What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-06 compared with 2023-03-08 · 282 added, 194 removed, 858 unchanged (36% of the section changed)

11 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ChromaDex Corporation and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of ChromaDex Corporation and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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Current assets

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

Cash and cash equivalents, including restricted cash of $ 152 for both periods presented

$ 27,325 $ 20,441

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Consolidated Statements of Operations

Year Ended December 31,

(In thousands, except per share data)

Year Ended December 31,

Sales, net $ 83,570 $ 72,050

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Operating loss ( 5,599 ) ( 18,628 )

Nonoperating expenses:

Nonoperating income:

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

Interest income (expense), net 3 ( 55 )

Interest income, net 661 3

Net loss $ ( 4,938 ) $ ( 16,540 )

Basic and diluted loss per common share $ ( 0.24 ) $ ( 0.40 )

Basic and diluted loss per common share attributable to ChromaDex Corporation $ ( 0.07 ) $ ( 0.24 )

Basic and diluted weighted average common shares outstanding 74,985 69,729

1 unchanged sentence

ChromaDex Corporation and Subsidiaries

Consolidated Statement of Stockholders’ Equity

Consolidated Statements of Stockholders’ Equity

(In thousands, unless otherwise indicated)

8 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

2 unchanged sentences

Balance, December 31, 2022 74,567 $ 74 $ 214,094 $ ( 185,493 ) $ ( 3 ) $ 28,672

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

6,297 6 7,741 — — 7,747

Issuance of restricted stock 414 1 — — — 1

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Translation adjustment — — — — ( 1 ) ( 1 )

Adjustment to retained earnings:

Cumulative effect of initially adopting ASC 326 — — — ( 29 ) — ( 29 )

Net loss — — — ( 4,938 ) — ( 4,938 )

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Share-based compensation expense 4,751 5,739

Loss on disposal of leasehold improvements and equipment 7 —

(Gain) Loss on sale or disposal of leasehold improvements and equipment ( 5 ) 7

Provision for doubtful trade receivables 964 63

Loss from impairment of intangibles 3 —

Non-cash financing costs 75 67

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Operating lease liabilities ( 519 ) ( 463 )

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

Net cash provided by (used in) operating activities 7,117 ( 15,098 )

Cash Flows From Investing Activities

Purchases of leasehold improvements and equipment ( 148 ) ( 334 )

Proceeds from the sale of leasehold improvements and equipment, net 5 —

Net cash used in investing activities ( 143 ) ( 334 )

1 unchanged sentence

Proceeds from issuance of common stock, net — 7,747

Proceeds from exercise of stock options — 9,495

Payment of debt issuance costs ( 75 ) ( 77 )

Principal payments on finance leases ( 15 ) ( 16 )

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

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

Net cash provided by (used in) financing activities ( 90 ) 7,654

Net increase (decrease) in cash and cash equivalents 6,884 ( 7,778 )

Cash and cash equivalents, including restricted cash of $ 152 for both periods - beginning of year

20,441 28,219

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

Cash and cash equivalents, including restricted cash of $ 152 for both periods - end of year

$ 27,325 $ 20,441

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Supplemental Schedule of Noncash Operating Activity

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

Adjustment to retained earnings, cumulative effect of initially adopting ASC 326 $ 29

Right-of-use assets and operating lease obligations reduced for entering into lease amendment $ 446 $ —

Supplemental Schedule of Noncash Investing Activity

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(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, 2023.

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:

The Company recognized $ 1.7 million revenue under bill-and-hold arrangements during the year ended December 31, 2022.

Net sales include revenue generated from shipping and handling charges billed to customers.

The costs directly associated with shipping and handling are integrated as a component of cost of goods sold.

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

Year Ended December 31,

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Shipping and handling fees billed $ 567 $ 428

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.

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

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 Company’s investments primarily include investments in money market funds managed by banks and low-risk, fixed-income investments 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.

