UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2022

Commission File Number: 001-37752


			CHROMADEX CORPORATION
			(Exact Name of Registrant as Specified in its Charter)


Delaware						26-2940963
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10900 Wilshire Blvd. Suite 600, Los Angeles, California						90024
(Address of Principal Executive Offices)						(Zip Code)

Registrant's telephone number, including area code: (310) 388-6706

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of Each exchange on which registered
Common Stock, $0.001 par value per share	CDXC	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company or emerging growth company. See definition of “large accelerated filer, accelerated filer, smaller reporting company and emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Yes

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

☑

As of ~~August 8,~~October 31, 2022 there were ~~68,342,800~~74,468,669 shares of the registrant’s common stock issued and outstanding.

CHROMADEX CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART I - Financial Information (unaudited)			Pg.

Item 1. Financial Statements (unaudited):			3

Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2022 and December 31, 2021			3

Condensed Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and ~~June~~September 30, 2021			4

Condensed Consolidated Statements of Stockholders’ Equity for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and ~~June~~September 30, 2021			5

Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~June~~September 30, 2021			7

Notes to Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2527

Item 3. Quantitative and Qualitative Disclosures About Market Risk			37

Item 4. Controls and Procedures			3437

PART II - Other Information

Item 1. Legal Proceedings			3437

Item 1A. Risk Factors			3639

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			60







Item 6. Exhibits			5861

Signatures			5962

PART I

Item 1. FINANCIAL STATEMENTS (unaudited)

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands except par values, unless otherwise indicated)


		Jun 30, 2022		Dec 31, 2021			Sep 30, 2022		Dec 31, 2021
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents, including restricted cash of $0.2 million as of both dates	Cash and cash equivalents, including restricted cash of $0.2 million as of both dates	$	17,072	$	28,219	Cash and cash equivalents, including restricted cash of $0.2 million as of both dates	$	13,262	$	28,219
Trade receivables, net of allowances of $54 and $65, respectively; Including receivables from Related Party of: $1.3 million and $2.1 million, respectively		4,228		5,226
Trade receivables, net of allowances of $51 and $65, respectively; Including receivables from Related Party of: $2.4 million and $2.1 million, respectively						Trade receivables, net of allowances of $51 and $65, respectively; Including receivables from Related Party of: $2.4 million and $2.1 million, respectively	4,744		5,226
Inventories	Inventories	15,753		13,601		Inventories	15,636		13,601
Prepaid expenses and other assets	Prepaid expenses and other assets	1,455		1,859		Prepaid expenses and other assets	4,259		1,859
Total current assets	Total current assets	38,508		48,905		Total current assets	37,901		48,905

Leasehold improvements and equipment, net	Leasehold improvements and equipment, net	2,899		3,003		Leasehold improvements and equipment, net	2,791		3,003
Intangible assets, net	Intangible assets, net	758		857		Intangible assets, net	714		857
Right-of-use assets	Right-of-use assets	3,884		4,352		Right-of-use assets	3,714		4,352
Other long-term assets	Other long-term assets	564		723		Other long-term assets	545		723
Total assets	Total assets	$	46,613	$	57,840	Total assets	$	45,665	$	57,840
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	10,197	$	10,423	Accounts payable	$	9,119	$	10,423
Accrued expenses	Accrued expenses	6,696		6,481		Accrued expenses	6,756		6,481
Current maturities of operating lease obligations	Current maturities of operating lease obligations	646		528		Current maturities of operating lease obligations	684		528
Current maturities of finance lease obligations	Current maturities of finance lease obligations	13		20		Current maturities of finance lease obligations	10		20
Customer deposits	Customer deposits	173		161		Customer deposits	158		161
Total current liabilities	Total current liabilities	17,725		17,613		Total current liabilities	16,727		17,613
Deferred revenue	Deferred revenue	4,228		4,346		Deferred revenue	4,228		4,346
Operating lease obligations, less current maturities	Operating lease obligations, less current maturities	3,882		4,154		Operating lease obligations, less current maturities	3,687		4,154

Total liabilities	Total liabilities	25,835		26,113		Total liabilities	24,642		26,113

Commitments and Contingencies (Note 10)	Commitments and Contingencies (Note 10)	0		0		Commitments and Contingencies (Note 10)

Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Common stock, $0.001 par value; authorized 150,000 shares; 68,155 shares and 68,126 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		68		68
Common stock, $0.001 par value; authorized 150,000 shares; 68,169 shares and 68,126 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Common stock, $0.001 par value; authorized 150,000 shares; 68,169 shares and 68,126 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	68		68
Additional paid-in capital	Additional paid-in capital	203,798		200,614		Additional paid-in capital	205,027		200,614
Accumulated deficit	Accumulated deficit	(183,090)		(168,953)		Accumulated deficit	(184,075)		(168,953)
Cumulative translation adjustments	Cumulative translation adjustments	2		(2)		Cumulative translation adjustments	3		(2)

Total stockholders' equity	Total stockholders' equity	20,778		31,727		Total stockholders' equity	21,023		31,727
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	46,613	$	57,840	Total liabilities and stockholders' equity	$	45,665	$	57,840

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~the Unaudited Condensed Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021

Sales, net	Sales, net	$	16,732	$	17,699	$	33,991	$	32,382	Sales, net	$	17,063	$	17,308	$	51,054	$	49,690
Cost of sales	Cost of sales	6,690		6,889		13,417		12,338		Cost of sales	6,856		6,730		20,273		19,068
Gross profit	Gross profit	10,042		10,810		20,574		20,044		Gross profit	10,207		10,578		30,781		30,622

Operating expenses:	Operating expenses:									Operating expenses:
Sales and marketing	Sales and marketing	8,021		6,232		16,258		12,490		Sales and marketing	5,868		7,221		22,126		19,711
Research and development	Research and development	1,245		1,004		2,323		1,791		Research and development	1,224		996		3,547		2,787
General and administrative	General and administrative	7,163		9,128		16,112		18,679		General and administrative	6,180		11,202		22,292		29,881
Total operating expenses	Total operating expenses	16,429		16,364		34,693		32,960		Total operating expenses	13,272		19,419		47,965		52,379
Operating loss	Operating loss	(6,387)		(5,554)		(14,119)		(12,916)		Operating loss	(3,065)		(8,841)		(17,184)		(21,757)

Other income, net - Employee Retention Tax Credit										Other income, net - Employee Retention Tax Credit	2,085		—		2,085		—
Interest expense, net	Interest expense, net	(10)		(12)		(18)		(31)		Interest expense, net	(5)		(15)		(23)		(46)
Net loss	Net loss	$	(6,397)	$	(5,566)	$	(14,137)	$	(12,947)	Net loss	$	(985)	$	(8,856)	$	(15,122)	$	(21,803)

