What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-18 · 570 added, 1485 removed, 93 unchanged (96% of the section changed)

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS (UNAUDITED)

ChromaDex Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

March 31, 2020 and December 31, 2019

June 30, 2020 and December 31, 2019

(In thousands, except per share data)

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

$ 13,608  

$ 18,812  

Trade receivables, net of allowances of $0.1 million and $2.8

million, respectively;

from Related Party:

$0.5 million and $0.8 million,

11,280  

11,535  

expenses and other assets

Current Assets

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

Trade receivables, net of allowances of $ 0.0 million and $ 2.8 million, respectively;

Receivables from Related Party:

$ 1.1 million and $ 0.8 million, respectively

Prepaid expenses and other assets

Total current assets

29,147  

33,518  

Improvements and Equipment, net

of Use Assets

Long-term Assets

$ 35,610  

$ 40,247  

Leasehold Improvements and Equipment, net

Intangible Assets, net

Right of Use Assets

Other Long-term Assets

Liabilities and Stockholders' Equity

$ 8,159  

$ 9,626  

maturities of operating lease obligations

maturities of finance lease obligations

Current Liabilities

Accounts payable

Accrued expenses

Current maturities of operating lease obligations

Current maturities of finance lease obligations

Customer deposits

Total current liabilities

14,466  

15,063  

Lease Obligations, Less Current Maturities

Deferred Revenue

Operating Lease Obligations, Less Current Maturities

Finance Lease Obligations, Less Current Maturities

Total liabilities

19,062  

19,802  

and Contingencies

Stockholders'

stock, $.001 par value;

Commitments and Contingencies

Stockholders' Equity

Common stock, $ .001 par value;

authorized 150,000 shares;

and outstanding March 31, 2020 59,605 shares and

31, 2019 59,562 shares

paid-in capital

144,290  

142,285  

issued and outstanding June 30, 2020 61,421 shares and

December 31, 2019 59,562 shares

Additional paid-in capital

Accumulated deficit

Cumulative translation adjustments

Total stockholders' equity

16,548  

20,445  

Total liabilities and stockholders' equity

$ 35,610  

$ 40,247  

Notes to Consolidated Financial Statements.

ChromaDex Corp o ration and

See Notes to Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three Month Periods Ended March 31, 2020 and March 31,

For the Three and the Six Month Periods Ended June 30, 2020 and June 30, 2019

(In thousands, except per share data)

$ 14,345  

$ 10,048  

and marketing

and development

and administrative

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Cost of sales

Operating expenses:

14,201  

13,673  

Sales and marketing

Research and development

General and administrative

Operating expenses

Operating loss

income (expense), net

Nonoperating income (expense)

and diluted loss per common share

and diluted weighted average common shares outstanding

59,782  

55,325  

Notes to Consolidated Financial Statements.

Chroma D ex Corporation and

Condensed Consolidated Statement of Stockholders'

For the Three Month Period Ended March 31, 2020

Nonoperating expense:

Interest expense, net

Nonoperating expense

Basic and diluted loss per common share

Basic and diluted weighted average

common shares outstanding

See Notes to Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

For the Three Month Periods Ended June 30, 2020 and June 30, 2019

(In thousands)

Stockholders'

 Paid-in

 Deficit

Balance, December 31, 2019

59,562  

$ 142,285  

$ 20,445  

of stock options

Balance, March 31, 2020

59,605  

$ 144,290  

$ 16,548  

Notes to Consolidated Financial Statements.

Issuance of common stock,

net of offering costs of $0.1 million

Exercise of stock options

Share-based compensation

Translation adjustment

Balance, June 30, 2020

$ ( 131,513 )

Stockholders'

Balance, March 31, 2019

Exercise of stock options

Share-based compensation

Balance, June 30, 2019

$ ( 105,845 )

See Notes to Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statement of Stockholders'

For the Three Month Period Ended March 31, 2019

Condensed Consolidated Statement of Stockholders' Equity

For the Six Month Periods Ended June 30, 2020 and June 30, 2019

(In thousands)

Stockholders'

 Paid-in

 Deficit

Balance, December 31, 2019

55,089  

$ 116,876  

$ 27,178  

of stock options

Balance, March 31, 2019

55,321  

$ 119,012  

$ 20,977  

Notes to Consolidated Financial Statements.

Chro m aDex Corporation and

$ ( 121,900 )

Issuance of common stock,

net of offering costs of $0.1 million

Exercise of stock options

Share-based compensation

Translation adjustment

Balance, June 30, 2020

$ ( 131,513 )

Stockholders'

Balance, December 31, 2018

Exercise of stock options

Share-based compensation

Balance, June 30, 2019

$ ( 105,845 )

See Notes to Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Month Periods Ended March 31, 2020 and March 31,

For the Six Month Periods Ended June 30, 2020 and June 30, 2019

(In thousands)

Flows From Operating Activities

  Net

  Adjustments

to reconcile net loss to net cash used in operating

    Depreciation

of leasehold improvements and equipment

    Amortization

of intangibles

    Amortization

of right of use assets

    Share-based

compensation expense

    Allowance

for doubtful trade receivables

    Non-cash

financing costs

  Changes

in operating assets and liabilities:

    Trade

    Contract

    Inventories

    Prepaid

expenses and other assets

    Accounts

    Accrued

    Deferred

    Customer

deposits and other

    Principal

payments on operating leases

June 30, 2020

June 30, 2019

Cash Flows From Operating Activities

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

Depreciation of leasehold improvements and equipment

Amortization of intangibles

Amortization of right of use assets

Share-based compensation expense

Allowance for doubtful trade receivables

Amortization of convertible notes issuance costs

Non-cash financing costs

Changes in operating assets and liabilities:

Trade receivables

Contract assets

Prepaid expenses and other assets

Accounts payable

Accrued expenses

Deferred revenue

Customer deposits and other

Principal payments on operating leases

Net cash used in operating activities

Flows From Investing Activities

  Purchases

of leasehold improvements and equipment

  Purchases

of intangible assets

  Investment

in other long-term assets

Cash Flows From Investing Activities

Purchases of leasehold improvements and equipment

Purchases of intangible assets

Investment in other long-term assets

Net cash used in investing activities

Flows From Financing Activities

  Proceeds

from exercise of stock options

  Payment

of debt issuance costs

  Principal

payments on finance leases

Cash Flows From Financing Activities

Proceeds from issuance of common stock, net

Proceeds from sale of convertible notes

Payment of convertible notes issuance costs

Proceeds from exercise of stock options

Payment of debt issuance costs

Principal payments on finance leases

Net cash provided by financing activities

decrease in cash

Beginning of Period, including restricted cash of $0.2 million for

both 2020 and 2019

18,812  

22,616  

Ending of Period, including restricted cash $0.2 million for both

2020 and 2019

$ 13,608  

$ 19,327  

Disclosures of Cash Flow Information

  Cash

payments for interest on finance leases

Schedule of Noncash Investing Activity

  Financing

lease obligation incurred for purchase of computer

  Operating

lease obligation incurred for tenant improvement credit

Notes to Consolidated Financial Statements.

Inte r im Financial Statements

accompanying financial statements of ChromaDex Corporation and its

wholly owned subsidiaries, ChromaDex, Inc., Healthspan Research,

LLC, ChromaDex Analytics, Inc.

and ChromaDex Asia Limited

(collectively referred to herein as “ChromaDex”

“Company”

or, in the first person as “we”,

“us”

and “our”) include all adjustments,

consisting of normal recurring adjustments and accruals, that, in

the opinion of the management of the Company, are necessary for a

fair presentation of the Company’s financial position as of

March 31, 2020 and results of operations and cash flows for the

three months ended March 31, 2020 and March 31, 2019.

unaudited interim financial statements should be read in

conjunction with the Company’s audited financial statements

and the notes thereto for the year ended December 31, 2019

appearing in the Company’s Annual Report on Form 10-K filed

with the Securities and Exchange Commission (the

“Commission”) on March 10, 2020.

Operating results for

the three months ended March 31, 2020 are not necessarily

indicative of the results to be achieved for the full year ending

on December 31, 2020.

The preparation of financial statements in

conformity with accounting principles generally accepted in the

United States of America (“GAAP”) requires management

to make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosures of contingent assets and

liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the period.

results could differ from those estimates.

balance sheet at December 31, 2019 has been derived from the

audited financial statements at that date, but does not include all

of the information and footnotes required by GAAP for complete

financial statements.

is a science-based integrated nutraceutical company devoted to

improving the way people age.

ChromaDex scientists partner with

leading universities and research institutions worldwide to

discover, develop and create solutions to deliver the full

potential of nicotinamide adenine dinucleotide and its impact on

human health.

ingredient, NIAGEN® nicotinamide riboside, sold

directly to consumers as TRU NIAGEN®, is backed with

clinical and scientific research, as well as extensive intellectual

property protection.

The Company also has analytical reference

standards and services segment, which focuses on natural product

fine chemicals (known as “phytochemicals”) and related

chemistry services.

Company's net cash outflow from operating activities was

approximately $5.2 million for the three-month period ended March

As of March 31, 2020, cash and cash equivalents totaled

approximately $13.6 million, which includes restricted cash of

approximately $0.2 million.

Subsequent to the period ended March 31, 2020,  

the Company entered into a

Securities Purchase Agreement with its existing stockholders,

Winsave Resources Limited and Pioneer Step Holdings Limited,

pursuant to which the Company sold and issued an aggregate of $5.0

million of the Company’s common stock

(the “Financing”).

Company anticipates that its current cash, cash equivalents, cash

to be generated from operations, $5.0 million received from the

Financing described above and available line of credit up to $7.0

million from Western Alliance Bank will be sufficient to meet its

projected operating plans through at least the next twelve months

from the issuance date of this report.

The Company may, however,

seek additional capital within the next twelve months, both to meet

its projected operating plans within the next twelve months and/or

to fund its longer-term strategic objectives.

Accounting Policies

Basis of presentation :

The financial statements and

accompanying notes have been prepared on a consolidated basis and

reflect the consolidated financial position of the Company and its

wholly owned subsidiaries.