As of December 31, 2023 and 2022, the Company had cash equivalents of $ 17.7 million and $ 10.5 million, respectively, concentrated in money market funds.

The Company classifies cash as restricted when its withdrawal or usage is constrained for a period exceeding three months.

As of December 31, 2023 and 2022, $ 152,000 of cash was classified as restricted, serving as collateral for letters of credit related to the Company’s office space in Los Angeles, California.

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

Trade Receivables, net :

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

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

Trade receivables are written off when deemed uncollectible.

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

Trade receivables are stated at their net realizable value, net of a sales allowance, an allowance for doubtful trade receivables and expected credit losses.

Credit is extended to customers based on an evaluation of their financial condition and other factors.

The Company establishes a sales allowance at the time of revenue recognition based on its history of adjustments and credits provided to customers.

In determining the necessary allowance for doubtful trade receivables, the Company considers the current aging and financial condition of its customers, the amount of trade receivables in dispute, and current payment patterns.

Trade receivables are written off against the allowance when management determines a balance is uncollectible and the Company no longer actively pursues collection of the receivable.

Expected credit losses are estimated based upon historical information, current conditions and reasonable and supportable forecasts.

Credit Risk :

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.

Cash and cash equivalents, consist of bank deposits and short-term investments, including low-risk, fixed-income investments and highly liquid investment-grade debt instruments with an original maturity of three months or less.

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

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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.

Notably, the Company engages in a sweep service with the U.S.

institution holding the largest portion of the Company's funds.

This service conducts nightly transfers, ensuring that the Company's cash balances exceeding the FDIC limit are judiciously distributed to other reputable banking partners.

These transfers are strategically executed in amounts below the FDIC threshold, thereby optimizing the Company's cash balance protection.

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

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Inventories :

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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 :

Intangible assets include licensing rights and are accounted for based on the fair value of consideration given or the fair value of the net assets acquired, whichever is more reliable.

Intangible assets with finite useful lives are amortized using the straight-line method over a period of 10 years, or, for licensed patent rights, the remaining term of the patents underlying licensing rights (considered to be the remaining useful life of the license), whichever is shorter.

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

Leasehold Improvements and Equipment, net :

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

Long-lived assets are reviewed for impairment on a periodic basis and when changes in circumstances indicate the possibility that the carrying amount may not be recoverable.

Intangible assets :

Intangible assets include licensing rights and are accounted for based on the fair value of consideration given or the fair value of the net assets acquired, whichever is more reliable.

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

The Company’s long-lived assets are reviewed for impairment on a periodic basis or when changes in circumstances indicate the possibility that the carrying amount may not be recoverable.

Long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.

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If a possible impairment is identified, the asset group’s fair value is measured relying primarily on a discounted cash flow methodology.

During the year ended December 31, 2023, the Company identified intangible assets which were impaired.

For further discussion, see Note 8, Intangible Assets, Net.

No assets were impaired during the year ended December 31, 2022.

Customer Deposits :

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Advertising expense for the years ended December 31, 2023 and 2022 were approximately $ 10.3 million and $ 11.4 million, respectively.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Share-based Compensation :

3 unchanged sentences

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.

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(iv) if an employee terminates service after vesting, the employee would have 30 to 90 days to exercise the share options;

and (v) the share options are nontransferable and nonhedgeable.

and (v) the share options are nontransferable and non-hedgeable.

The volatility assumption is based on the historical volatility of the Company’s common stock with an equivalent remaining expected term.

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These tiers include:

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

The fair value hierarchy gives the highest priority to Level 1 inputs.

Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Unobservable inputs are used when little or no market data is available.

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

Level 1, defined as observable inputs such as quoted market prices in active markets;

Level 2, defined as inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair value hierarchy gives the highest priority to Level 1 inputs and lowest priority to Level 3 inputs.

As of December 31, 2023 and 2022, the Company did not have any Level 2 or Level 3 assets or liabilities.