Basic and diluted loss per common share		$	(0.09)	$	(0.08)	$	(0.21)	$	(0.20)

Basic and diluted loss per common share attributable to ChromaDex Corporation										Basic and diluted loss per common share attributable to ChromaDex Corporation	$	(0.01)	$	(0.13)	$	(0.22)	$	(0.33)

Basic and diluted weighted average common shares outstanding	Basic and diluted weighted average common shares outstanding	68,336		67,986		68,325		66,086		Basic and diluted weighted average common shares outstanding	68,345		68,236		68,331		66,811

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~the Unaudited Condensed Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In thousands, unless otherwise indicated)


		Three Months Ended June 30, 2022																		Three Months Ended September 30, 2022
		Common Stock			Additional Paid-in Capital				Accumulated Deficit			Cumulative Translation Adjustments				Total Stockholders' Equity				Common Stock					Additional Paid-in Capital			Accumulated Deficit				Cumulative Translation Adjustments				Total Stockholders' Equity
		Shares	Amount								Shares								Amount												Total Stockholders' Equity
Balance, April 1, 2022		68,149	$	68			$	202,502						$	(176,693)			$	—		$	25,877
Balance, July 1, 2022																			Balance, July 1, 2022	68,155			$	68		$	203,798		$	(183,090)				$	2			$	20,778

Issuance of restricted stock	Issuance of restricted stock	6	—		—											—			Issuance of restricted stock	14			—		—			—				—				—
Share-based compensation	Share-based compensation	—	—		1,296				—			—				1,296			Share-based compensation	—			—		1,229			—				—				1,229
Translation adjustment	Translation adjustment	—	—		—				—			2				2			Translation adjustment	—			—		—			—				1				1

Net loss	Net loss	—	—		—				(6,397)			—				(6,397)			Net loss	—			—		—			(985)				—				(985)
Balance, June 30, 2022		68,155	$	68	$	203,798			$	(183,090)		$	2			$	20,778
Balance, September 30, 2022																			Balance, September 30, 2022	68,169			$	68	$	205,027		$	(184,075)			$	3			$	21,023


		Six Months Ended June 30, 2022																		Nine Months Ended September 30, 2022
		Common Stock			Additional Paid-in Capital				Accumulated Deficit			Cumulative Translation Adjustments				Total Stockholders' Equity				Common Stock						Additional Paid-in Capital				Accumulated Deficit				Cumulative Translation Adjustments				Total Stockholders' Equity
		Shares	Amount								Shares								Amount
Balance, January 1, 2022	Balance, January 1, 2022	68,126	$	68			$	200,614						$	(168,953)			$	(2)		$	31,727	Balance, January 1, 2022		68,126			$	68			$	200,614			$	(168,953)			$	(2)	$	31,727

Issuance of restricted stock	Issuance of restricted stock	29	—		—											—			Issuance of restricted stock	43			—				—				—				—				—
Share-based compensation	Share-based compensation	—	—		3,184				—			—				3,184			Share-based compensation	—			—			4,413				—				—				4,413
Translation adjustment	Translation adjustment	—	—		—				—			4				4			Translation adjustment	—			—			—				—				5				5

Net loss	Net loss	—	—		—				(14,137)			—				(14,137)			Net loss	—			—			—				(15,122)				—				(15,122)
Balance, June 30, 2022		68,155	$	68	$	203,798			$	(183,090)		$	2			$	20,778
Balance, September 30, 2022																			Balance, September 30, 2022	68,169			$	68		$	205,027			$	(184,075)			$	3			$	21,023

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~the Unaudited Condensed Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders' Equity - Continued

(In thousands, unless otherwise indicated)


		Three Months Ended June 30, 2021																		Three Months Ended September 30, 2021
		Common Stock			Additional Paid-in Capital				Accumulated Deficit			Cumulative Translation Adjustments				Total Stockholders' Equity				Common Stock					Additional Paid-in Capital			Accumulated Deficit			Cumulative Translation Adjustments			Total Stockholders' Equity
		Shares	Amount								Shares								Amount
Balance, April 1, 2021		67,702	$	68			$	192,972						$	(149,206)			$	(2)		$	43,832
Issuance of common stock, net of offering costs of $0.3 million		213	—		1,869											1,869
Balance, July 1, 2021																			Balance, July 1, 2021	68,009			$	68		$	196,848		$	(154,772)		$	(2)		$	42,142

Issuance of common stock resulting from the exercise of stock options	Issuance of common stock resulting from the exercise of stock options	94	—		391				—			—				391			Issuance of common stock resulting from the exercise of stock options	85			—		341			—			—			341
Share-based compensation	Share-based compensation	—	—		1,616				—			—				1,616			Share-based compensation	—			—		1,822			—			—			1,822

Net loss	Net loss	—	—		—				(5,566)			—				(5,566)			Net loss	—			—		—			(8,856)			—			(8,856)
Balance, June 30, 2021		68,009	$	68	$	196,848			$	(154,772)		$	(2)			$	42,142
Balance, September 30, 2021																			Balance, September 30, 2021	68,094			$	68	$	199,011		$	(163,628)		$	(2)		$	35,449


		Six Months Ended June 30, 2021																		Nine Months Ended September 30, 2021
		Common Stock			Additional Paid-in Capital				Accumulated Deficit			Cumulative Translation Adjustments				Total Stockholders' Equity				Common Stock						Additional Paid-in Capital				Accumulated Deficit				Cumulative Translation Adjustments				Total Stockholders' Equity
		Shares	Amount								Shares								Amount
Balance, January 1, 2021	Balance, January 1, 2021	61,881	$	62			$	158,190						$	(141,825)			$	(3)		$	16,424	Balance, January 1, 2021		61,881			$	62			$	158,190			$	(141,825)			$	(3)	$	16,424
Issuance of common stock, net of offering costs of $0.4 million	Issuance of common stock, net of offering costs of $0.4 million	4,059	4		26,736											26,740			Issuance of common stock, net of offering costs of $0.4 million	4,059			4				26,736				—				—				26,740
Issuance of common stock resulting from the exercise of stock options	Issuance of common stock resulting from the exercise of stock options	2,069	2		9,022				—			—				9,024			Issuance of common stock resulting from the exercise of stock options	2,154			2			9,363				—				—				9,365
Share-based compensation	Share-based compensation	—	—		2,900				—			—				2,900			Share-based compensation	—			—			4,722				—				—				4,722
Translation adjustment	Translation adjustment	—	—		—				—			1				1			Translation adjustment	—			—			—				—				1				1
Net loss	Net loss	—	—		—				(12,947)							(12,947)			Net loss	—			—			—				(21,803)				—				(21,803)
Balance, June 30, 2021		68,009	$	68	$	196,848			$	(154,772)		$	(2)			$	42,142
Balance, September 30, 2021																			Balance, September 30, 2021	68,094			$	68		$	199,011			$	(163,628)			$	(2)			$	35,449