All significant intercompany balances

and transactions have been eliminated from these financial

The Company’s fiscal year ends on December

Net increase (decrease) in cash

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

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

Supplemental Disclosures of Cash Flow Information

Cash payments for interest on finance leases

Supplemental Schedule of Noncash Operating Activity

Financing lease obligation incurred for prepayment of licensing fees

Supplemental Schedule of Noncash Investing Activity

Financing lease obligation incurred for purchase of computer equipment and software

Operating lease obligation incurred for tenant improvement credit received

See Notes to Consolidated Financial Statements.

Interim Financial Statements

The accompanying financial statements of ChromaDex Corporation and its wholly owned subsidiaries, ChromaDex, Inc., Healthspan Research, LLC, ChromaDex Analytics, Inc.

and ChromaDex Asia Limited (collectively referred to herein as “ChromaDex” or the “Company” or, in the first person as “we”, “us” and “our”) include all adjustments, consisting of normal recurring adjustments and accruals, that, in the opinion of the management of the Company, are necessary for a fair presentation of the Company’s financial position as of June 30, 2020 and results of operations and cash flows for the three and the six months ended June 30, 2020 and June 30, 2019.

These unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2019 appearing in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) on March 10, 2020, as amended on May 18, 2020.

Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results to be achieved for the full year ending on December 31, 2020.The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.

Actual results could differ from those estimates.

The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

Nature of Business

ChromaDex is a science-based integrated nutraceutical company devoted to improving the way people age.

ChromaDex scientists partner with leading universities and research institutions worldwide to discover, develop and create solutions to deliver the full potential of nicotinamide adenine dinucleotide and its impact on human health.Its flagship ingredient, NIAGEN® nicotinamide riboside, sold directly to consumers as TRU NIAGEN®, is backed with clinical and scientific research, as well as extensive intellectual property protection.The Company also has analytical reference standards and services segment, which focuses on natural product fine chemicals (known as “phytochemicals”) and related chemistry services.

The Company's net cash outflow from operating activities was approximately $6.8 million for the six-month period ended June 30, 2020.As of June 30, 2020, cash and cash equivalents totaled approximately $ 18.9 million, which includes restricted cash of approximately $ 0.2 million.

The Company anticipates that its current cash, cash equivalents, cash to be generated from operations and available line of credit up to $ 7.0 million from Western Alliance Bank will be sufficient to meet its projected operating plans through at least the next twelve months from the issuance date of this report.

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

Significant Accounting Policies

Basis of presentation :The financial statements and accompanying notes have been prepared on a consolidated basis and reflect the consolidated financial position of the Company and its wholly owned subsidiaries.

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

The Company’s fiscal year ends on December 31.

Recent accounting standards :

the Financial Accounting

Standards Board issued ASU 2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments.

The standard’s main goal is to improve

financial reporting by requiring earlier recognition of credit

losses on financing receivables and other financial assets in

The new guidance represents significant changes to

accounting for credit losses:

(i) full lifetime expected credit

losses will be recognized upon initial recognition of an asset in

(ii) the current incurred loss impairment model that

recognizes losses when a probable threshold is met will be replaced

with the expected credit loss impairment method without recognition

and (iii) the expected credit losses estimate will be

based upon historical information, current conditions, and

reasonable and supportable forecasts.

ASU 2016-13 introduces two

distinctive credit loss impairment models:

(i) Current expected

credit loss impairment model (Subtopic 326-20) applicable to

financial assets measured at amortized cost;

available-for-sale debt securities impairment model (Subtopic

ASU 2016-13 is effective for public entities for fiscal

years beginning after December 15, 2019, including interim periods

within those fiscal years.

The Company can elect to defer

compliance effective for fiscal years beginning after December 15,

We are currently evaluating the impact of our pending

adoption of ASU 2016-13 on our consolidated financial

Per Share Applicable to Common Stockholders

following table sets forth the computations of earnings per share

amounts applicable to common stockholders for the three months

ended March 31, 2020 and March 31, 2019:

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

Measurement of Credit Losses on Financial Instruments.

The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope.

The new guidance represents significant changes to accounting for credit losses:

(i) full lifetime expected credit losses will be recognized upon initial recognition of an asset in scope;

(ii) the current incurred loss impairment model that recognizes losses when a probable threshold is met will be replaced with the expected credit loss impairment method without recognition threshold;

and (iii) the expected credit losses estimate will be based upon historical information, current conditions, and reasonable and supportable forecasts.

ASU 2016-13 introduces two distinctive credit loss impairment models:

(i) current expected credit loss impairment model (Subtopic 326-20) applicable to financial assets measured at amortized cost;

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

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

The Company can elect to defer compliance effective for fiscal years beginning after December 15, 2022.

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

Earnings Per Share Applicable to Common Stockholders

The following table sets forth the computations of earnings per share amounts applicable to common stockholders for the three and the six months ended June 30, 2020 and June 30, 2019:

Three Months Ended

thousands, except per share data)

and diluted loss per common share

and diluted weighted average common shares outstanding

59,782  

55,325  

dilutive securities (2):

  Stock

12,194  

10,078  

  Warrants

approximately 0.2 million and 0.2 million nonvested restricted

stock for the periods ending March 31, 2020 and March 31, 2019,

respectively, which are participating securities that feature

voting and dividend rights.

from the computation of loss per share as their impact is

antidilutive.

Party Transactions

Sale of consumer  

receivable at

million  

Watson Group and Horizon Ventures are related parties through

common ownership of an enterprise that beneficially owns more than

10% of the common stock of the Company.

amounts of major classes of inventory as of March 31, 2020 and

December 31, 2019 are as follows:

$ 1,364  

Consumer Products -

Finished Goods

Consumer Products -

Work in Process

$ 11,280  

$ 11,535  

Operating Leases

March 31, 2020, the Company had operating lease assets in right of

use assets of approximately $0.8 million and corresponding

operating lease liabilities of approximately $1.3 million.

three months ended March 31, 2020 and March 31, 2019, the following

were expenses incurred in connection with our operating

For the Three Months Ended Mar.

   Operating

lease expense

   Variable

lease expense

lease rent expense

 At Mar.

Weighted-average

remaining lease term (years) –

Six Months Ended

(In thousands, except per share data)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Basic and diluted loss per common share

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

Potentially dilutive securities (2):

Stock options

Convertible notes

____________________________

(1) Includes approximately 0.2 million and 0.2 million nonvested restricted stock for the periods ending June 30, 2020and June 30, 2019, 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.

Related Party Transactions

Sale of consumer products

Three months ended

Six months ended

Trade receivable at

$ 1.3 million

$ 1.9 million

$ 3.1 million

$ 3.2 million

$ 1.0 million

$ 0.8 million

Horizon Ventures (1)

$ 1.6 million

$ 0.1 million

$ 2.9 million

$ 1.9 million

$ 4.7 million

$ 3.2 million

$ 1.1 million

$ 0.8 million

Watson Group and Horizon Ventures are related parties through common ownership of an enterprise that beneficially owns more than 10% of the common stock of the Company.

(1) For the three and six months ended June 30, 2020, Horizon Ventures made purchases to donate to the healthcare workers in Hong Kong hospitals.

The amounts of major classes of inventory as of June 30, 2020 and December 31, 2019 are as follows:

(In thousands)

Consumer Products - Finished Goods

Consumer Products - Work in Process

Bulk ingredients

Reference standards

Stock Issuance

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

The selling price was determined by the average closing price over the ten trading days immediately preceding the date of Securities Purchase Agreement (the “Financing”).On May 7, 2020, the Company closed the Financing and received proceeds of $ 4.9 million, net of offering costs.

Operating Leases

Weighted-average

discount rate –

As of June 30, 2020, the Company had operating lease assets in right of use assets of approximately $ 0.7 million and corresponding operating lease liabilities of approximately $ 1.2 million.For the three and the six months ended June 30, 2020 and June 30, 2019, the following were expenses incurred in connection with our operating leases:

For the Three Months Ended Jun.

For the Six Months Ended Jun.

(In thousands)

Operating leases

future lease payments under operating leases as of March 31, 2020

are as follows:

months ending December 31, 2020

Ending December 31, 2021

Ending December 31, 2022

Ending December 31, 2023

Ending December 31, 2024

present value discount

lease liabilities

current portion

obligations under operating leases

Finance Leases

March 31, 2020, the Company had finance lease assets in equipment

assets of approximately $0.7 million and corresponding finance

lease liabilities of approximately $0.2 million.

For the three

months ended March 31, 2020 and March 31, 2019, the following were

expenses incurred in connection with our finance

For the Three Months Ended Mar.

   Amortization

of equipment assets

   Interest

on lease liabilities

Weighted-average

remaining lease term (years) –

Operating lease expense

Variable lease expense

Operating lease expense

Short-term lease rent expense

Total expense

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

Weighted-average discount rate – operating leases

Minimum future lease payments under operating leases as of June 30, 2020 are as follows:

Six months ending December 31, 2020

Year Ending December 31, 2021

Year Ending December 31, 2022

Year Ending December 31, 2023

Year Ending December 31, 2024

Less present value discount

Operating lease liabilities

Long-term obligations under operating leases

Finance Leases

Weighted-average

discount rate –

As of June 30, 2020, the Company had finance lease assets in equipment assets of approximately $ 0.4 million and corresponding finance lease liabilities of approximately $ 0.2 million.For the three and the six months ended June 30, 2020 and June 30, 2019, the following were expenses incurred in connection with our finance leases:

For the Three Months Ended Jun.

For the Six Months Ended Jun.

(In thousands)

Finance leases

future lease payments under finance leases as of March 31, 2020 are

Months Ending December 31, 2020

Ending December 31, 2021

Ending December 31, 2022

present value discount

lease liabilities

current portion

obligations under finance leases

20, 2017, the stockholders of the Company approved the ChromaDex

Corporation 2017 Equity Incentive Plan (the "2017 Plan").