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

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

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

Recent Accounting Standards Adopted by the Company:

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

Measurement of Credit Losses on Financial Instruments.

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and (ii) available-for-sale debt securities impairment model (Subtopic 326-30).

ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

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

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

The Company adopted this standard on January 1, 2023 using the modified retrospective method resulting in an adjustment to the opening balance of retained earnings of $ 29,000 .

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” to amend certain disclosure and presentation requirements for a variety of topics within the ASC.

These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC.

The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date.

Early adoption is prohibited.

The Company is currently evaluating the impact that the adoption of ASU 2023-06 may have on its consolidated financial statements and disclosures.

In November 2023, the FASB issued ASU 2023 - 07, "Segment Reporting – Improvements to Reportable Segments Disclosures" (ASU 2023-07), which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity's CODM.

The amendments in ASU 2023-07 also expand the interim segment disclosure requirements.

ASU 2023-07 will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis.

The Company is currently evaluating the impact that the adoption of ASU 2023-07 may have on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures".

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.

A public entity should apply the amendments in ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024.

Early adoption and retrospective application are permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

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.

In connection with the preparation of these financial statements for the year ended December 31, 2023, 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 year ended December 31, 2023.

Management assessed that there were such conditions and events, including a history of recurring operating losses, a history of negative cash flows from operating activities and inflationary pressures.

For the year ended December 31, 2023, the Company incurred a net loss of approximately $ 4.9 million, however, during the same period the Company’s operating activities provided cash of $ 7.1 million.

As of December 31, 2023, the Company had unrestricted cash and cash equivalents of $ 27.2 million which consists of bank deposits and short-term investments, including 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 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.

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.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Loss Per Share Applicable to Common Stockholders

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

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

Year Ended December 31,

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Restricted stock units 589 650

(1) Includes approximately 0.2 million nonvested shares of restricted stock for the years ended December 31, 2022 and 2021 which are participating securities that feature voting and dividend rights.

(1) Includes a weighted average of approximately 174,000 and 183,000 nonvested shares of restricted stock for the years ended December 31, 2023 and 2022, respectively, which are participating securities that feature voting and dividend rights.

(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

Business Segments and Concentrations

The Company has the following three reportable segments for the years ended December 31, 2023 and 2022:

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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 evaluates performance and allocates resources based on reviewing net sales, gross profit and operating income (loss) 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.

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

The following tables set forth financial information by segment:

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Cost of sales 24,755 4,980 3,055 — 32,790

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

Gross profit (loss) 44,773 6,157 ( 150 ) — 50,780

Operating expenses:

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Disaggregation of revenue

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Total Net Sales $ 69,528 $ 11,137 $ 2,905 $ 83,570

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Year Ended December 31, 2022 Consumer

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

Geographical Concentrations

Net sales from international sources

The Company's net sales are predominantly generated in the United States, however, international sources collectively represent more than 10% of both total net sales and net sales for each business segment.

These international sources span across Europe, North America, South America, Asia, and Oceania.

Net sales from international sources detailed by each business segment are as follows:

Year Ended December 31,

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Total net sales from international sources $ 25.0 $ 21.8

*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.

Concentrations of Major Customers and Vendors

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:

Percentage of revenues from major customers of the Company’s consumer products segment for the years indicated were as follows:

Year Ended December 31,

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Watson Group - Related Party 15.4 % 13.9 %

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

At December 31,

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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

As of December 31,

Major Customers 2023 2022

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Life Extension 16.1 % *

Persona * 10.3 %

Amazon Marketplaces 12.2 % *

* Represents less than 10%

During the year ended December 31, 2023, the Company recorded an allowance for doubtful trade receivables of approximately $ 964,000 .

The higher provision was primarily a result of the Chapter 11 bankruptcy filing by iMedia Brands, Inc., which owns ShopHQ, a multiplatform interactive television network, which has been a sales channel for Tru Niagen®.