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~the Unaudited Condensed Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands, unless otherwise indicated)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021

Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net loss	Net loss	$	(14,137)	$	(12,947)	Net loss	$	(15,122)	$	(21,803)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation of leasehold improvements and equipment	Depreciation of leasehold improvements and equipment	413		447		Depreciation of leasehold improvements and equipment	648		679
Amortization of intangibles	Amortization of intangibles	99		121		Amortization of intangibles	143		174
Amortization of right of use assets	Amortization of right of use assets	468		254		Amortization of right of use assets	638		385
Share-based compensation expense	Share-based compensation expense	3,184		2,900		Share-based compensation expense	4,413		4,722
Loss on disposal of leasehold improvements and equipment	Loss on disposal of leasehold improvements and equipment	5		—		Loss on disposal of leasehold improvements and equipment	7		—
Provision for doubtful trade receivables	Provision for doubtful trade receivables	22		26		Provision for doubtful trade receivables	28		(152)
Non-cash financing costs	Non-cash financing costs	34		57		Non-cash financing costs	54		87
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade receivables	Trade receivables	976		(3,331)		Trade receivables	454		(2,448)
Inventories	Inventories	(2,152)		(500)		Inventories	(2,035)		(992)
Implementation costs for cloud computing arrangement	Implementation costs for cloud computing arrangement	(204)		(79)		Implementation costs for cloud computing arrangement	(281)		(150)
Prepaid expenses and other assets	Prepaid expenses and other assets	529		171		Prepaid expenses and other assets	(2,261)		(608)
Accounts payable	Accounts payable	(226)		525		Accounts payable	(1,304)		1,359
Accrued expenses	Accrued expenses	215		(564)		Accrued expenses	275		198
Deferred revenue	Deferred revenue	(118)		—		Deferred revenue	(118)		(95)
Customer deposits and other	Customer deposits and other	16		(68)		Customer deposits and other	2		(103)
Operating lease liabilities	Operating lease liabilities	(154)		(312)		Operating lease liabilities	(311)		(472)
Net cash used in operating activities	Net cash used in operating activities	(11,030)		(13,300)		Net cash used in operating activities	(14,770)		(19,219)

Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Purchases of leasehold improvements and equipment	Purchases of leasehold improvements and equipment	(110)		(311)		Purchases of leasehold improvements and equipment	(162)		(407)

Net cash used in investing activities	Net cash used in investing activities	(110)		(311)		Net cash used in investing activities	(162)		(407)

Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	—		26,740		Proceeds from issuance of common stock, net	—		26,740
Proceeds from exercise of stock options	Proceeds from exercise of stock options	—		9,024		Proceeds from exercise of stock options	—		9,365
Payment of debt issuance costs	Payment of debt issuance costs	—		(47)		Payment of debt issuance costs	(15)		(47)
Principal payments on finance leases	Principal payments on finance leases	(7)		(25)		Principal payments on finance leases	(10)		(27)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(7)		35,692		Net cash (used in) provided by financing activities	(25)		36,031

Net (decrease) increase in cash and cash equivalents	Net (decrease) increase in cash and cash equivalents	(11,147)		22,081		Net (decrease) increase in cash and cash equivalents	(14,957)		16,405
Cash and cash equivalents, including restricted cash of $0.2 million for both periods - beginning of period	Cash and cash equivalents, including restricted cash of $0.2 million for both periods - beginning of period	28,219		16,697		Cash and cash equivalents, including restricted cash of $0.2 million for both periods - beginning of period	28,219		16,697
Cash and cash equivalents, including restricted cash of $0.2 million for both periods - end of period	Cash and cash equivalents, including restricted cash of $0.2 million for both periods - end of period	$	17,072	$	38,778	Cash and cash equivalents, including restricted cash of $0.2 million for both periods - end of period	$	13,262	$	33,102

Supplemental Disclosures of Cash Flow Information	Supplemental Disclosures of Cash Flow Information					Supplemental Disclosures of Cash Flow Information
Cash payments for interest on finance leases	Cash payments for interest on finance leases	$	—	$	1	Cash payments for interest on finance leases	$	—	$	1
Cash payments for principal on operating lease liabilities	Cash payments for principal on operating lease liabilities	$	204	$	312	Cash payments for principal on operating lease liabilities	$	372	$	472

Supplemental Schedule of Noncash Operating Activity	Supplemental Schedule of Noncash Operating Activity					Supplemental Schedule of Noncash Operating Activity
Right-of-use assets and operating lease obligations incurred for entering into lease amendment	Right-of-use assets and operating lease obligations incurred for entering into lease amendment	$	—	$	2,209	Right-of-use assets and operating lease obligations incurred for entering into lease amendment	$	—	$	2,209

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~the Unaudited Condensed Consolidated Financial Statements.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1. Nature of Business

ChromaDex Corporation and its wholly owned subsidiaries, ChromaDex, Inc., ChromaDex International, Inc., ChromaDex Analytics, Inc., ChromaDex Asia Limited, Asia Pacific Scientific, Inc., ChromaDex Europa B.V. and ChromaDex Sağlik Ürünleri Anonim Şirketi (collectively, “ChromaDex” or the “Company”) isare a global bioscience company dedicated to healthy aging. The ChromaDex team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), an essential coenzyme that is a key regulator of cellular metabolism and is found in every cell of the human body. NAD+ levels in humans have been shown to decline with age, among other factors, and may be increased through supplementation with NAD+ precursors.

ChromaDex is the innovator behind the NAD+ precursor nicotinamide riboside (NR), commercialized as the flagship ingredient Niagen®. Nicotinamide riboside and other NAD+ precursors are protected by ChromaDex’s patent and/or licensed rights portfolio. The Company delivers Niagen® as the sole active ingredient in its consumer product Tru Niagen®. The Company further develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw materials to the manufacturers of consumer products. ~~The~~Additionally, the Company ~~also~~ offers natural product fine chemicals, known as phytochemicals, and related research and development services.

Note 2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation: The accompanying ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim ~~condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements include all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. Results of operations for any interim period are not necessarily indicative of results for any other interim period or for the full year. These ~~condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the ~~consolidated financial statements~~Consolidated Financial Statements and notes thereto included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC.