Company's Board of Directors amended the 2017 Plan in January 2018

and the stockholders of the Company approved an amendment to the

2017 Plan on June 22, 2018.

The 2017 Plan is the successor to the

ChromaDex Corporation Second Amended and Restated 2007 Equity

Incentive Plan (the "2007 Plan").

As of March 31, 2020, under the

2017 Plan, the Company is authorized to issue shares subject to

awards that total no more than the sum of (i) 9,000,000 new shares,

(ii) approximately 384,000 unallocated shares remaining available

for the grant of new awards under the 2007 Plan, (iii) any

returning shares from the 2007 Plan or the 2017 Plan, such as

forfeited, cancelled, or expired shares and (iv) 500,000 shares

pursuant to an inducement award.

The remaining number of shares

available for issuance under the 2017 Plan totaled approximately

1.2 million shares at March 31, 2020.

On April 16, 2020, the

Company’s Board of Directors amended the 2017 Plan, subject

to stockholder approval, to among other things, increase the number

of shares of common stock authorized for issuance under the 2017

Plan by 5.5 million shares.

Amortization of equipment assets

Interest on lease liabilities

Total expenses

Weighted-average remaining lease term (years) finance leases

Weighted-average discount rate finance leases

Minimum future lease payments under finance leases as of June 30, 2020 are as follows:

(In thousands)

Six Months Ending December 31, 2020

Year Ending December 31, 2021

Year Ending December 31, 2022

Less present value discount

Finance lease liabilities

Less current portion

Long-term obligations under finance leases

Share-Based Compensation

On June 20, 2017, the stockholders of the Company approved the ChromaDex Corporation 2017 Equity Incentive Plan (the "2017 Plan").

The Company's Board of Directors amended the 2017 Plan in January 2018 and the stockholders of the Company approved amendments to the 2017 Plan in June 2018 and June 2020.

The 2017 Plan is the successor to the ChromaDex Corporation Second Amended and Restated 2007 Equity Incentive Plan (the "2007 Plan").

As of June 30, 2020, under the 2017 Plan, the Company is authorized to issue shares subject to awards that total no more than the sum of (i) 14,500,000 new shares, (ii) approximately 384,000 unallocated shares remaining available for the grant of new awards under the 2007 Plan, (iii) any returning shares from the 2007 Plan or the 2017 Plan, such as forfeited, cancelled, or expired shares and (iv) 500,000 shares pursuant to an inducement award.

The remaining number of shares available for issuance under the 2017 Plan totaled approximately 6.9 million shares at June 30, 2020.

General Vesting Conditions

The stock option awards generally vest ratably over a three-year

period following grant date after a passage of time.

However, some

stock option awards are market or performance based and vest based

on certain triggering events established by the Compensation

Committee of the Board of Directors.

fair value of the Company’s stock options that are not market

based was estimated at the date of grant using the Black-Scholes

option pricing model.

The table below outlines the weighted average

assumptions for options granted during the three months ended March

Three months Ended

March 31, 2020

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

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

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

The table below outlines the weighted average assumptions for options granted during the six months ended June 30, 2020.

Six months Ended June 30, 2020

Expected term

Expected volatility

Risk-free rate

Expected dividends

Service Period Based Stock Options

following table summarizes activity of service period-based stock

options at March 31, 2020 and changes during the three months then

ended (in thousands except per-share data and remaining contractual

The following table summarizes activity of service period-based stock options at June 30, 2020 and changes during the six months then ended (in thousands except per-share data and remaining contractual term):

Weighted Average

Outstanding at Dec.

$ 3.86  

$ 2.06  

Outstanding at Mar.

11,003  

$ 3.82  

Exercisable at Mar.

$ 3.77  

aggregate intrinsic values in the table above are based on the

Company’s stock price of $3.26, which is the closing price of

the Company’s stock on the last day of business for the

period ended March 31, 2020.

Performance Based  

The Company also grants stock option awards that are performance

based and vest based on the achievement of certain criteria

established from time to time by the Compensation Committee of the

Board of Directors.

If these performance criteria are not met, the

compensation expenses are not recognized and the expenses that have

been recognized will be reversed.

The following table summarizes performance based stock options

activity at March 31, 2020 and changes during the three months then

ended (in thousands except per share data and remaining contractual

Options Granted

Options Exercised

Options Expired

Options Forfeited

Outstanding at Jun.

Exercisable at Jun.

______________

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $ 4.59 , which is the closing price of the Company’s stock on the last day of business for the period ended June 30, 2020.

Performance Based Stock Options

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

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

The following table summarizes performance based stock options activity at June 30, 2020 and changes during the six months then ended (in thousands except per share data and remaining contractual term):

Weighted Average

Outstanding at Dec.

$ 1.89  

$ 2.26  

Outstanding at Mar.

$ 4.00  

Exercisable at Mar.

$ 1.89  

aggregate intrinsic values in the table above are based on the

Company’s stock price of $3.26, which is the closing price of

the Company’s stock on the last day of business for the

period ended March 31, 2020.

Total Remaining Unamortized Compensation for Stock

March 31, 2020, there was approximately $9.8 million of total

unrecognized compensation expense related to non-vested share-based

compensation arrangements granted under the plans for employee

stock options.

That cost is expected to be recognized over a

weighted average period of 2 years.

Options Granted

Options Exercised

Options Forfeited

Outstanding at Jun.

Exercisable at Jun.

_________________

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $4.59, which is the closing price of the Company’s stock on the last day of business for the period ended June 30, 2020.

Total Remaining Unamortized Compensation for Stock Options

As of June 30, 2020, there was approximately $ 8.4 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans for employee stock options.That cost is expected to be recognized over a weighted average period of 2 years.

Share-Based Compensation

compensation expense was as follows:

months ending  

Share-based compensation expenses were as follows:

Three months ending

Six months ending

(In thousands)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Share-based compensation expense

3 unchanged sentences

General and administrative

$ 1,873  

$ 2,029  

Company has the following three reportable segments for the

three-month period ended March 31, 2020:

Consumer products

provides finished dietary supplement products that contain

the Company's proprietary ingredients directly to consumers as well

as to distributors.

develops and commercializes proprietary-based ingredient

technologies and supplies these ingredients as raw materials to the

manufacturers of consumer products.

reference standards and services segment:

includes supply of

phytochemical reference standards and other research and

development services.

“Corporate and other”

classification includes corporate

items not allocated by the Company to each reportable segment.

Business Segments

The Company has the following three reportable segments for the three- and six-month periods ended June 30, 2020:

Consumer products segment:

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

Ingredients segment:

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

Analytical reference standards and services segment:

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

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

Further, there are no intersegment sales that require elimination.

The Company evaluates performance and allocates resources based on

reviewing gross margin by reportable segment.

$ 11,144  

$ 2,475  

$ 14,345  

and marketing

and development

and administrative

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

Three months ended

Analytical Reference

June 30, 2020

Standards and

(In thousands)

Services segment

Cost of sales

Operating expenses:

14,201  

Sales and marketing

Research and development

General and administrative

Operating expenses

Operating income (loss)

$ 1,651  

$ 1,366  

$ 7,454  

$ 1,494  

$ 1,100  

$ 10,048  

and marketing

and development

and administrative

Three months ended

Analytical Reference

June 30, 2019

Standards and

(In thousands)

Services segment

Cost of sales

Operating expenses:

13,673  

Sales and marketing

Research and development

General and administrative

Operating expenses

Operating income (loss)

March 31, 2020

$ 13,306  

$ 1,771  

$ 19,636  

$ 35,610  

December 31, 2019

$ 12,137  

$ 2,135  

$ 25,057  

$ 40,247  

Six months ended

Analytical Reference

June 30, 2020

Standards and

(In thousands)

Services segment

Cost of sales

Operating expenses:

Sales and marketing

Research and development

General and administrative

Operating expenses

Operating income (loss)

Six months ended

Analytical Reference

June 30, 2019

Standards and

(In thousands)

Services segment

Cost of sales

Operating expenses:

Sales and marketing

Research and development

General and administrative

Operating expenses

Operating income (loss)

Analytical Reference

At June 30, 2020

Standards and

(In thousands)

Services segment

Analytical Reference

At December 31, 2019

Standards and

(In thousands)

Services segment

Disaggregation of Revenue

disaggregate our revenue from contracts with customers by type of

goods or services for each of our segments, as we believe it best

depicts how the nature, amount, timing and uncertainty of our

revenue and cash flows are affected by economic factors.

details in the tables below.

Months Ended March 31, 2020

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

See details in the tables below.

Three Months Ended June 30, 2020

(In thousands)

Analytical Reference Standards

TRU NIAGEN®, Consumer Product

NIAGEN® Ingredient

Subtotal NIAGEN Related

Other Ingredients

Reference Standards

NIAGEN®, Consumer Product

$ 11,144  

NIAGEN Related

$ 11,144  

$ 1,961  

$ 13,105  

Other Goods and Services

$ 1,240  

$ 11,144  

$ 2,475  

$ 14,345  

Months Ended March 31, 2019

Consulting and Other

Subtotal Other Goods and Services

Total Net Sales

Three Months Ended June 30, 2019

(In thousands)

Analytical Reference Standards

TRU NIAGEN , Consumer Product

NIAGEN Ingredient

Subtotal NIAGEN Related

Other Ingredients

Reference Standards

NIAGEN®, Consumer Product

$ 7,454  

NIAGEN Related

$ 7,454  

$ 1,110  

$ 8,564  

Other Goods and Services

$ 1,100  

$ 1,484  

$ 7,454  

$ 1,494  

$ 1,100  

$ 10,048  

Consulting and Other

Subtotal Other Goods and Services

Total Net Sales

Six Months Ended June 30, 2020

(In thousands)

Analytical Reference Standards

TRU NIAGEN®, Consumer Product

NIAGEN® Ingredient

Subtotal NIAGEN Related

Other Ingredients

Reference Standards

Consulting and Other

Subtotal Other Goods and Services

Total Net Sales

Six Months Ended June 30, 2019

(In thousands)

Analytical Reference Standards

TRU NIAGEN®, Consumer Product

NIAGEN® Ingredient

Subtotal NIAGEN Related

Other Ingredients

Reference Standards

Consulting and Other

Subtotal Other Goods and Services

Total Net Sales

Disclosure of Major Customers

customers who accounted for more than 10% of the Company’s

total sales were as follows:

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

Three months ended

Six months ended

Major Customers

Horizon Ventures - Related Party

Watson Group - Related Party

Represents less than 10%.

accounts which had more than 10% of the Company’s total trade

receivables were as follows:

of the Company's Total Trade Receivables

March 31, 2020

December 31, 2019

Major accounts which had more than 10% of the Company’s total trade receivables were as follows:

Percentage of the Company's Total Trade Receivables

Major Accounts

At June 30, 2020

At December 31, 2019

Watson Group - Related Party (1)

Thorne Research

Life Extension

Amazon Marketplaces

_____________________

* Represents less than 10%.

and Contingencies

- Elysium Health, LLC

(1) Includes approximately $0.1 million trade receivables from Horizon Ventures.