As of December 31, 2023, the Company determined the balance to be uncollectible and wrote off the full provision.

As of December 31, 2023, concentration for the Company's outstanding trade receivables is significant, with approximately 81 % of the total outstanding trade receivables aggregated among three customers.

Whenever a significant concentration is present it poses a potential risk to the Company's financial performance and cash flows, as any adverse changes in the payment behavior or financial health of these major customers could impact the Company's cash flows and financial results.

The Company has determined that the current concentration is primarily due to the timing of purchases, and the Company does not consider the concentration of its trade receivables to be a significant risk.

Nevertheless, to ensure prudence and safeguard against potential challenges arising from this concentration, the Company remains vigilant in monitoring the creditworthiness and payment behavior of these major customers.

Furthermore, the Company continues to pursue new partnerships and business opportunities which helps to diversify its customer base and minimize the risk of an overreliance on any particular trade receivable.

Despite the Company’s risk mitigation efforts, there is no assurance that the Company will not experience delays or defaults in payment from its customers, which could result in an increase in the Company's bad debt expense, a reduction in cash flows, and a negative impact on its financial performance.

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,

Major Vendor As of December 31,

Vendor A 64.3 % 50.1 %

Additionally, the Company has an exclusive manufacturer for the supply of NR, W.R.

Effective November 2, 2023, the Company entered into a Ninth Amendment to the Manufacturing and Supply Agreement (the "Grace Manufacturing Agreement"), initially effective in January 2016.

In January 2019, Grace was issued patents related to the crystalline form of NR chloride which limit the Company’s ability to find alternatives for supply (Grace Patents).

In December 2023, the Company and Grace executed a Limited Licensing Agreement.

Pursuant to this agreement, the Company is authorized to procure NR supply from a designated third party in explicitly defined quantities for purchase in 2024.

Any acquisitions of NR within the stipulated quantity from this third-party source will result in a corresponding reduction of the minimum purchase commitment quantities that the Company has established directly with Grace for the same specific period.

Additionally, the Company has entered into a manufacturing and supply agreement with the aforementioned third party, committing to the purchase of the full allowable amount during the specified period.

Pursuant to the Ninth Amendment and the manufacturing and supply agreement with the aforementioned third party, the Company is committed to purchase approximately $ 15.9 million of total inventory between January 1, 2024 and December 31, 2024, which is the only future purchase commitment with Grace and the third-party.

The Grace Manufacturing Agreement is set to expire on December 31, 2024, subject to potential renewal, the terms of which will be negotiated by both parties.

Any failure to extend the Grace Manufacturing Agreement on satisfactory terms could potentially have a material adverse impact on the Company’s financial results and strategic position, as outlined in Item 1A.

Risk Factors of this Annual Report on Form 10-K, "We rely on a single supplier, W.R.

Grace, for NR and a limited number of third-party suppliers for the raw materials required to produce our products."

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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:

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

Net Sales Trade Receivable as of

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Watson Group $ 12.8 million $ 10.0 million $ 2.8 million $ 3.1 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:

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

As of December 31,

(In thousands) 2023 2022

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Intangible Assets, Net

Intangible assets for the periods indicated consisted of the following:

Intangible assets as of the periods indicated consisted of the following:

As of December 31,

(In thousands, except years) Weighted Average

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Intangible assets, net $ 510 $ 671

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

During the years ended December 31, 2023 and 2022, amortization expense was approximately $ 158,000 and $ 186,000 , respectively.

During the year ended December 31, 2023, the Company identified intangible assets which were impaired due to the cessation of use of certain intellectual properties, resulting in an impairment charge of $ 3,000 and the removal of the intangible balances from the gross asset and accumulated amortization amounts approximating $ 630,000 and $ 627,000 , respectively.