Basis of Consolidation: The accompanying ~~unaudited condensed financial statements~~Unaudited Condensed Financial Statements and notes thereto 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.

Significant Accounting Policies: There have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2022, that have had a material impact on the Company’s ~~condensed financial statements~~Unaudited Condensed Consolidated Financial Statements and related notes.

Recent Accounting Pronouncements: In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (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. Public entities that qualify as a smaller reporting company can elect to defer compliance effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 3. Liquidity

Evaluation of Ability to Maintain Current Level of Operations

In connection with the preparation of these ~~condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements for the ~~six~~nine months ended ~~June~~September 30, 2022, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they became due over the next twelve months from the date of issuance of the Company’s ~~second~~third quarter of 2022 interim ~~condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements. Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued impact of the COVID-19 pandemic and inflationary pressures. For the ~~six~~nine months ended ~~June~~September 30, 2022, the Company incurred a net loss of $~~14.1~~15.1 million and used net cash in operating activities of $~~11.0~~14.8 million. As of ~~June~~September 30, 2022, the Company had unrestricted cash and cash equivalents of ~~$16.9~~$13.1 million which consists of bank deposits or highly liquid investment-grade debt instruments with an original maturity of three months or less. The fair value of the Company’s cash and cash equivalents is derived using Level 1 inputs. Subsequent to September 30, 2022,

the Company closed two separate securities purchase agreements and received proceeds of approximately $7.7 million, net of offering costs of $0.4 million. For further discussion of the securities purchase agreements, see Note 12, Subsequent Events.

Management evaluated these conditions and anticipates that its current unrestricted cash and cash equivalents, cash generated from the securities purchase agreements and cash to be generated from net sales will be sufficient to meet its financial obligations as they become due over at least the next twelve months from the issuance date of these financial statements. ~~Management’s assessment additionally includes plans to minimize expenses and reduce the cash burn rate for the second half of fiscal year 2022.~~ The Company may, however, seek additional capital within the next twelve months, both to fund its projected operating plans after the next twelve months and/or to fund the Company’s longer-term strategic objectives.

The Company has an available line of credit with Western Alliance Bank for up to $10.0 million, subject to certain terms and conditions which currently allow for ~~$3.8~~$4.3 million of borrowing. There are no outstanding borrowings as of ~~June~~September 30, 2022. In June 2020, the Company filed a $125 million registration statement on Form S-3 with the SEC, utilizing a “shelf” registration process. Under this shelf registration process, the Company may sell securities from time to time, including up to $50 million pursuant to the At Market Issuance Sales Agreement, dated as of June 12, 2020, with B. Riley FBR, Inc. and Raymond James & Associates, Inc. (ATM Facility). As of ~~June~~September 30, 2022, approximately $47.8 million remains available under the ATM Facility. The Company’s potential use of the ATM facility is subject to the satisfaction of various conditions in the ATM Facility agreement as well market conditions. As a result, the Company’s ability to rely on the ATM Facility to raise liquidity is limited to a material extent.

Note 4. 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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2021		2022		2021		(In thousands, except per share data)	2022		2021		2022		2021
Net loss	Net loss	$	(6,397)	$	(5,566)	$	(14,137)	$	(12,947)	Net loss	$	(985)	$	(8,856)	$	(15,122)	$	(21,803)

Basic and diluted loss per common share	Basic and diluted loss per common share	$	(0.09)	$	(0.08)	$	(0.21)	$	(0.20)	Basic and diluted loss per common share	$	(0.01)	$	(0.13)	$	(0.22)	$	(0.33)

Basic and diluted weighted average common shares outstanding (1):	Basic and diluted weighted average common shares outstanding (1):	68,336		67,986		68,325		66,086		Basic and diluted weighted average common shares outstanding (1):	68,345		68,236		68,331		66,811

Potentially dilutive securities (2):	Potentially dilutive securities (2):									Potentially dilutive securities (2):
Stock options	Stock options	11,907		10,535		11,907		10,535		Stock options	10,064		10,540		10,064		10,540
Restricted stock units	Restricted stock units	593		92		593		92		Restricted stock units	748		116		748		116

(1) Includes approximately 0.2 million nonvested shares of restricted stock for each of the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 which are participating securities that feature voting and dividend rights.

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

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 5. Business Segments

The Company has the following 3three reportable segments:

•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; and,

•Analytical Reference Standards and Services segment: offers the supply of phytochemical reference standards and other research and development services.

The Company’s reportable segments are significant operating segments that offer differentiated services. This structure reflects the Company’s current operational and financial management and provides the best structure to maximize the Company's objectives and investment strategy, while maintaining financial discipline. The Company's Chief Executive Officer, who is its chief operating decision maker (CODM), reviews financial information for each operating segment to evaluate performance and allocate resources. The Company evaluates performance and allocates resources based on reviewing gross margin by reportable segment. The Company's CODM does not review assets by segment in his evaluation and therefore assets by segment are not disclosed below. There are no intersegment sales that require elimination. The “Corporate and other” classification includes corporate items not allocated by the Company to each reportable segment.

The following tables set forth financial information by segment:


Three months ended June 30, 2022		Consumer Products segment			Ingredients segment			Analytical Reference Standards and Services segment				Corporate and other				Total

Three months ended September 30, 2022										Three months ended September 30, 2022					Consumer Products segment						Ingredients segment				Analytical Reference Standards and Services segment					Corporate and other			Total

(In thousands)	(In thousands)			Consumer Products segment							Ingredients segment												Analytical Reference Standards and Services segment									Corporate and other						Total			(In thousands)
Net sales	Net sales							Net sales						$		14,561				$								1,819			$		683				$				—		$	17,063
Cost of sales	Cost of sales							Cost of sales						5,224				899				733							—				6,856
Gross profit (loss)	Gross profit (loss)						9,302			783					(43)				—					10,042		Gross profit (loss)				9,337				920					(50)			—			10,207
Operating expenses:	Operating expenses:																				Operating expenses:
Sales and marketing	Sales and marketing	7,864			—			157				—				8,021			Sales and marketing			5,696					12				160				—					5,868
Research and development	Research and development	1,113			132			—				—				1,245			Research and development			1,089					135				—				—					1,224
General and administrative	General and administrative	—			—			—				7,163				7,163			General and administrative			—					—				—				6,180					6,180
Operating expenses	Operating expenses	8,977			132			157				7,163				16,429			Operating expenses			6,785					147				160				6,180					13,272