Commitments and Contingencies

Inventory Purchase Obligations

In the second quarter of 2020, the Company entered into an amended manufacturing and supply agreement whereby the Company is obligated to purchase approximately $ 17.4 million of total inventory through June 30, 2021.The Company’s remaining purchase obligations as of June 30, 2020 were as follows:

Six Months Ending December 31, 2020

Six Months Ending June 30, 2021

Legal proceedings - Elysium Health, LLC

(A) California Action

On December 29, 2016, ChromaDex, Inc.

filed a complaint in the

United States District Court for the Central District of

California, naming Elysium Health, Inc.

(together with Elysium

Health, LLC, “Elysium”) as defendant (the

“Complaint”).

On January 25, 2017, Elysium filed an

answer and counterclaims in response to the Complaint (together

with the Complaint, the “California Action”).

course of the California Action, the parties have each filed

amended pleadings several times and have each engaged in several

rounds of motions to dismiss and one round of motion for judgment

on the pleadings with respect to various claims.

Most recently, on

November 27, 2018, ChromaDex, Inc.

filed a fifth amended complaint

that added an individual, Mark Morris, as a defendant.

Morris (“the Defendants”) moved to dismiss on December

The court denied Defendants’

motion on February 4,

Defendants filed their answer to ChromaDex, Inc.'s fifth

amended complaint on February 19, 2019.

filed a complaint in the United States District Court for the Central District of California, naming Elysium Health, Inc.

(together with Elysium Health, LLC, “Elysium”) as defendant (the “Complaint”).

On January 25, 2017, Elysium filed an answer and counterclaims in response to the Complaint (together with the Complaint, the “California Action”).

Over the course of the California Action, the parties have each filed amended pleadings several times and have each engaged in several rounds of motions to dismiss and one round of motion for judgment on the pleadings with respect to various claims.

Most recently, on November 27, 2018, ChromaDex, Inc.

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

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

The court denied Defendants’ motion on February 4, 2019.

Defendants filed their answer to ChromaDex, Inc.'s fifth amended complaint on February 19, 2019.

ChromaDex, Inc.

answer to Elysium’s restated counterclaims on March 5, 2019.

filed an answer to Elysium’s restated counterclaims on March 5, 2019.

Discovery closed on August 9, 2019.

On August 16, 2019, the parties filed motions for partial summary

judgment as to certain claims and counterclaims.

The parties filed

opposition briefs on August 28, 2019, and reply briefs on September

On October 9, 2019, among other things, the court vacated

the previously scheduled trial date, ordered supplemental briefing

with respect to certain issues related to summary judgment.

filed its opening supplemental brief on October 30, 2019, ChromaDex

filed its opening supplemental brief on November 18, 2019, and

Elysium filed a reply brief on November 27, 2019, and the court

heard argument on January 13, 2020.

On January 16, 2020, the court

granted both parties’

motions for summary judgment in part

and denied both in part.

On ChromaDex’s motion, the court

granted summary judgment in favor of ChromaDex on Elysium’s

counterclaims for (i) breach of contract related to manufacturing

according to the defined standard, selling NIAGEN and

ingredients that are substantially similar to pterostilbene to

other customers, distributing the NIAGEN®

specifications, and failing to provide information concerning the

quality and identity of NIAGEN®, and (ii) breach of the

implied covenant of good faith and fair dealing.

The court denied

summary judgment on Elysium’s counterclaims for (i)

fraudulent inducement of the Trademark License and Royalty

Agreement, dated February 3, 2014, by and between ChromaDex, Inc.

and Elysium (the “License Agreement”), (ii) patent

misuse, and (iii) unjust enrichment.

On Elysium’s motion, the

court granted summary judgment in favor of Elysium on

ChromaDex’s claim for damages related to $110,000 in avoided

costs arising from documents that Elysium used in violation of the

Supply Agreement, dated February 3, 2014, by and between ChromaDex,

and Elysium, as amended (the “NIAGEN®

Agreement”).

The court denied summary judgment on

Elysium’s counterclaim for breach of contract related to

certain refunds or credits to Elysium.

The court also denied

summary judgment on ChromaDex’s breach of contract claim

against Morris and claims for disgorgement of $8.3 million in

Elysium’s resale profits, $600,000 for a price discount

received by Elysium, and $684,781 in Morris’s

compensation.

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

ChromaDex, Inc.

presently asserts in the California Action, among

other allegations, are that (i) Elysium breached the Supply

Agreement, dated June 26, 2014, by and between ChromaDex, Inc.

Elysium (the “pTeroPure®

Supply Agreement”), by

failing to make payments to ChromaDex, Inc.

for purchases of

pTeroPure®

and by improper disclosure of confidential

ChromaDex, Inc.

information pursuant to the pTeroPure®

Agreement, (ii) Elysium breached the NIAGEN®

Supply Agreement,

by failing to make payments to ChromaDex, Inc.

for purchases of

NIAGEN®, (iii) Defendants willfully and maliciously

misappropriated ChromaDex, Inc.

trade secrets concerning its

ingredient sales business under both the California Uniform Trade

Secrets Act and the Federal Defend Trade Secrets Act, (iv) Morris

breached two confidentiality agreements he signed by improperly

stealing confidential ChromaDex, Inc.

documents and information,

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

to and competing with ChromaDex, Inc.

while still employed there,

and (vi) Elysium aided and abetted Morris’s breach of

fiduciary duty.

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

The parties filed opposition briefs on August 28, 2019, and reply briefs on September 4, 2019.

On October 9, 2019, among other things, the court vacated the previously scheduled trial date, ordered supplemental briefing with respect to certain issues related to summary judgment.

Elysium filed its opening supplemental brief on October 30, 2019, ChromaDex filed its opening supplemental brief on November 18, 2019, and Elysium filed a reply brief on November 27, 2019, and the court heard argument on January 13, 2020.

On January 16, 2020, the court granted both parties’ motions for summary judgment in part and denied both in part.

On ChromaDex’s motion, the court granted summary judgment in favor of ChromaDex on Elysium’s counterclaims for (i) breach of contract related to manufacturing NIAGEN® according to the defined standard, selling NIAGEN and ingredients that are substantially similar to pterostilbene to other customers, distributing the NIAGEN® product specifications, and failing to provide information concerning the quality and identity of NIAGEN®, and (ii) breach of the implied covenant of good faith and fair dealing.

The court denied summary judgment on Elysium’s counterclaims for (i) fraudulent inducement of the Trademark License and Royalty Agreement, dated February 3, 2014, by and between ChromaDex, Inc.

and Elysium (the “License Agreement”), (ii) patent misuse, and (iii) unjust enrichment.

On Elysium’s motion, the court granted summary judgment in favor of Elysium on ChromaDex’s claim for damages related to $ 110,000 in avoided costs arising from documents that Elysium used in violation of the Supply Agreement, dated February 3, 2014, by and between ChromaDex, Inc.

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

The court denied summary judgment on Elysium’s counterclaim for breach of contract related to certain refunds or credits to Elysium.

The court also denied summary judgment on ChromaDex’s breach of contract claim against Morris and claims for disgorgement of $8.3 million in Elysium’s resale profits, $600,000 for a price discount received by Elysium, and $684,781 in Morris’s compensation.

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

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

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

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

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

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

trade secrets concerning its ingredient sales business under both the California Uniform Trade Secrets Act and the Federal Defend Trade Secrets Act, (iv) Morris breached two confidentiality agreements he signed by improperly stealing confidential ChromaDex, Inc.

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

by lying to and competing with ChromaDex, Inc.

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

ChromaDex, Inc.

is seeking damages and interest for

Elysium’s alleged breaches of the NIAGEN®

Agreement and pTeroPure®

Supply Agreement and Morris’s

alleged breaches of his confidentiality agreements, compensatory

damages and interest, punitive damages, injunctive relief, and

attorney’s fees for Defendants’

alleged willful and

malicious misappropriation of ChromaDex, Inc.’s trade

secrets, and compensatory damages and interest, disgorgement of all

benefits received, and punitive damages for Morris’s alleged

breach of his fiduciary duty and Elysium’s aiding and

abetting of that alleged breach.

The claims that Elysium presently alleges in the California Action

are that (i) ChromaDex, Inc.

breached the NIAGEN®

Agreement by not issuing certain refunds or credits to Elysium,

(ii) ChromaDex, Inc.

fraudulently induced Elysium into entering

into the License Agreement, (iv) ChromaDex, Inc.’s conduct

constitutes misuse of its patent rights, and (v) ChromaDex, Inc.

was unjustly enriched by the royalties Elysium paid pursuant to the

License Agreement.