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

(In thousands)

Thereafter 15

ChromaDex Corporation and Subsidiaries

1 unchanged sentence

Leasehold Improvements and Equipment, Net

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

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

As of December 31,

(In thousands) 2023 2022

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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.

During the years ended December 31, 2023 and 2022, the Company sold or disposed of certain leasehold improvements and equipment resulting in a gain of $ 5,000 and a loss of $ 7,000 , respectively.

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

Operating Leases

On October 11, 2023, the Company amended its existing lease in Los Angeles, California.

In accordance with Accounting Standards Codification (ASC) 842, the amended lease agreement is considered modified and subject to lease modification guidance.

The right-of-use (ROU) asset and lease liability related to the lease agreement were remeasured based on the change in the lease conditions, which included rent abatement totaling approximately $ 355,000 .

The reassessed value of the ROU asset and lease liability as of the modification date was $ 1.0 million and $ 1.2 million, respectively.

The lease term remained unchanged and extends through March 31, 2027 and provides one option to extend for an additional five years .

As of December 31, 2023 and 2022, the Company had ROU assets of $ 2.4 million and $ 3.5 million, respectively, and corresponding operating lease liabilities of $ 3.3 million and $ 4.2 million, respectively.

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

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

Year Ended December 31,

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Total expense $ 1,214 $ 1,281

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 %.

1) Variable lease costs, including property taxes and insurance and common area maintenance fees, are classified in cost of services in the Company's Consolidated Statements of Operations.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2023, the weighted average remaining lease term for operating leases is 3.9 years and the weighted average discount rate used to determine the operating lease liabilities is 7.0 %.

Future minimum lease payments under operating leases as of December 31, 2023 are as follows:

6 unchanged sentences

Share-Based Compensation

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.

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.

In June 2023, stockholders approved an amendment to the Company’s 2017 Equity Incentive Plan to increase the number of shares available for issuance by 3.65 million shares of common stock.

Pursuant to the latest amendment, the 2017 Plan provides for the issuance of shares that total no more than the sum of (i) 18,150,000 new shares, (ii) any returning shares such as forfeited, cancelled, or expired shares granted under either the 2017 Plan or the Second Amended and Restated 2007 Equity Incentive Plan and (iii) 500,000 shares pursuant to an inducement award.

The number of shares available to be issued under the 2017 Plan will be reduced by (i) one share for each share that relates to an option or stock appreciation right award and (ii) 1.5 shares for each share which relates to an award other than a stock option or stock appreciation right award (a full-value award).

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The fair value of the Company’s stock options that are not market or performance based was estimated at the date of grant using the Black-Scholes based option valuation model.

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

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

Year Ended December 31,

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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:

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

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

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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:

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

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

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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:

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

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

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Restricted Stock Units

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

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

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

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Granted 700 2.16

Vested ( 144 ) 5.05

Forfeited ( 21 ) 7.49

8 unchanged sentences

Restricted Stock Awards

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

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

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

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Unvested shares at December 31, 2022 183 $ 3.25

Vested ( 16 ) 4.23

Forfeited — —

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Total $ 4,751 $ 5,739

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 $ 3.5 million and $ 1.0 million in share-based compensation expense for unvested options and unvested restricted stock units, respectively, that were outstanding as of December 31, 2023.

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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.

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, 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

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, 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.

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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 .

In exchange for the rights granted in the Supply Agreement, NHSc committed to an initial purchase of NRCL totaling approximately $ 2.0 million.

NHSc fulfilled this commitment during the fourth quarter of 2022 , with $ 1.7 million involving 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.

During the years ended December 31, 2023 and December 31, 2022, no royalty or milestone payments were earned.

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

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Deferred revenue balance $ 3,311 $ 3,955

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:

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Effective tax rate 0.0 % 0.0 %

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

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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

(In thousands) 2023 2022

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The Company increased its valuation allowance by approximately $ 0.1 million to $ 46.4 million as of December 31, 2023 from $ 46.3 million as of December 31, 2022.