Operating income (loss)	Operating income (loss)	$	325		$	651		$	(200)			$	(7,163)			$	(6,387)		Operating income (loss)			$	2,552				$	773			$	(210)			$	(6,180)				$	(3,065)


Six Months Ended June 30, 2022		Consumer Products segment			Ingredients segment			Analytical Reference Standards and Services segment				Corporate and other				Total

Nine Months Ended September 30, 2022										Nine Months Ended September 30, 2022					Consumer Products segment						Ingredients segment				Analytical Reference Standards and Services segment					Corporate and other			Total

(In thousands)	(In thousands)			Consumer Products segment							Ingredients segment												Analytical Reference Standards and Services segment									Corporate and other						Total			(In thousands)
Net sales	Net sales							Net sales						$		44,018				$								4,710			$		2,326				$				—		$	51,054
Cost of sales	Cost of sales							Cost of sales						15,694				2,302				2,277							—				20,273
Gross profit	Gross profit						18,987			1,488					99				—					20,574		Gross profit				28,324				2,408					49			—			30,781
Operating expenses:	Operating expenses:																				Operating expenses:
Sales and marketing	Sales and marketing	15,938			24			296				—				16,258			Sales and marketing			21,634					36				456				—					22,126
Research and development	Research and development	2,115			208			—				—				2,323			Research and development			3,204					343				—				—					3,547
General and administrative	General and administrative	—			—			—				16,112				16,112			General and administrative			—					—				—				22,292					22,292
Operating expenses	Operating expenses	18,053			232			296				16,112				34,693			Operating expenses			24,838					379				456				22,292					47,965

Operating income (loss)	Operating income (loss)	$	934		$	1,256		$	(197)			$	(16,112)			$	(14,119)		Operating income (loss)			$	3,486				$	2,029			$	(407)			$	(22,292)				$	(17,184)

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements


Three months ended June 30, 2021		Consumer Products segment			Ingredients segment			Analytical Reference Standards and Services segment				Corporate and other				Total

Three months ended September 30, 2021										Three months ended September 30, 2021					Consumer Products segment						Ingredients segment				Analytical Reference Standards and Services segment					Corporate and other			Total

(In thousands)	(In thousands)			Consumer Products segment							Ingredients segment												Analytical Reference Standards and Services segment									Corporate and other						Total			(In thousands)
Net sales	Net sales							Net sales						$		14,772				$								1,789			$		747				$				—		$	17,308
Cost of sales	Cost of sales							Cost of sales						5,253				732				745							—				6,730
Gross profit	Gross profit						9,849			829					132				—					10,810		Gross profit				9,519				1,057					2			—			10,578
Operating expenses:	Operating expenses:																				Operating expenses:
Sales and marketing	Sales and marketing	6,190			1			41				—				6,232			Sales and marketing			7,067					10				144				—					7,221
Research and development	Research and development	926			78			—				—				1,004			Research and development			895					101				—				—					996
General and administrative	General and administrative	—			—			—				9,128				9,128			General and administrative			—					—				—				11,202					11,202
Operating expenses	Operating expenses	7,116			79			41				9,128				16,364			Operating expenses			7,962					111				144				11,202					19,419

Operating income (loss)	Operating income (loss)	$	2,733		$	750		$	91			$	(9,128)			$	(5,554)		Operating income (loss)			$	1,557				$	946			$	(142)			$	(11,202)				$	(8,841)


Six Months Ended June 30, 2021		Consumer Products segment			Ingredients segment			Analytical Reference Standards and Services segment				Corporate and other				Total

Nine Months Ended September 30, 2021										Nine Months Ended September 30, 2021					Consumer Products segment						Ingredients segment				Analytical Reference Standards and Services segment					Corporate and other			Total

(In thousands)	(In thousands)			Consumer Products segment							Ingredients segment												Analytical Reference Standards and Services segment									Corporate and other						Total			(In thousands)
Net sales	Net sales							Net sales						$		42,605				$								4,608			$		2,477				$				—		$	49,690
Cost of sales	Cost of sales							Cost of sales						15,003				1,970				2,095							—				19,068
Gross profit	Gross profit						18,083			1,581					380				—					20,044		Gross profit				27,602				2,638					382			—			30,622
Operating expenses:	Operating expenses:																				Operating expenses:
Sales and marketing	Sales and marketing	12,301			11			178				—				12,490			Sales and marketing			19,368					21				322				—					19,711
Research and development	Research and development	1,644			147			—				—				1,791			Research and development			2,539					248				—				—					2,787
General and administrative	General and administrative	—			—			—				18,679				18,679			General and administrative			—					—				—				29,881					29,881
Operating expenses	Operating expenses	13,945			158			178				18,679				32,960			Operating expenses			21,907					269				322				29,881					52,379

Operating income (loss)	Operating income (loss)	$	4,138		$	1,423		$	202			$	(18,679)			$	(12,916)		Operating income (loss)			$	5,695				$	2,369			$	60			$	(29,881)				$	(21,757)

Disaggregation of Revenue

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


Three Months Ended June 30, 2022		Consumer Products Segment			Ingredients Segment			Analytical Reference Standards and Services Segment					Total
Three Months Ended September 30, 2022							Three Months Ended September 30, 2022				Consumer Products Segment						Ingredients Segment				Analytical Reference Standards and Services Segment				Total
(In thousands)	(In thousands)			Consumer Products Segment						Ingredients Segment					Analytical Reference Standards and Services Segment									Total				(In thousands)
Tru Niagen®, Consumer Product	Tru Niagen®, Consumer Product						Tru Niagen®, Consumer Product					$	14,561				$	—			$	—						$	14,561
Niagen® Ingredient	Niagen® Ingredient	—					1,454				—					1,454			Niagen® Ingredient			—				1,804				—			1,804
Subtotal Niagen® Related	Subtotal Niagen® Related	$	14,520		$	1,454		$	—				$	15,974	Subtotal Niagen® Related				14,561				1,804				—				16,365

Other Ingredients	Other Ingredients	—			10			—					10		Other Ingredients				—				15				—				15
Reference Standards	Reference Standards	—			—			704					704		Reference Standards				—				—				661				661
Consulting and Other	Consulting and Other	—			—			44					44		Consulting and Other				—				—				22				22
Subtotal Other Goods and Services	Subtotal Other Goods and Services	$	—		$	10		$	748				$	758	Subtotal Other Goods and Services				—				15				683				698

Total Net Sales	Total Net Sales	$	14,520		$	1,464		$	748				$	16,732	Total Net Sales				$	14,561			$	1,819			$	683			$	17,063