Elysium is seeking damages for ChromaDex,

Inc.’s alleged breaches of the NIAGEN®

Supply Agreement,

and compensatory damages, punitive damages, and/or rescission of

the License Agreement and restitution of any royalty payments

conveyed by Elysium pursuant to the License Agreement, and a

declaratory judgment that ChromaDex, Inc.

has engaged in patent

is seeking damages and interest for Elysium’s alleged breaches of the NIAGEN® Supply Agreement and pTeroPure® Supply Agreement and Morris’s alleged breaches of his confidentiality agreements, compensatory damages and interest, punitive damages, injunctive relief, and attorney’s fees for Defendants’ alleged willful and malicious misappropriation of ChromaDex, Inc.’s trade secrets, and compensatory damages and interest, disgorgement of all benefits received, and punitive damages for Morris’s alleged breach of his fiduciary duty and Elysium’s aiding and abetting of that alleged breach.

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

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

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

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

Elysium is seeking damages for ChromaDex, Inc.’s alleged breaches of the NIAGEN® Supply Agreement, and compensatory damages, punitive damages, and/or rescission of the License Agreement and restitution of any royalty payments conveyed by Elysium pursuant to the License Agreement, and a declaratory judgment that ChromaDex, Inc.

has engaged in patent misuse.

On January 17, 2020, Elysium moved to substitute its counsel.

same day, the court ordered hearing on that motion for January 21,

2020, and granted Elysium’s motion at the hearing.

23, 2020, the court issued a scheduling order that, among other

things, set trial on the remaining claims to begin on May 12, 2020.

On March 19, 2020, in light of the global COVID-19 pandemic and

ongoing private mediation efforts, the parties jointly stipulated

to adjourn the trial date.

The Court vacated the trial date on

March 20, 2020.

On May 6, 2020, the Court scheduled a status

conference for June 9, 2020.

The same day, the court ordered hearing on that motion for January 21, 2020, and granted Elysium’s motion at the hearing.

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

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

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

The Court held a telephonic status conference on June 9, 2020, during which the Court indicated that it will reschedule the jury trial as soon as conditions permit.

(B) Patent Office Proceedings

On July 17, 2017, Elysium filed petitions with the U.S.

Trademark Office for 

partes  review of U.S.

Patents 8,197,807 (the “’807 Patent”) and

8,383,086 (the “’086 Patent”), patents to which

ChromaDex, Inc.

Patent and Trademark Office for inter partes review of U.S.

Patents 8,197,807 (the “’807 Patent”) and 8,383,086 (the “’086 Patent”), patents to which ChromaDex, Inc.

is the exclusive licensee.

The Patent Trial and

Appeal Board (“PTAB”) denied institution of

partes  review for the

’807 Patent on January 18, 2018.

On January 29, 2018, the

PTAB granted institution of the 

partes  review as to claims

1 and 3-5 and denied institution as to claim 2 of the ’086

The Patent Trial and Appeal Board (“PTAB”) denied institution of the inter partes review for the ’807 Patent on January 18, 2018.

On January 29, 2018, the PTAB granted institution of the inter partes review as to claims 1 and 3-5 and denied institution as to claim 2 of the ’086 Patent.

Based upon a recent U.S.

Supreme Court decision, and solely

on a procedural basis, the PTAB was required to include claim 2 in

the trial of the 

partes  review.

was heard on October 2, 2018.

The PTAB issued its written decision

on January 16, 2019, upholding claim 2 of the ’086 Patent

which relates to the use of isolated NR in a pharmaceutical

composition as valid.

Elysium is now prevented from raising

invalidity arguments against the ’086 Patent in the ongoing

patent litigation in Delaware that it brought or could have brought

before the PTAB in its 

partes  review.

appealed the PTAB’s decision with respect to claim 2 on March

A cross-appeal with respect to claims 1 and 3–5 was

filed on March 20, 2019.

Supreme Court decision, and solely on a procedural basis, the PTAB was required to include claim 2 in the trial of the inter partes review.

The matter was heard on October 2, 2018.

The PTAB issued its written decision on January 16, 2019, upholding claim 2 of the ’086 Patent which relates to the use of isolated NR in a pharmaceutical composition as valid.

Elysium is now prevented from raising invalidity arguments against the ’086 Patent in the ongoing patent litigation in Delaware that it brought or could have brought before the PTAB in its inter partes review.

Elysium appealed the PTAB’s decision with respect to claim 2 on March 6, 2019.

A cross-appeal with respect to claims 1 and 3–5 was filed on March 20, 2019.

Elysium filed its opening brief on June 17, 2019.

Dartmouth moved to voluntarily dismiss its cross-appeal

on August 14, 2019.

Dartmouth moved to voluntarily dismiss its cross-appeal on August 14, 2019.

The motion was granted on August 18, 2019.

Dartmouth’s response brief was filed on August 28, 2019.

Elysium’s reply brief was filed on October 9, 2019.

argument on Elysium’s appeal was heard on March 5, 2020.

March 6, 2020, the United States Court of Appeals for the Federal

Circuit affirmed the PTAB’s decision, rejecting Elysium's

attempt to invalidate claim 2 of the '086

Dartmouth’s response brief was filed on August 28, 2019.

Elysium’s reply brief was filed on October 9, 2019.

Oral argument on Elysium’s appeal was heard on March 5, 2020.

On March 6, 2020, the United States Court of Appeals for the Federal Circuit affirmed the PTAB’s decision, rejecting Elysium's attempt to invalidate claim 2 of the '086 patent.

On September 27, 2017, Elysium Health Inc.

("Elysium Health") filed

a complaint in the United States District Court for the Southern

District of New York, against ChromaDex, Inc.

(the “Elysium

SDNY Complaint”).

Elysium Health alleges in the Elysium SDNY

Complaint that ChromaDex, Inc.

made false and misleading statements

in a citizen petition to the Food and Drug Administration it filed

on or about August 18, 2017.

Among other allegations, Elysium

Health avers that the citizen petition made Elysium Health’s

product appear dangerous, while casting ChromaDex, Inc.’s own

product as safe.

The Elysium SDNY Complaint asserts four claims for

("Elysium Health") filed a complaint in the United States District Court for the Southern District of New York, against ChromaDex, Inc.

(the “Elysium SDNY Complaint”).

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

made false and misleading statements in a citizen petition to the Food and Drug Administration it filed on or about August 18, 2017.

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

The Elysium SDNY Complaint asserts four claims for relief:

(i) false advertising under the Lanham Act, 15 U.S.C.

(ii) trade libel;

(iii) deceptive business

practices under New York General Business Law §

tortious interference with prospective economic relations.

ChromaDex, Inc.

denies the claims in the Elysium SDNY Complaint and

intends to defend against them vigorously.

On October 26, 2017,

(iii) deceptive business practices under New York General Business Law § 349;

and (iv) tortious interference with prospective economic relations.

ChromaDex, Inc.

moved to dismiss the Elysium SDNY Complaint on the

grounds that, inter alia, its statements in the citizen petition

are immune from liability under the Noerr-Pennington Doctrine, the

litigation privilege, and New York’s Anti-SLAPP statute, and

that the Elysium SDNY Complaint failed to state a claim.

Health opposed the motion on November 2, 2017.

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

On October 26, 2017, ChromaDex, Inc.

moved to dismiss the Elysium SDNY Complaint on the grounds that, inter alia, its statements in the citizen petition are immune from liability under the Noerr-Pennington Doctrine, the litigation privilege, and New York’s Anti-SLAPP statute, and that the Elysium SDNY Complaint failed to state a claim.

Elysium Health opposed the motion on November 2, 2017.

ChromaDex, Inc.

1 unchanged sentence

On October 26, 2017, ChromaDex, Inc.

filed a complaint in the

United States District Court for the Southern District of New York

against Elysium Health (the “ChromaDex SDNY

Complaint”).

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

ChromaDex, Inc.

alleges that Elysium Health made

material false and misleading statements to consumers in the

promotion, marketing, and sale of its health supplement product,

Basis, and asserts five claims for relief:

(i) false advertising

under the Lanham Act, 15 U.S.C.

§1125(a);

competition under 15 U.S.C.

(iii) deceptive

practices under New York General Business Law §

deceptive practices under New York General Business Law §

alleges that Elysium Health made material false and misleading statements to consumers in the promotion, marketing, and sale of its health supplement product, Basis, and asserts five claims for relief:

(i) false advertising under the Lanham Act, 15 U.S.C.

(ii) unfair competition under 15 U.S.C.

(iii) deceptive practices under New York General Business Law § 349;

(iv) deceptive practices under New York General Business Law § 350;

and (v) tortious interference with prospective economic advantage.

On November 16, 2017, Elysium Health moved to dismiss for failure

to state a claim.

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

ChromaDex, Inc.

opposed the motion on November

30, 2017 and Elysium Health filed a reply on December 7,

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

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

On November 3, 2017, the Court consolidated the Elysium SDNY Complaint and the ChromaDex SDNY Complaint actions under the caption In re Elysium Health-ChromaDex Litigation, 17-cv-7394, and stayed discovery in the consolidated action pending a Court-ordered mediation.

The mediation was unsuccessful.

On September 27, 2018,

the Court issued a combined ruling on both parties’

For ChromaDex’s motion to dismiss, the Court

converted the part of the motion on the issue of whether the

citizen petition is immune under the Noerr-Pennington Doctrine into

a motion for summary judgment, and requested supplemental evidence

from both parties, which were submitted on October 29, 2018.

Court otherwise denied the motion to dismiss.

On January 3, 2019,

the Court granted ChromaDex, Inc.’s motion for summary

judgment under the Noerr-Pennington Doctrine and dismissed all

claims in the Elysium SDNY Complaint.

Elysium moved for

reconsideration on January 17, 2019.

The Court denied

Elysium’s motion for reconsideration on February 6, 2019, and

issued an amended final order granting ChromaDex, Inc.’s

motion for summary judgment on February 7, 2019.

The Court granted in part and denied in part Elysium’s motion

to dismiss, sustaining three grounds for ChromaDex’s Lanham

Act claims while dismissing two others, sustaining the claim under

New York General Business Law §

349, and dismissing the claims

under New York General Business Law §

350 and for tortious

interference.

Elysium filed an answer and counterclaims on October

10, 2018, alleging claims for (i) false advertising under the

Lanham Act, 15 U.S.C.