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.

For fiscal year 2023, the Company identified $ 0.1 million in U.S.

taxable income on global intangible low-taxed income (GILTI).

As of December 31, 2023, the Company’s net operating loss (NOL) carryforwards for federal and state income tax purposes are approximately $ 139.8 million and $ 114.4 million, respectively, portions of which were reduced in the year ending December 31, 2023 for both federal and state.

During the year ended December 31, 2023, $ 2.1 million of federal NOL carryforwards and $ 2.2 million of state NOL carryforwards were reduced against taxable income.

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, 2017, is limited to 80% of taxable income.

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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.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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.

The Company has not identified any material uncertain tax positions requiring a reserve as of December 31, 2023 and December 31, 2022.

Line of Credit and Other Available Sources of Financing

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 8, 2023, the Company entered into a fifth amendment to the Credit Agreement.

Pursuant to such amendment, the Credit Agreement provides for a revolving credit line of up to $ 10.0 million subject to the terms and conditions of the agreement, as amended, and extended the maturity date to November 12, 2025.

The amendment also modified the interest rate to be calculated at a floating rate per month equal to (a) the greater of (i) 8.25 % per year (previously 3.25 % per year) or (ii) the Prime Rate published by The Wall Street Journal, or such other rate of interest publicly announced by the Lender as its Prime Rate, plus (b) 1.00 % (previously 1.50 %), plus an additional 5.00 % during any period that an event of default has occurred and is continuing.

In addition, the amendment modified certain financial covenants, including (a) the amount of the Borrowers’ cash maintained at Lender (b) revising how quick ratio is calculated for purposes of the quick ratio covenant, and (c) Borrowers’ minimum liquidity requirements.

As of December 31, 2023, the Company had no outstanding debt under this line of credit arrangement.

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 financial covenants.

If the Company draws from the line of credit, the Company is also subject to a number of affirmative and restrictive covenants, including covenants regarding delivery of financial statements, the amount of the Company’s cash maintained at Western Alliance Bank, 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.

As the Company had no borrowings under the line of credit as of December 31, 2023, the Company was not subject to the covenants of this agreement.

Debt Issuance Costs

For the years ended December 31, 2023 and 2022, the Company incurred debt issuance costs of approximately $ 75,000 and $ 77,000 , respectively, in connection with this line of credit arrangement and had an unamortized balance of approximately $ 68,000 and $ 69,000 as of December 31, 2023 and 2022, respectively.

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.

Other Available Sources of Financing

In June 2023, the Company filed a new $ 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 $ 47.8 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, 2023, 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.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Joint Venture

(the “Joint Venture” or “JV”) and the Company shall pay $ 1.0 million in cash to Taikuk (the “Taikuk Fee”) upon the closing of the Shareholders Agreement (the “Closing”).

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

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.

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”).

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, 2023, it remains 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 years ended December 31, 2023 and December 31, 2022.

During the years ended December 31, 2023 and December 31, 2022, operating activity under the JV was not material .

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, primarily consisting of inventory.

The Company uses contract manufacturers to provide manufacturing services for its products.

During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, the Company enters into agreements with its contract manufacturers that either allow them to procure inventory based on criteria as defined by the Company or that establish the parameters defining the Company’s requirements.

A portion of the Company’s purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional purchase commitments.

In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm orders being placed.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Future minimum payments under inventory purchase obligations as of December 31, 2023 are as follows:

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On January 23, 2020, the court issued a scheduling order that, among other things, set trial on the remaining claims to begin on May 12, 2020.

On March 19, 2020, in light of the global 2019 coronavirus disease (COVID-19) pandemic and ongoing private mediation efforts, the parties jointly stipulated to adjourn the trial date.

On March 19, 2020, in light of the global 2019 coronavirus disease ("COVID-19" or "COVID") pandemic and ongoing private mediation efforts, the parties jointly stipulated to adjourn the trial date.

