What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-06 · 117 added, 132 removed, 531 unchanged (32% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2020 and December 31, 2019

September 30, 2020 and December 31, 2019

(In thousands, except per share data)

26 unchanged sentences

authorized 150,000 shares;

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

issued and outstanding September 30, 2020 61,587 shares and

December 31, 2019 59,562 shares

7 unchanged sentences

Condensed Consolidated Statements of Operations

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

For the Three and the Nine Month Periods Ended September 30, 2020 and September 30, 2019

(In thousands, except per share data)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

Cost of sales

14 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

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

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

(In thousands)

Stockholders'

Balance, March 31, 2020

Issuance of common stock,

net of offering costs of $0.1 million

Balance, June 30, 2020

Exercise of stock options

Share-based compensation

Translation adjustment

Balance, June 30, 2020

Balance, September 30, 2020

$ ( 135,728 )

Stockholders'

Balance, March 31, 2019

Balance, June 30, 2019

$ ( 105,845 )

Issuance of common stock, net of offering costs of $0.2 million

Issuance of common stock for conversion of debt and accrued interest

Debt discount to convertible notes

Exercise of stock options

Exercise of warrants

Share-based compensation

Balance, June 30, 2019

Balance, September 30, 2019

$ ( 113,047 )

2 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

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

For the Nine Month Periods Ended September 30, 2020 and September 30, 2019

(In thousands)

2 unchanged sentences

$ ( 121,900 )

Issuance of common stock,

net of offering costs of $0.1 million

Issuance of common stock, net of offering costs of $0.1 million

Exercise of stock options

1 unchanged sentence

Translation adjustment

Balance, June 30, 2020

Balance, September 30, 2020

$ ( 135,728 )

1 unchanged sentence

Balance, December 31, 2018

Issuance of common stock, net of offering costs of $0.2 million

Issuance of common stock for conversion of debt and accrued interest

Debt discount to convertible notes

Exercise of stock options

Exercise of warrants

Share-based compensation

Balance, June 30, 2019

Balance, September 30, 2019

$ ( 113,047 )

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

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

For the Nine Month Periods Ended September 30, 2020 and September 30, 2019

(In thousands)

June 30, 2020

June 30, 2019

Cash Flows From Operating Activities

9 unchanged sentences

Trade receivables

Contract assets

Prepaid expenses and other assets

18 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash

Net decrease in cash

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

4 unchanged sentences

Financing lease obligation incurred for prepayment of licensing fees

Operating lease obligation incurred for entering into lease amendment

Supplemental Schedule of Noncash Investing Activity

1 unchanged sentence

Operating lease obligation incurred for tenant improvement credit received

Supplemental Schedule of Noncash Financing Activity

Issuance of common stock for conversion of debt and accrued interest

See Notes to Consolidated Financial Statements.

1 unchanged sentence

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.

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 September 30, 2020 and results of operations and cash flows for the three and the nine months ended September 30, 2020 and September 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.

Operating results for the nine months ended September 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.

2 unchanged sentences

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.

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 $10.6 million for the nine-month period ended September 30, 2020.

As of September 30, 2020, cash and cash equivalents totaled approximately $ 15.5 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.

1 unchanged sentence

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.

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.

15 unchanged sentences

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:

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

Three Months Ended

Six Months Ended

Nine 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):

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.

Includes approximately 0.2 million and 0.2 million nonvested restricted stock for the periods ending Sep.

30, 2020and Sep.

30, 2019, respectively, which are participating securities that feature voting and dividend rights.

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

3 unchanged sentences

Three months ended

Six months ended

Nine months ended

Trade receivable at

14 unchanged sentences

$ 0.8 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:

(1) For the nine months ended September 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 September 30, 2020 and December 31, 2019 are as follows:

(In thousands)

5 unchanged sentences

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.

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

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.

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

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

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

As of September 30, 2020, the Company had operating lease assets in right of use assets of approximately $ 1.3 million and corresponding operating lease liabilities of approximately $ 1.7 million.

For the three and the nine months ended September 30, 2020 and September 30, 2019, the following were expenses incurred in connection with our operating leases:

(In thousands)

For the Three Months Ended Sep.

For the Nine Months Ended Sep.