§1125(a);

(ii) unfair competition under

and (iii) deceptive practices under New

York General Business Law §

ChromaDex answered

Elysium’s counterclaims on November 2, 2018.

ChromaDex, Inc.

filed an amended complaint on March 27, 2019,

adding new claims against Elysium Health for false advertising and

unfair competition under the Lanham Act, 15 U.S.C.

On April 10, 2019, Elysium Health answered the amended complaint

and filed amended counterclaims, also adding new claims against

ChromaDex, Inc.

for false advertising and unfair competition under

the Lanham Act, 15 U.S.C.

On July 1, 2019, Elysium

Health filed further amended counterclaims, adding new claims under

the Copyright Act §§

On February 9, 2020,

On September 27, 2018, the Court issued a combined ruling on both parties’ motions to dismiss.

For ChromaDex’s motion to dismiss, the Court converted the part of the motion on the issue of whether the citizen petition is immune under the Noerr-Pennington Doctrine into a motion for summary judgment, and requested supplemental evidence from both parties, which were submitted on October 29, 2018.

The Court otherwise denied the motion to dismiss.

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

Elysium moved for reconsideration on January 17, 2019.

The Court denied Elysium’s motion for reconsideration on February 6, 2019, and issued an amended final order granting ChromaDex, Inc.’s motion for summary judgment on February 7, 2019.

The Court granted in part and denied in part Elysium’s motion to dismiss, sustaining three grounds for ChromaDex’s Lanham Act claims while dismissing two others, sustaining the claim under New York General Business Law § 349, and dismissing the claims under New York General Business Law § 350 and for tortious interference.

Elysium filed an answer and counterclaims on October 10, 2018, alleging claims for (i) false advertising under the Lanham Act, 15 U.S.C.

(ii) unfair competition under 15 U.S.C.

and (iii) deceptive practices under New York General Business Law § 349.

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

ChromaDex, Inc.

filed a motion for leave to amend its complaint to

add additional claims against Elysium Health for false advertising

and unfair competition.

On February 10, 2020, Elysium Health filed

a motion for leave to amend its counterclaims to identify allegedly

false and misleading statements in ChromaDex’s advertising.

filed an amended complaint on March 27, 2019, adding new claims against Elysium Health for false advertising and unfair competition under the Lanham Act, 15 U.S.C.

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

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

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

On February 9, 2020, ChromaDex, Inc.

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

On February 10, 2020, Elysium Health filed a motion for leave to amend its counterclaims to identify allegedly false and misleading statements in ChromaDex’s advertising.

Those motions were both granted after respective stipulations.

March 12, 2020, Elysium Health answered the second amended

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

On March 13, 2020, ChromaDex, Inc.

filed an answer and

objection to Elysium Health’s third amended

counterclaims.

The Company is unable to predict the outcome of these matters and,

at this time, cannot reasonably estimate the possible loss or range

of loss with respect to the legal proceedings discussed herein.

of March 31, 2020, ChromaDex, Inc.

did not accrue a potential loss

for the California Action or the Elysium SDNY Complaint because

ChromaDex, Inc.

believes that the allegations are without merit and

thus it is not probable that a liability has been

(D) Delaware –

Patent Infringement Action

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

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

As of June 30, 2020, ChromaDex, Inc.

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

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

(D) Delaware – Patent Infringement Action

On September 17, 2018, ChromaDex, Inc.

and Trustees of Dartmouth

College filed a patent infringement complaint in the United States

District Court for the District of Delaware against Elysium Health,

The complaint alleges that Elysium’s BASIS®

supplement violates U.S.

Patents 8,197,807 (the “’807

Patent”) and 8,383,086 (the “’086 Patent”)

that comprise compositions containing isolated nicotinamide

riboside held by Dartmouth and licensed exclusively to ChromaDex,

and Trustees of Dartmouth College filed a patent infringement complaint in the United States District Court for the District of Delaware against Elysium Health, Inc.

The complaint alleges that Elysium’s BASIS® dietary supplement violates U.S.

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

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

The answer asserts various affirmative defenses and denies that

Plaintiffs are entitled to any relief.

On November 7, 2018, Elysium filed a motion to stay the patent

infringement proceedings pending resolution of (1)

partes  review of the

’807 Patent and the ’086 Patent before the Patent Trial

and Appeal Board (“PTAB”) and (2) the outcome of the

litigation in the California Action.

The answer asserts various affirmative defenses and denies that Plaintiffs are entitled to any relief.

On November 7, 2018, Elysium filed a motion to stay the patent infringement proceedings pending resolution of (1) the inter partes review of the ’807 Patent and the ’086 Patent before the Patent Trial and Appeal Board (“PTAB”) and (2) the outcome of the litigation in the California Action.

ChromaDex, Inc.

opposition brief on November 21, 2018 detailing the issues with

Elysium’s motion to stay.

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

In particular, ChromaDex, Inc.

argued that given claim 2 of the ’086 Patent was only

included in the PTAB’s 

partes  review for

procedural reasons the PTAB was unlikely to invalidate claim 2 and

therefore litigation in Delaware would continue regardless.

addition, ChromaDex, Inc.

argued that the litigation in the

California Action is unlikely to have a significant effect on the

ongoing patent litigation.

After the PTAB released its written

decision upholding claim 2 of the ’086 Patent, proving right

ChromaDex, Inc.’s prediction, ChromaDex, Inc.

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

June 19, 2019, the Delaware court granted in part and denied in

part Elysium’s motion, ordering that the case was stayed

pending the resolution of Elysium’s patent misuse

counterclaim in the California Action.

argued that given claim 2 of the ’086 Patent was only included in the PTAB’s inter partes review for procedural reasons the PTAB was unlikely to invalidate claim 2 and therefore litigation in Delaware would continue regardless.

In addition, ChromaDex, Inc.

argued that the litigation in the California Action is unlikely to have a significant effect on the ongoing patent litigation.

After the PTAB released its written decision upholding claim 2 of the ’086 Patent, proving right ChromaDex, Inc.’s prediction, ChromaDex, Inc.

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

On June 19, 2019, the Delaware court granted in part and denied in part Elysium’s motion, ordering that the case was stayed pending the resolution of Elysium’s patent misuse counterclaim in the California Action.

On November 1, 2019, ChromaDex, Inc.

filed a motion to lift the

stay due to changed circumstances in the California Action, among

other reasons.

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

Briefing on the motion was completed on November 22, 2019.

On January 6, 2020, the Delaware court issued an oral order

instructing the parties to submit a joint status report after the

January 13, 2020 motions hearing in the California Action.

joint status report was submitted on January 30, 2020.

4, 2020, the Delaware court issued an order granting ChromaDex,

Inc.’s motion to lift the stay and setting a scheduling

conference for March 10, 2020.

On March 19, 2020, the Delaware

court entered a scheduling order, which, among other things, set

the claim-construction hearing for December 17, 2020 and trial for

the week of September 27, 2021.

On January 6, 2020, the Delaware court issued an oral order instructing the parties to submit a joint status report after the January 13, 2020 motions hearing in the California Action.

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

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

On March 19, 2020, the Delaware court entered a scheduling order, which, among other things, set the claim-construction hearing for December 17, 2020 and trial for the week of September 27, 2021.

On April 17, 2020, ChromaDex, Inc.

1 unchanged sentence

On April 24, 2020, ChromaDex, Inc.

moved for leave to amend the complaint to add Healthspan Research,

LLC as a plaintiff.

On May 5, 2020, Elysium filed its opposition to

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

dismiss ChromaDex, Inc.

moved for leave to amend the complaint to add Healthspan Research, LLC as a plaintiff.

On May 5, 2020, Elysium filed its opposition to ChromaDex, Inc.’s motion for leave to amend and moved to dismiss ChromaDex, Inc.

for alleged lack of standing.

will file its opposition to Elysium’s motion to dismiss

on May 19, 2020.

Legal proceedings –

Utah Lanham Act Action

On March 6, 2019, Novex Biotech LLC (“Novex”) filed an

action in the Third Judicial District Court County of Salt Lake,

State of Utah against ChromaDex, Inc.

and 10 fictional defendants.

The complaint alleges that Novex markets a dietary supplement,

Oxydrene Elite, that competes with ChromaDex’s product, TRU

The complaint further alleges that ChromaDex, Inc.

violated the Lanham Act by making false or misleading claims for

Novex is seeking an injunction and damages for the

competitive harm it alleges to have suffered.

ChromaDex, Inc.

timely removed the action to federal court in the

District of Utah.

ChromaDex answered the complaint and also filed

counterclaims against Novex under the Lanham Act and California

ChromaDex’s counterclaims allege that Novex has

falsely advertised its product called Oxydrene.

Novex moved to

dismiss the counterclaims and ChromaDex has opposed this motion.

March 13, 2020 the case was dismissed with prejudice.

From time to time we are involved in legal proceedings arising in

the ordinary course of our business.

We believe that there is no

other litigation pending that is likely to have, individually or in

the aggregate, a material adverse effect on our financial condition

or results of operations.

filed its opposition to Elysium’s motion to dismiss and reply in support of its motion to amend on May 19, 2020.

Elysium filed its reply in support of its motion to dismiss on May 26, 2020.

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

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

The parties’ Joint Claim Construction Brief is due on November 5, 2020.

The Court will hold a Markman hearing on claim-construction issues on December 17, 2020.

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

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

Contingencies

In September 2019, the Company received a letter from a licensor

stating that the Company owed the licensor $1.6 million plus

interest of sublicense fees as a result of the Company entering

into the supply agreement with a customer.

After reviewing the

relevant facts and circumstances, the Company believes that the

Company does not owe any sublicense fees to the licensor and has

corresponded with the licensor to resolve the matter.

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.

Subsequent to the period ended March 31, 2020, the Company

entered into a private placement with related parties and sold

approximately 1.2 million shares for $5.0 million at $4.08 per

The selling price was determined by the average closing

price over the ten trading days immediately preceding the date of

private placement.