The court vacated the trial date on March 20, 2020.

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The verdict found (i) Elysium liable for breaches of the Niagen® and pTeroPure® Supply Agreements for failing to pay for purchases of the ingredients totaling approximately $ 3.0 million, (ii) Mark Morris liable for breach of a confidentiality agreement, requiring him to disgorge approximately $ 17,307 , (iii) ChromaDex liable for breaching the Niagen® Supply Agreement for not issuing certain refunds or credits to Elysium in the amount of $ 625,000 , and (iv) ChromaDex liable for fraudulent inducement of the Licensing Agreement in the amount of $ 250,000 , along with $ 1,025,000 in punitive damages arising from the same counterclaim.

On January 17, 2022, ChromaDex filed a motion for prejudgment interest on the approximately $ 3.0 million in damages awarded by the jury for Elysium’s breaches of the NIAGEN® and pTeroPure® Supply Agreements.

On October 25, 2021, ChromaDex informed the court that it would request prejudgment interest on the approximately $ 3.0 million in damages awarded by the jury for Elysium’s breaches of the Niagen® and pTeroPure® Supply Agreements.

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

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

On June 16, 2023, ChromaDex, Elysium, and Mark Morris filed a joint status report and stipulation informing the court that the U.S.

Court of Appeals for the Federal Circuit had issued its mandate in the Federal Circuit Appeal and requesting the court continue the stay of the California Action until August 22, 2023, in order to allow the parties in the Federal Circuit Appeal the opportunity to file a petition for a writ of certiorari in the Supreme Court.

On June 20, 2023, the court approved the joint stipulation and continued the stay until August 22, 2023.

On August 14, 2023, at the request of the parties, the court further continued the stay until September 21, 2023.

On September 15, 2023, ChromaDex, Elysium, and Mark Morris filed a joint status report and stipulation informing the court that ChromaDex and the Trustees of Dartmouth College had filed a petition for writ of certiorari in the Supreme Court and requesting the court continue the stay pending the Supreme Court’s decision on the petition.

On September 15, 2023, the court approved the joint stipulation and continued the stay pending the Supreme Court’s decision on the petition.

On November 15, 2023, ChromaDex, Elysium, and Mark Morris filed a joint status report and stipulation informing the court that the U.S.

Court of Appeals for the Second Circuit, in a case captioned In re Elysium-ChromaDex Litigation, No.

22-1059 (the “Second Circuit Appeal”), had affirmed the order by the SDNY Court granting ChromaDex’s motion to enforce the settlement agreement and requesting that the court continue the stay of the California Action until February 23, 2024, in order to allow the parties in the Second Circuit Appeal the opportunity to file a petition for a writ of certiorari in the Supreme Court.

On November 16, 2023, the court approved the joint stipulation and continued the stay until February 23, 2024.

On February 23, 2024, ChromaDex, Elysium, and Mark Morris filed a joint status report and stipulation requesting that the court approve a schedule for briefing concerning the judgment in the California Action.

On February 26, 2024, the court approved the joint stipulation and adopted the parties’ proposed briefing schedule.

ChromaDex must file its opening brief no later than April 26, 2024.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(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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Pursuant to the Court’s order, Elysium filed fourth amended counterclaims on April 21, 2021.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

All discovery closed on April 23, 2021.

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ChromaDex filed its reply brief on February 10, 2023.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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, 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.

Oral argument took place on October 13, 2023.

On October 26, 2023, the court of appeals issued a decision affirming the district court’s decision enforcing the Settlement Agreement, and also dismissed ChromaDex’s conditional cross-appeal as moot.

On November 16, 2023, the court of appeals decision become final.

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Elysium filed a response to the motion for reargument on January 28, 2021.

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

ChromaDex filed a motion for leave to

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

file a reply on February 8, 2021.

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

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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.

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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.

