we or our customers, suppliers, and other partners are not aware of or able to respond to effectively, and which may adversely affect us.

The impact of COVID-19 or outbreak of any other epidemic or infectious disease can also exacerbate other risks discussed in these risk factors and throughout this report.

The occurrence of pandemics and epidemics, including potential resurgences, poses risks to our business, results of operations, financial condition, and cash flows.

In the past, we have seen how pandemics, like the COVID-19 outbreak, have adversely affected various aspects of our business.

Future outbreaks or resurgences of pandemics may lead to events that could again adversely affect our business, results of operations, financial condition and cash flows including:

• the implementation of measures by authorities, businesses and individuals to contain the spread, such as travel restrictions, quarantines, social distancing orders, and vaccination requirements;

• disruptions in our supply chain due to global shortages of components and materials necessary for our products;

• increased product costs and operating expenses;

• reduced consumer and investor confidence;

• reduced business and consumer spending lowering demand for our products;

• increased market volatility and interest rates as well as diminished credit availability;

• adoption of entirely remote work arrangements and enhanced health and safety protocols;

• unforeseen risks that we or our customers, suppliers, and other partners are not aware of or able to respond to effectively.

The impact of an outbreak of any pandemic or epidemic can also exacerbate other risks discussed in these risk factors and throughout this report.

Our ability to use our net operating loss (NOL) carryforwards and certain other tax attributes may be limited.

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In addition, the issuance of shares of our common stock upon the exercise of outstanding options or warrants may result in dilution to our stockholders.

Incorporated by Reference Filed or

Description Form File Number Exhibit Filing Date

Amended and Restated Certificate of Incorporation of the Registrant

10-K 001-37752 3.1 3/15/2018

Certificate of Amendment to the Certificate of Incorporation of the Registrant

8-K 000-53290 3.1 4/12/2016

Amended and Restated Bylaws of the Registrant

8-K 001-37752 3.3 3/17/2022

Executive Employment Agreement, dated January 1, 2023, by and between Brianna Gerber and the Registrant +

8-K 001-37752 10.1 1/5/2023

Certification of the Chief Executive Officer pursuant to Rule 13a-14(A) of the Securities Exchange Act of 1934, as amended

Certification of the Chief Financial Officer pursuant to Rule 13a-14(A) of the Securities Exchange Act of 1934, as amended

Certification pursuant to 18 U.S.C.

Section 1350 (as adopted pursuant to Section 906 of the Sarbanes−Oxley Act of 2002)

101.INS Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+ Indicates management contract or compensatory plan or arrangement.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHROMADEX CORPORATION

May 10, 2023 /s/ BRIANNA L.

Chief Financial Officer

(principal financial officer and duly authorized on behalf of the registrant)

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-Q

Item 1A. Risk Factors