M A NAGEMENT'S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this Management's Discussion and Analysis

(“MD&A”), other than purely historical information,

including estimates, projections, statements relating to our

business plans, objectives and expected operating results, and the

assumptions upon which those statements are based, are

"forward-looking statements" within the meaning of the Private

Securities Litigation Reform Act of 1995, Section 27A of the

Securities Act of 1933 and Section 21E of the Securities Exchange

Act of 1934, as amended.

Forward-looking statements generally can

be identified by the use of forward-looking terminology such as

“may,”

“would,”

“expect,”

“intend,”

“could,”

“estimate,”

“should,”

“anticipate,”

“believe,”

expressions.  Forward-looking statements are based on

current expectations and assumptions that are subject to risks and

uncertainties which may cause actual results to differ materially

from the forward-looking statements. We undertake no

obligation to update or revise publicly any forward-looking

statements, whether as a result of new information, future events,

or otherwise.  Readers should carefully review the risk

factors and related notes  

set forth below in Part II,

Item 1A, “Risk Factors”

and included under Part I, Item

1A, “Risk Factors”

of our Annual Report on Form 10-K

for the year ended December 31, 2019 filed with the Securities and

Exchange Commission on March 10, 2020 (our “Annual

Report”).

The following MD&A is intended to help readers understand the

results of our operation and financial condition, and is provided

as a supplement to, and should be read in conjunction with, our

Interim Unaudited Financial Statements and the accompanying Notes

to Interim Unaudited Financial Statements under Part 1, Item 1 of

this Quarterly Report on Form 10-Q.

Growth and percentage comparisons made herein generally refer to

the three months ended March 31, 2020 compared with the three

months ended March 31, 2019 unless otherwise noted.

otherwise indicated or unless the context otherwise requires, all

references in this document to “we,”

“us,”

“our,”

the “Company,”

“ChromaDex”

and similar expressions refer to ChromaDex

Corporation, and depending on the context, its

subsidiaries.

Company Overview

ChromaDex is a  

science-based integrated nutraceutical company

devoted to improving the way people age.

ChromaDex scientists

partner with leading universities and research institutions

worldwide to discover, develop and create solutions to deliver the

full potential of nicotinamide adenine dinucleotide ("NAD") and its

impact on human health.

NAD is an essential coenzyme and a key regulator of cellular

Best known for its role in cellular energy production,

NAD is now thought to play an important role in healthy aging.

cellular functions related to health and healthy aging are

sensitive to levels of locally available NAD and this represents an

active area of research in the field of NAD.

NAD levels are not constant, and in humans, NAD levels have been

shown to decline by more than 50% from young adulthood to middle

NAD continues to decline as humans grow older.

There are other

causes of reduced NAD levels such as over-nutrition, alcohol

consumption and a number of disease states.

NAD may also be

increased, including through calorie restriction

Healthy aging, mitochondria and NAD

continue to be areas of focus in the research community.

2019, there were over 250 published human clinical studies on NAD.

The areas of study include Alzheimer’s disease,

Parkinson’s disease, neuropathy and heart

In 2013, ChromaDex commercialized NIAGEN®

riboside ("NR"), a novel form of vitamin B3.

Data from numerous

animal studies, and confirmed in human clinical trials, show that

NR is a highly efficient NAD precursor that significantly raises

is safe for human consumption.

has twice been successfully reviewed under FDA's new

dietary ingredient (“NDI”) notification program, has

been successfully notified to the FDA as generally recognized as

safe (“GRAS”), and has been approved by Health Canada,

the European Commission and the Therapeutic Goods Administration of

Animal studies of NIAGEN®

have demonstrated a

variety of outcomes ranging from increased NAD levels, increased

cellular metabolism and energy production to improvements in

insulin sensitivity.

is the trade name for our

proprietary ingredient NR, and is protected by patents to which we

are the exclusive licensee.

ChromaDex is the world leader in the emerging NAD space.

has approximately 195 partnerships with leading universities and

research institutions around the world including the National

Institutes of Health, Cornell, Dartmouth, Harvard, Massachusetts

Institute of Technology, University of Cambridge and the Mayo

Other relationships are currently being

Our scientific advisory board is led by Chairman Dr.

Kornberg, Nobel Laureate Stanford Professor, Dr.

Charles Brenner,

one of the world’s recognized experts in NAD and inventor of

nicotinamide riboside, Dr.

Rudi Tanzi, the co-chair of the

department of neurology at Harvard Medical School and one of the

world’s leading experts in food and nutrition, Sir John

Walker, Nobel Laureate and Emeritus Director, MRC Mitochondrial

Biology Unit in the University of Cambridge, England, Dr.

German, Chairman of food, nutrition and health at the University of

California, Davis, and Dr.

Brunie Felding, Associate Professor,

Department of Molecular Medicine at Scripps Research Institute,

California Campus.

Impact of COVID-19

The COVID-19 pandemic continues to drive global uncertainty and

It has impacted certain parts of our business,

including, among other things, decreased sales from our

international partner A.S.

Watson group in Hong Kong due to its

store closures and reduced operating hours.

Our overall TRU

consumer product operations continued strong growth in

the first quarter of 2020 as net sales were up 10% compared to the

fourth quarter of 2019 and by 50% compared to the first quarter of

It is too early to know if COVID-19 will be positive or

negative for our business, but we have been operating

conservatively given the economic uncertainty.

We have experienced shipment delays from our suppliers;

have not encountered any major disruptions in our supply chain.

have been increasing our overall inventory levels since 2018 in

anticipation of high sales growth and have maintained adequate

safety stocks to support such growth.

We currently have adequate

inventory on hand to meet our current demands.

Overall, we believe

the supply chain disruptions arising from COVID-19 will not have a

material impact to our business operations.

In response to the outbreak, we prioritized the health and safety

of our employees by closing our offices or enhancing safety

protocols in place to ensure the well-being of our employees.

have been able to successfully conduct business

Financial Condition and Results of Operations

discussion and analysis of our financial condition and results of

operations is based on our financial statements, which have been

prepared in accordance with U.S.

generally accepted accounting

principles (“GAAP”).

The preparation of these financial

statements requires our management to make estimates and

assumptions that affect the reported amounts of assets and

liabilities and the disclosure of contingent assets and liabilities

at the date of the financial statements, as well as the reported

revenues, if any, and expenses during the reporting periods.

ongoing basis, we evaluate such estimates and judgments, including

those described in greater detail below.

We base our estimates on

historical experience and on various other factors that we believe

are reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying value of assets

and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different

assumptions or conditions.

On April 27, 2020,  

the Company entered into a

Securities Purchase Agreement with its existing stockholders

Winsave Resources Limited and Pioneer Step Holdings Limited,

pursuant to which the Company agreed to sell and issue an aggregate

of $5.0 million of the Company’s common stock at a purchase

price of $4.08 per share.

The selling price was determined by the

average closing price over the ten trading days immediately

preceding the date of Securities Purchase Agreement.

The financing

closed on May 7, 2020, pursuant to which the Company issued

approximately 1.2 million shares of its common

March 31, 2020, the Company had approximately $13.6 million of cash

and cash equivalents on hand.

We anticipate that our current cash,

cash equivalents, cash to be generated from operations, $5.0

million received from the Financing described above and available

line of credit up to $7.0 million from Western Alliance Bank will

be sufficient to meet our projected operating plans for at least

the next twelve months.

We may, however, seek additional capital in

the next twelve months, both to meet our projected operating plans

after the next twelve months and/or to fund our longer term

strategic objectives.

capital may come from public and/or private stock or debt

offerings, borrowings under lines of credit or other sources.

additional funds may not be available on favorable terms, or at

Further, if we issue equity or debt securities to raise

additional funds, our existing stockholders may experience dilution

and the new equity or debt securities we issue may have rights,

preferences and privileges senior to those of our existing

stockholders.

In addition, if we raise additional funds through

collaboration, licensing or other similar arrangements, it may be

necessary to relinquish valuable rights to our products or

proprietary technologies, or to grant licenses on terms that are

not favorable to us.

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, achieve long term

strategic objectives, 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.

Further, as a result

of the COVID-19 pandemic and actions taken to slow its spread, the

global credit and financial markets have experienced extreme

volatility, including diminished liquidity and credit availability,

declines in consumer confidence, declines in economic growth,

increases in unemployment rates and uncertainty about economic

There can be no assurance that further deterioration in

credit and financial markets and confidence in economic conditions

will not occur.

If equity and credit markets deteriorate, it may

make any necessary debt or equity financing more difficult to

obtain, more costly and/or more dilutive.

our operations are subject to regulation by various state and

federal agencies.

In addition, we expect a significant increase in

the regulation of our target markets.

Dietary supplements are

subject to Food and Drug Administration (the "FDA"), Federal Trade

Commission and U.S.

Department of Agriculture regulations relating

to composition, labeling and advertising claims.

These regulations

may in some cases, particularly with respect to those applicable to

new ingredients, require a notification that must be submitted to

the FDA along with evidence of safety.

There are similar

regulations related to food additives.

sales and net loss for the three-month periods ending on March 31,

2020 and March 31, 2019 were as follows:

months ending

$ 14,345  

$ 10,048  

and diluted loss per common share

consist of gross

sales less discounts and returns.

months ending

  Consumer

$ 11,144  

$ 7,454  

  Ingredients

  Analytical

reference standards and services

     Total net sales

$ 14,345  

$ 10,048  

The Company's TRU

sales for the consumer products segment continue to

increase after the Company's strategic shift towards consumer

products in 2017.

The increase in

sales for the ingredients segment is largely due to the increased

sales of our flagship ingredient NIAGEN®.

The demand from our

customers increased as we gain more consumer awareness for our

NIAGEN®.

The decrease in

sales for the analytical reference standards and services for the

three months ended March 31, 2020 is largely due to the spinoff of

regulatory consulting business unit in November 2019, which

generated net sales of approximately $216,000 in the first quarter

In addition, the sales of analytical reference standards

also decreased largely due to COVID-19.