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements


Six Months Ended June 30, 2022		Consumer Products Segment			Ingredients Segment			Analytical Reference Standards and Services Segment					Total
Nine Months Ended September 30, 2022							Nine Months Ended September 30, 2022				Consumer Products Segment						Ingredients Segment				Analytical Reference Standards and Services Segment				Total
(In thousands)	(In thousands)			Consumer Products Segment						Ingredients Segment					Analytical Reference Standards and Services Segment									Total				(In thousands)
Tru Niagen®, Consumer Product	Tru Niagen®, Consumer Product						Tru Niagen®, Consumer Product					$	44,018				$	—			$	—						$	44,018
Niagen® Ingredient	Niagen® Ingredient	—					2,585				—					2,585			Niagen® Ingredient			—				4,389				—			4,389
Subtotal Niagen® Related	Subtotal Niagen® Related	$	29,457		$	2,585		$	—				$	32,042	Subtotal Niagen® Related				44,018				4,389				—				48,407

Other Ingredients	Other Ingredients	—			306			—					306		Other Ingredients				—				321				—				321
Reference Standards	Reference Standards	—			—			1,587					1,587		Reference Standards				—				—				2,248				2,248
Consulting and Other	Consulting and Other	—			—			56					56		Consulting and Other				—				—				78				78
Subtotal Other Goods and Services	Subtotal Other Goods and Services	$	—		$	306		$	1,643				$	1,949	Subtotal Other Goods and Services				—				321				2,326				2,647

Total Net Sales	Total Net Sales	$	29,457		$	2,891		$	1,643				$	33,991	Total Net Sales				$	44,018			$	4,710			$	2,326			$	51,054


Three Months Ended June 30, 2021		Consumer Products Segment			Ingredients Segment			Analytical Reference Standards and Services Segment					Total
Three Months Ended September 30, 2021							Three Months Ended September 30, 2021				Consumer Products Segment						Ingredients Segment				Analytical Reference Standards and Services Segment				Total
(In thousands)	(In thousands)			Consumer Products Segment						Ingredients Segment					Analytical Reference Standards and Services Segment									Total				(In thousands)
Tru Niagen®, Consumer Product	Tru Niagen®, Consumer Product						Tru Niagen®, Consumer Product					$	14,772				$	—			$	—						$	14,772
Niagen® Ingredient	Niagen® Ingredient	—					1,281				—					1,281			Niagen® Ingredient			—				1,665				—			1,665
Subtotal Niagen® Related	Subtotal Niagen® Related	$	15,396		$	1,281		$	—				$	16,677	Subtotal Niagen® Related				14,772				1,665				—				16,437

Other Ingredients	Other Ingredients	—			223			—					223		Other Ingredients				—				124				—				124
Reference Standards	Reference Standards	—			—			695					695		Reference Standards				—				—				735				735
Consulting and Other	Consulting and Other	—			—			104					104		Consulting and Other				—				—				12				12
Subtotal Other Goods and Services	Subtotal Other Goods and Services	$	—		$	223		$	799				$	1,022	Subtotal Other Goods and Services				—				124				747				871

Total Net Sales	Total Net Sales	$	15,396		$	1,504		$	799				$	17,699	Total Net Sales				$	14,772			$	1,789			$	747			$	17,308


Six Months Ended June 30, 2021		Consumer Products Segment			Ingredients Segment			Analytical Reference Standards and Services Segment					Total
Nine Months Ended September 30, 2021							Nine Months Ended September 30, 2021				Consumer Products Segment						Ingredients Segment				Analytical Reference Standards and Services Segment				Total
(In thousands)	(In thousands)			Consumer Products Segment						Ingredients Segment					Analytical Reference Standards and Services Segment									Total				(In thousands)
Tru Niagen®, Consumer Product	Tru Niagen®, Consumer Product						Tru Niagen®, Consumer Product					$	42,605				$	—			$	—						$	42,605
Niagen® Ingredient	Niagen® Ingredient	—					2,484				—					2,484			Niagen® Ingredient			—				4,149				—			4,149
Subtotal Niagen® Related	Subtotal Niagen® Related	$	27,833		$	2,484		$	—				$	30,317	Subtotal Niagen® Related				42,605				4,149				—				46,754

Other Ingredients	Other Ingredients	—			335			—					335		Other Ingredients				—				459				—				459
Reference Standards	Reference Standards	—			—			1,495					1,495		Reference Standards				—				—				2,230				2,230
Consulting and Other	Consulting and Other	—			—			235					235		Consulting and Other				—				—				247				247
Subtotal Other Goods and Services	Subtotal Other Goods and Services	$	—		$	335		$	1,730				$	2,065	Subtotal Other Goods and Services				—				459				2,477				2,936

Total Net Sales	Total Net Sales	$	27,833		$	2,819		$	1,730				$	32,382	Total Net Sales				$	42,605			$	4,608			$	2,477			$	49,690

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Disclosure of Major Customers

Major customers are defined as customers whose sales or trade receivables individually consist of more than ten percent of total sales or total trade receivables, respectively. Percentage of net sales from major customers of the Company’s consumer products segment for the periods indicated were as follows:

Three Months Ended June 30, Six Months Ended June 30,
Major Customers 2022 2021 2022 2021
A.S. Watson Group - Related Party * 16.5 % 12.0 % 13.8 %

* Represents less than 10%


	Three Months Ended September 30,				Nine Months Ended September 30,
Major Customers	2022		2021		2022		2021

A.S. Watson Group - Related Party	15.4	%	15.2	%	12.0	%	14.3	%

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


Major Customers	Major Customers	At Jun 30, 2022		At Dec 31, 2021		Major Customers	At Sep 30, 2022		At Dec 31, 2021
A.S. Watson Group - Related Party	A.S. Watson Group - Related Party	34.2	%	39.6	%	A.S. Watson Group - Related Party	51.3	%	39.6	%
Life Extension	Life Extension	14.1	%	22.1	%	Life Extension	15.7	%	22.1	%
Amazon Marketplaces	Amazon Marketplaces	13.7	%	*		Amazon Marketplaces	21.6	%	*
Matakana Health		11.5	%	*

Persona	Persona	*		10.3	%	Persona	*		10.3	%

* Represents less than 10%

Note 6. Related Party Transactions

~~The Company has 2 related parties,~~ A.S. Watson Group ~~and Horizon Ventures,~~is a related party through common ownership of an enterprise that beneficially owns more than 10% of the common stock of the Company. The sale of consumer products and corresponding trade receivables to related parties during the periods indicated are as follows:


		Net Sales								Net Sales
		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021				2022		2021		2022		2021
A.S. Watson Group - Related Party	A.S. Watson Group - Related Party	$1.5	million	$2.9	million	$4.1	million	$4.5	million		A.S. Watson Group - Related Party	$2.6	million	$2.6	million	$6.7	million	$7.1	million

Total Related Party Net Sales	Total Related Party Net Sales	$1.5	million	$2.9	million	$4.1	million	$4.5	million		Total Related Party Net Sales	$2.6	million	$2.6	million	$6.7	million	$7.1	million

~~During all periods indicated, sales to Horizon Ventures were insignificant.~~

Trade Receivable as of

Jun 30, 2022

Dec 31, 2021

Sep 30, 2022

Dec 31, 2021

A.S. Watson Group - Related Party

$1.3

million

$2.1

million

A.S. Watson Group - Related Party

$2.4

million

$2.1

million

Total Related Party Trade Receivables

$1.3

million

$2.1

million

Total Related Party Trade Receivables

$2.4

million

$2.1

million

~~For the periods indicated, trade receivables to Horizon Ventures were insignificant.~~

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Joint Venture Agreement

On May 19, 2022, the Company entered into an agreement to form a joint venture (the ~~“JV”~~“May JV Agreement”) to expand the Company’s market strategy to include opportunities in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan (the “Territory”)~~, subject to~~. The May JV Agreement was among the ~~terms and satisfaction of the conditions contained therein. The JV agreement is among~~Company, Crystal Lake Developments Limited (Crystal Lake), Pioneer Idea Holdings Limited (Pioneer Idea), and Hong Kong (China) Taikuk Group Ltd (Taikuk). Crystal Lake is indirectly wholly-owned by Li ~~Ka Shing,~~Ka-Shing, and Pioneer Idea is indirectly owned by Solina Chau, and each of Mr. LiKa-Shing and Ms. Chau own through affiliated entities more than 5% of the Company’s common stock. On September 30, 2022, the Company entered into a Termination Agreement for the purpose of terminating the May JV Agreement. The ~~business~~Termination Agreement was approved by the Audit Committee of the Board in accordance with the Company’s Related-Persons Transaction Policy.

In connection with the Termination Agreement, on September 30, 2022, Asia Pacific Scientific, Inc., an indirect wholly owned subsidiary of the Company, and Hong Kong (China) Taikuk Group Ltd (Taikuk) entered into a shareholders agreement (the “Shareholders Agreement”) pursuant to which Taikuk has agreed to contribute $1.0 million (the “Subscription Price”) in exchange for an 11% non-voting equity interest in ChromaDex Asia Pacific Ventures Limited, a subsidiary of Asia Pacific Scientific, Inc. (the “Joint Venture” or “JV”). Additionally, the Company shall pay $1.0 million in cash to Taikuk (the “Taikuk Fee”) upon the closing of the Shareholders Agreement (the “Closing”). The Company and Taikuk have mutually agreed that no exchange of funds for the Taikuk Fee and Subscription Price was necessary and, accordingly, no cash has or will exchange hands related to these provisions of the Shareholders Agreement. The articles of association of the JV ~~will be~~were amended and restated simultaneously with the Closing.

The purpose of the JV is to ~~market, sell and distribute~~commercialize Tru Niagen® and other products containing ~~NR (the “Products”)~~nicotinamide riboside to be developed by the Company in the ordinary course (the “Products”) in the Territory.

The ~~JV agreement will have~~Shareholders Agreement has an initial term of 20 years, unless earlier terminated. ~~Crystal Lake, Pioneer Idea and Taikuk have each agreed to contribute $1.8 million, $1.2 million and $1.0 million, respectively into~~The Company indirectly owns an 89% equity interest (and all of the ~~JV. In addition, the Company has agreed to pay $1.0 million to Taikuk, and Taikuk will receive an additional 5% non-voting equity interest~~voting interests) in the JV for introducing the parties. Following the closing of the formation of the JV (the “Closing”), each of the parties will hold the following interest in the JV: the Company (71%), Crystal Lake (10.8%), Pioneer Idea (7.2%) and ~~Taikuk (a 11% non-voting interest). The Company will have~~has the right to elect 3all three directors of the 5 directors in the JV, and Pioneer Idea will have the right to elect the other 2 directors, with each director having 1 vote. Certain material corporate actions will require unanimous approval of the board of the JV. ~~The Closing is subject to certain customary closing conditions and is expected to occur by the end of the third quarter of 2022.~~

Prior to being able to commercialize the Products in the Territory, the JV will have to obtain all applicable regulatory approvals, including “Blue Hat” or health food registration with the ~~PRC~~Peoples Republic of China State Administration for Market Regulation for Products in the name of the Company or its designee (collectively, the “Blue Hat Registration”). ~~Prior to the JV obtaining the~~Upon completion of Blue Hat Registration, ~~we will supply~~ the ~~Products~~Company shall make a payment of $1.0 million in cash to ~~the JV who will appoint a third party sub-distributor to sell the Products in the Territory. Once Blue~~Taikuk (the “Blue Hat Registration ~~is obtained, we will license to the JV certain intellectual property relating to the Products for the JV to manufacture and sell the Products in the Territory.~~Fee”). If the Blue Hat Registration is not obtained within 24 months of the Closing (which ~~deadline for obtaining the Blue Hat Registration~~ may be extended by an additional 12 months upon mutual consent of the parties), the JV may repurchase the 11% non-voting interest ~~owned~~purchased by Taikuk for ~~2 dollars. As~~$1 (the “Right of Repurchase”). The Right of Repurchase functions as a performance vesting condition under ASC 718 and the 11% non-voting equity interest is accounted for as nonemployee share-based compensation. The equity interest will only vest if Blue Hat Registration is achieved, at which time the minority interest will be recorded. Consequently, no amounts related to the Blue Hat Registration Fee or the 11% non-voting interest have been recognized in the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022.

The fair value of the 11% non-voting interest and corresponding share-based compensation expense of $1.0 million was determined as of the grant date of ~~this report,~~September 30, 2022 and based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs. The most significant of these inputs were the combined weighted averages of the a) discount rate at 27.5%, b) present value of estimated future cash flows of $3.9 million and c) the present value of the terminal value at $5.6 million.