Operating leases

6 unchanged sentences

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

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

(In thousands)

Nine months ending December 31, 2020

Year Ending December 31, 2021

2 unchanged sentences

Year Ending December 31, 2024

Year Ending December 31, 2025

Less present value discount

Operating lease liabilities

Less current portion

Long-term obligations under operating leases

Finance Leases

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.

As of September 30, 2020, the Company had finance lease assets in equipment assets of approximately $ 0.4 million and corresponding finance lease liabilities of approximately $ 0.1 million.

For the three and the nine months ended September 30, 2020 and September 30, 2019, the following were expenses incurred in connection with our finance leases:

(In thousands)

For the Three Months Ended Sep.

For the Nine Months Ended Sep.

Finance leases

4 unchanged sentences

Weighted-average discount rate – finance leases

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

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

(In thousands)

Six Months Ending December 31, 2020

Three Months Ending December 31, 2020

Year Ending December 31, 2021

8 unchanged sentences

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.

As of September 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 6.7 million shares at September 30, 2020.

General Vesting Conditions

1 unchanged sentence

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

The fair value of the Company’s stock options that are not market based is 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 nine months ended September 30, 2020.

Nine months Ended September 30, 2020

Expected term

3 unchanged sentences

Service Period Based Stock Options

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):

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

Weighted Average

4 unchanged sentences

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.

Outstanding at Sep.

Exercisable at Sep.

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $ 4.01 , which is the closing price of the Company’s stock on the last day of business for the period ended September 30, 2020.

Performance Based Stock Options

1 unchanged sentence

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):

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

Weighted Average

3 unchanged sentences

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.

Outstanding at Sep.

Exercisable at Sep.

*The aggregate intrinsic values in the table above are based on the Company’s stock price of $4.01, which is the closing price of the Company’s stock on the last day of business for the period ended September 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.

As of September 30, 2020, there was approximately $ 7.8 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.

Share-Based Compensation

1 unchanged sentence

Three months ending

Six months ending

Nine months ending

(In thousands)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Share-based compensation expense

4 unchanged sentences

Business Segments

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

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

Consumer products segment:

9 unchanged sentences

Analytical Reference

June 30, 2020

September 30, 2020

Standards and

10 unchanged sentences

Analytical Reference

June 30, 2019

September 30, 2019

Standards and

8 unchanged sentences

Operating income (loss)

Six months ended

Nine months ended

Analytical Reference

June 30, 2020

September 30, 2020

Standards and

8 unchanged sentences

Operating income (loss)

Six months ended

Nine months ended

Analytical Reference

June 30, 2019

September 30, 2019

Standards and

9 unchanged sentences

Analytical Reference

At June 30, 2020

At September 30, 2020

Standards and

9 unchanged sentences

See details in the tables below.

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In thousands)

8 unchanged sentences

Total Net Sales

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

(In thousands)

8 unchanged sentences

Total Net Sales

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(In thousands)

8 unchanged sentences

Total Net Sales

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

(In thousands)

11 unchanged sentences

Three months ended

Six months ended

Nine months ended

Major Customers

Horizon Ventures - Related Party

Watson Group - Related Party

2 unchanged sentences

Major Accounts

At June 30, 2020

At September 30, 2020

At December 31, 2019

Watson Group - Related Party

Thorne Research

Life Extension

Amazon Marketplaces

_____________________

Life Extension

Matakana Health

* Represents less than 10%.

(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

In the third quarter of 2020, the Company entered into an amended manufacturing and supply agreement whereby the Company is obligated to purchase approximately $ 18.3 million of total inventory through December 31, 2021.

The Company’s remaining purchase obligations as of September 30, 2020 were as follows:

Three Months Ending December 31, 2020

$ 3.7 Million

Twelve Months Ending December 31, 2021

$ 14.6 Million

$ 18.3 Million

Legal proceedings - Elysium Health, LLC

49 unchanged sentences

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.

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 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 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.

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.

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 October 21, 2020, the court ordered the parties to confer and submit by no later than November 4, 2020, a joint status report that includes a proposed trial date.

(B) Southern District of New York Action

On September 27, 2017, Elysium Health Inc.

54 unchanged sentences

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.

As of September 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.

30 unchanged sentences

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

The Court held a hearing on the motion for leave to amend the complaint and Elysium’s motion to dismiss on September 16, 2020, but has not yet issued a ruling.

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

8 unchanged sentences

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

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