Cost of Sales

sales include raw  

materials, labor, overhead, and

delivery costs.

months ending

Cost of sales:

  Consumer

$ 4,302  

$ 3,071  

  Ingredients

  Analytical

reference standards and services

     Total cost of sales

$ 6,034  

$ 4,747  

cost of sales, as a percentage of net sales, decreased by 5% for

the three-month period ended March 31, 2020 compared to the

comparable period in 2019.

The cost of sales,

as a percentage of net sales, for the consumer products segment was

39% and decreased by 2% compared to 2019.

Compared to the other

segments, the consumer products segment experienced better margins

due to the positive impact of TRU NIAGEN®

The cost of sales,

as a percentage of net sales, for the ingredients segment decreased

9% compared to 2019.

In the first quarter of 2019, we had an

inventory write off of approximately $154,000 related to our

decision to wind down sales for a certain ingredient.

The cost of sales,

as a percentage of net sales for the analytical reference standards

and services segment, increased 15% for the thee-month period ended

March 31, 2020.

The decrease in analytical reference standards

sales led to a lower labor utilization rate, which resulted in

increasing our cost of sales as a percentage of net

profit is net sales less the cost of sales and is affected by a

number of factors including product mix, competitive pricing and

costs of products and services.

months ending

Gross profit:

  Consumer

$ 6,842  

$ 4,383  

  Ingredients

  Analytical

reference standards and services

     Total gross profit

$ 8,311  

$ 5,301  

products segment posted gross profit of $6.8 million for the

three-month period ending March 31, 2020, an increase of 56%

compared to 2019.

The increased gross

profit for the ingredients segment was largely due to an increase

in sales of our NIAGEN®

to key customers.

The decreased gross

profit for the analytical reference standards and services segment

for the three-month period ended March 31, 2020 is largely due to

the decreased sales of analytical reference standards.

chain labor costs make up a substantial portion of the costs and

these fixed labor costs did not decrease in proportion to sales,

hence yielding lower profit margin.

Operating Expenses-Sales and Marketing

and marketing expenses  

consist of salaries, advertising

and marketing expenses.

months ending

Sales and marketing expenses:

  Consumer

$ 4,409  

$ 3,917  

  Ingredients

  Analytical

reference standards and services

     Total sales and marketing

$ 4,447  

$ 4,174  

For the consumer

products segment, the increase during the three-month period ended

March 31, 2020 is largely due to increased staffing as well as

direct marketing expenses associated with social media and other

customer awareness and acquisition programs.

For the ingredients

segment, we reversed approximately $114,000 of certain accrued

commission expense during the three-month period ended March 31,

2020, as we were no longer obligated to pay the

For the analytical

reference standards and services segment, the decrease for the

three-month period is mainly due to decreased sales and marketing

Operating Expenses-Research and Development

and development expenses mainly consist of clinical trials and

process development expenses.

months ending

Research and development expenses:

  Consumer

  Ingredients

     Total research and development

$ 1,168  

We are allocating

the research and development expenses related to our NIAGEN®

branded ingredient to the consumer products and ingredients

segment, based on revenues recorded.

Overall, we decreased our

research and development efforts during the three-month period

ended March 31, 2020 as we evaluate and realign the priorities of

our ongoing research and development efforts of our flagship

ingredient, NIAGEN®

nicotinamide riboside.

Operating Expenses-General and Administrative

and administrative  

expenses consist of general

company administration, legal, IT, accounting and executive

management expenses.

months ending

     General and

administrative

$ 8,835  

$ 8,331  

three-month period ended March 31, 2020, we incurred approximately

$1.0 million of severance and restructuring expenses.

expenses relate to alignment of the business operations to reduce

redundancies and improve efficiencies as we scale the

tax assets are reduced by a valuation allowance when, in the

opinion of management, it is more likely than not that some portion

or all of the deferred tax assets will not be realized.

31, 2020, and March 31, 2019, the Company maintained a full

valuation allowance against the entire deferred income tax balance

which resulted in an effective tax rate of approximately 0% for the

three-month periods ended March 31, 2020, and March 31, 2019,

respectively.

As defined in ASC 740, Income Taxes, future

realization of the tax benefit will depend on the existence of

sufficient taxable income, including the expectation of continued

future taxable income.

Depreciation and Amortization

expense for the three-month period ended March 31, 2020 was

approximately $214,000 as compared to $173,000 for the three-month

period ended March 31, 2019.

We depreciate our assets on a

straight-line basis, based on the estimated useful lives of the

respective assets.

expense of intangible assets for the three-month period ended March

31, 2020 was approximately $62,000 as compared to $61,000 for the

three-month period ended March 31, 2019.

We amortize intangible

assets using a straight-line method, generally over 10 years.

licensed patent rights, the useful lives are 10 years or the

remaining term of the patents underlying licensing rights,

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.

expense of right of use assets for the three-month period ended

March 31, 2020 was approximately $92,000 as compared to $138,000

for the three-month period ended March 31, 2019.

Liquidity and Capital Resources

inception through March 31, 2020, we have incurred aggregate losses

of approximately $127.8 million.

These losses are primarily due to

expenses associated with the development and expansion of our

These operations have been financed through capital

contributions, the issuance of common stock and warrants through

private placements, and the issuance of debt.

board of directors periodically reviews our capital requirements in

light of our proposed business plan.

Our future capital

requirements will remain dependent upon a variety of factors,

including cash flow from operations, the ability to increase sales,

increasing our gross profits from current levels, reducing selling

and administrative expenses as a percentage of net sales, continued

development of customer relationships, and our ability to market

our new products successfully.

However, based on our results from

operations, we may determine that we need additional financing to

implement our business plan.

There can be no assurance that any

such financing will be available on terms favorable to us or at

Without adequate financing we may have to further delay or

terminate product and service expansion and curtail certain

selling, general and administrative expenses.

Any inability to

raise additional financing would have a material adverse effect on

On April 27, 2020, the Company entered into a Securities

Purchase Agreement with its existing stockholders Winsave Resources

Limited and Pioneer Step Holdings Limited, pursuant to which the

Company agreed to sell and issue an aggregate of $5.0 million of

the Company’s common stock at a purchase price of $4.08 per

The selling price was determined by the average closing

price over the ten trading days immediately preceding the date of

Securities Purchase Agreement.

The financing closed on May 7, 2020,

pursuant to which the Company issued approximately 1.2 million

shares of its common stock.

we anticipate that our current cash, cash equivalents, cash to be

generated from operations, $5.0 million received from the Financing

described above and available line of credit up to $7.0 million

from Western Alliance Bank will be sufficient to meet our projected

operating plans for at least the next twelve months, we may require

additional funds, either through additional equity or debt

financings or collaborative agreements or from other sources.

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.

If adequate financing is not available,

the Company will further delay, postpone or terminate product and

service expansion and curtail certain selling, general and

administrative operations.

The inability to raise additional

financing may have a material adverse effect on the future

performance of the Company.

Further, as a result of the COVID-19

pandemic and actions taken to slow its spread, the global credit

and financial markets have experienced extreme volatility,

including diminished liquidity and credit availability, declines in

consumer confidence, declines in economic growth, increases in

unemployment rates and uncertainty about economic stability.

can be no assurance that further deterioration in credit and

financial markets and confidence in economic conditions will not

If equity and credit markets deteriorate, it may make any

necessary debt or equity financing more difficult to obtain, more

costly and/or more dilutive.

Net cash used in operating activities

cash used in operating activities for the three months ended March

31, 2020 was approximately $5.2 million as compared to

approximately $3.0 million for the three months ended March 31,

Along with the net loss, a decrease in allowance for doubtful

trade receivables and a decrease in accounts payable were the

largest uses of cash during the three-month period ended March 31,

2020, partially offset by a decrease in trade receivables and

noncash share-based compensation expense.

Net cash used in

operating activities for the three months ended March 31, 2019

largely reflects net loss, partially offset by an increase in

deferred revenue and noncash share-based compensation

expect our operating cash flows to fluctuate significantly in

future periods as a result of fluctuations in our operating

results, shipment timetables, accounts receivable collections,

inventory management, and the timing of our payments, among other

Net cash used in investing activities

cash used in investing activities was approximately $20,000 for the

three months ended March 31, 2020, compared to approximately $0.3

million for the three months ended March 31, 2019.

Net cash used in

investing activities for the three months ended March 31, 2020

mainly consisted of purchases of leasehold improvements and

Net cash used in investing activities for the three

months ended March 31, 2019 also consisted of purchases of

leasehold improvements and equipment.

Net cash provided by financing activities

cash provided by financing activities was approximately $37,000 for

the three months ended March 31, 2020, compared to approximately

$55,000 for the three months ended March 31, 2019.

provided by financing activities for the three months ended March

31, 2020 primarily consisted of proceeds from exercise of stock

options, partially offset by principal payments on finance leases.

Net cash provided financing activities for the three months ended

March 31, 2019 also consisted of proceeds from exercise of stock

options, partially offset by principal payments on finance

Contractual Obligations and Commitments

the three months ended March 31, 2020, there were no material

changes outside of the ordinary course of business in the specified

contractual obligations disclosed in “Management’s

Discussion and Analysis of Financial Condition and Results of

Operations,”

as contained in our Annual Report, other than as

disclosed in “Item 1 Financial Statements”

Quarterly Report.

Off-Balance Sheet Arrangements

the three months ended March 31, 2020, we had no material

off-balance sheet arrangements.

Q UANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

In September 2019, the Company received a letter from a licensor stating that the Company owed the licensor $1.6 million plus interest of sublicense fees as a result of the Company entering into the supply agreement with a customer.

After reviewing the relevant facts and circumstances, the Company believes that the Company does not owe any sublicense fees to the licensor and has corresponded with the licensor to resolve the matter.

The Company does not believe that the ultimate resolution of this matter will be material to the Company’s results of operations, financial condition or cash flows.

Subsequent Event

Subsequent to the period ended June 30, 2020, the Company entered into a lease amendment to lease additional space located in Longmont, Colorado.

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

Pursuant to the lease amendment, the Company will make additional total lease payments of approximately $ 1.1 million during the term of the lease.

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 1. Financial Statements