On March 15, 2023, ChromaDex filed a petition for a panel rehearing and/or rehearing en banc.

On April 10, 2023, the court of appeals invited Elysium to file a response to the petition and on April 24, 2023, Elysium filed a response to the petition.

On May 10, 2023, the court of appeals denied the petition.

On May 17, 2023, the court of appeals issued the mandate.

On June 16, 2023, Elysium filed a bill of costs and a motion for attorneys’ fees and costs.

On June 30, 2023, ChromaDex filed objections to Elysium’s bill of costs.

On July 21, 2023, ChromaDex filed a response to Elysium’s motion for attorneys’ fees and costs.

On July 28, 2023, ChromaDex filed an application for an extension of time to September 7, 2023 to file a petition for writ of certiorari .

On August 1, 2023, the Supreme Court granted the requested extension.

On August 14, 2023, Elysium filed a reply in support of its motion for attorneys’ fees and costs.

On September 7, 2023, ChromaDex filed a petition for writ of certiorari .

On October 16, 2023, the Supreme Court denied the petition.

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

23 unchanged sentences

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

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

On April 4, 2023, the court of appeals stayed the appeal pending issuance of the mandate in the pending appeal from the Delaware patent infringement action.

On June 22, 2023, the court of appeals directed the parties to inform the court of appeals by no later than August 1, 2023 how they believe the appeal should proceed.

On August 1, 2023, the parties requested that the court of appeals continue the stay of briefing until Dartmouth has determined whether it will seek certiorari .

On August 25, 2023, the court of appeals granted the request, and instructed the parties, within seven days of the Supreme Court’s disposition of any petition for certiorari or the expiration of the time to seek certiorari if no petition is filed, to inform the court how they think the appeal should proceed.

On October 23, 2023, the parties jointly informed the court of appeals that the Supreme Court had denied the petition for writ of certiorari and that they believed the decision on appeal should be vacated and remanded with instructions to the Patent Trial and Appeal Board to dismiss the IPR proceedings.

On December 18, 2023, the court of appeals dismissed the appeal as moot, vacated the PTAB’s final written decision, and remanded to the PTAB with instructions to dismiss the IPR as moot.

ChromaDex Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

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

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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

On January 2, 2024, the parties filed a joint stipulation of voluntary dismissal.

On January 4, 2024, the Court entered the joint stipulation and terminated the case.

Contingencies

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The Second Letter asserts that such statements contain coronavirus-related prevention or treatment claims and are deceptive in violation of the Federal Trade Commission Act.

On May 4, 2021, the Company provided a response to the Second Letter stating that it had removed the social media posts from its accounts identified in the Second Letter and requested that third parties remove the post from their accounts that were identified in the Second Letter.

On May 4, 2021, the Company provided a response to the Second Letter stating that it had removed the social posts from its accounts identified in the Second Letter and requested that third parties remove the post from their accounts that were identified in the Second Letter.

The Company stated that the press release identified in the Second Letter is appropriate and not a deceptive act or practice under applicable law.

1 unchanged sentence

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

Employee Retention Tax Credit

4 unchanged sentences

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.

The Company determined that it 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 quarter ended September 30, 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 years ended December 31, 2023 and December 31, 2022, the Company collected $ 0.9 million and $ 0.6 million, respectively, related to the ERTC.

As of December 31, 2023, the Company's Consolidated Balance Sheets include an ERTC benefit of $ 0.9 million and associated commissions payable of $ 0.1 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.

On September 14, 2023, the IRS announced an immediate halt in processing new claims for the employee retention credit until at least the end of the year, citing ongoing concerns about improper claims.

The IRS guaranteed ongoing processing of existing claims, albeit at a reduced pace and with increased compliance scrutiny.

To date, the Company has not received communications from the IRS regarding the Company’s existing claims.

Nevertheless, the Company is diligently monitoring the situation to ensure continued compliance.

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