Once Blue Hat Registration is complete and certain distribution agreements relating to the commercialization of the Products in the Territory are assigned and entered into (the “Distribution Agreements”), Taikuk would be entitled to certain royalty payments based on the Company’s and the JV’s net revenue for sales of the Products in the Territory under the Distribution Agreements. Operating activity under the JV ~~has~~was not ~~yet launched.~~material during the three months ended September 30, 2022.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 7. Inventories

The Company's major classes of inventory and corresponding balances as of ~~June~~September 30, 2022 and December 31, 2021 are as follows:


(In thousands)	(In thousands)	Jun 30, 2022		Dec 31, 2021		(In thousands)	Sep 30, 2022		Dec 31, 2021
Consumer Products - Finished Goods	Consumer Products - Finished Goods	$	7,605	$	6,823	Consumer Products - Finished Goods	$	9,214	$	6,823
Consumer Products - Work in Process	Consumer Products - Work in Process	4,966		4,131		Consumer Products - Work in Process	3,157		4,131
Bulk ingredients	Bulk ingredients	2,655		2,131		Bulk ingredients	2,743		2,131
Reference standards	Reference standards	527		516		Reference standards	522		516
Total Inventory	Total Inventory	$	15,753	$	13,601	Total Inventory	$	15,636	$	13,601

Note 8. Leases

The Company accounts for its leases in accordance with ASU No. 2016-02 (Topic 842) which requires that a lessee recognize the assets and liabilities that arise from operating leases. The ASU requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use (ROU) asset on the balance sheet. The Company leases office space facilities and a research and development laboratory under non-cancelable operating leases with varying expirations extending through fiscal year 2028. The lease agreements provide for renewal options and rent escalation over the lease term as well as require the Company to pay maintenance, insurance and property taxes. Lease expense is recognized on a straight-line basis over the term of the lease.

Operating Leases

As of ~~June~~September 30, 2022, the Company had right-of-use assets and corresponding operating lease liabilities of approximately ~~$3.9~~$3.7 million and ~~$4.5~~$4.4 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the components of operating lease expense are as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2022		2021		2022		2021
Operating leases	Operating leases									Operating leases
Operating lease expense	Operating lease expense	$	236	$	152	$	492	$	305	Operating lease expense	$	235	$	152	$	727	$	359
Variable lease expense	Variable lease expense	45		54		85		94		Variable lease expense	47		51		132		139
Operating lease expense	Operating lease expense	281		206		577		399		Operating lease expense	282		203		859		498
Short-term lease rent expense	Short-term lease rent expense	63		63		127		125		Short-term lease rent expense	33		63		160		191
Total expense	Total expense	$	344	$	269	$	704	$	524	Total expense	$	315	$	266	$	1,019	$	689


	At ~~June~~September 30, 2022
Weighted-average remaining lease term (years), operating leases	~~4.7~~4.6
Weighted-average discount rate, operating leases	~~5.7~~5.9	%

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Future minimum lease payments under operating leases as of ~~June~~September 30, 2022 are as follows:


Year	Year	(In thousands)		Year	(In thousands)
2022 (Remainder)	2022 (Remainder)	$	438	2022 (Remainder)	$	216
2023	2023	949		2023	949
2024	2024	1,159		2024	1,159
2025	2025	1,141		2025	1,141
2026	2026	906		2026	906
2027	2027	498		2027	498
Thereafter	Thereafter	179		Thereafter	179
Total	Total	5,270		Total	5,048
Less present value discount	Less present value discount	(742)		Less present value discount	(677)
Present value of total operating lease liabilities	Present value of total operating lease liabilities	4,528		Present value of total operating lease liabilities	4,371
Less current portion	Less current portion	(646)		Less current portion	(684)
Long-term obligations under operating leases	Long-term obligations under operating leases	$	3,882	Long-term obligations under operating leases	$	3,687

Note 9. Share-Based Compensation

Equity Plans

The Company grants awards to recipients through the 2017 Equity Incentive Plan, as amended (the “2017 Plan”), which was approved by stockholders and the Board of Directors. The 2017 Plan provides for the issuance of shares that total no more than the sum of (i) 14,500,000 new shares, (ii) approximately 384,000 unallocated shares remaining available for the grant of new awards under the Second Amended and Restated 2007 Equity Incentive Plan, (iii) any returning shares such as forfeited, cancelled, or expired shares and (iv) 500,000 shares pursuant to an inducement award. The number of shares available to be issued under the 2017 Plan will be reduced by (i) 1one share for each share that relates to an option or stock appreciation right award and (ii) 1.5 shares for each share which relates to an award other than a stock option or stock appreciation right award (a full-value award). As of ~~June~~September 30, 2022, there were approximately ~~2.8~~4.4 million remaining shares available for issuance under the 2017 Plan. Options expire 10 years from the date of grant.

The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for stock option awards that are not market based. Determining the appropriate fair-value model and calculating the fair value of stock option awards at the grant date requires judgment, including estimating stock price volatility and expected option life. The fair-value of the restricted stock unit awards at the grant date is based on the market price on the grant date. The Company develops estimates based on historical data and market information, which can change significantly over time, and adjusts for forfeitures as they occur.

General Vesting Conditions

The Company’s stock options and restricted stock unit awards are generally subject to a one-year cliff vesting period after which 1/3rd of the shares vest with the remaining shares vesting ratably each month over a two-year period subject to the passage of time. Beginning in the second quarter of 2022, restricted stock units are generally subject to a ~~three year~~three-year vesting period with 1/3rd vesting per year on the anniversary of the grant date. ~~Additionally, certain~~Certain stock option awards are market or performance based and vest based on certain triggering events established by the Compensation Committee. Certain executive stock option and RSU awards provide for accelerated vesting if there is a change in control or termination without cause.

Stock Options

~~The fair value of the Company’s stock options that are not market based are estimated at the grant date using the Black-Scholes option pricing model.~~ The Company used the following weighted average assumptions for options granted during the ~~six~~nine months ended ~~June~~September 30, 2022:


Weighted Average:	~~Six~~Nine Months Ended ~~June~~September 30, 2022
Expected term	~~5.7~~6.7 years
Expected volatility	~~76.0~~76.5	%
Risk-free rate	~~2.0~~2.5	%
Expected dividends	—	%

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Service Period Based Stock Options

The following table summarizes activity of service period-based stock options during the ~~six~~nine months ended ~~June~~September 30, 2022:


			Weighted Average							Weighted Average
(In thousands except per-share data and remaining contractual term)	(In thousands except per-share data and remaining contractual term)	Number of Options	Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value			(In thousands except per-share data and remaining contractual term)	Number of Options	Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2021	Outstanding at December 31, 2021	9,495	$	4.65	6.5	$	2,452		Outstanding at December 31, 2021	9,495	$	4.65	6.5	$	2,452
Options Granted	Options Granted	2,056	2.57						Options Granted	2,334	2.46
Options Exercised	Options Exercised	—	—			—			Options Exercised	—	—			—
Options Forfeited	Options Forfeited	(685)	5.22						Options Forfeited	(2,806)	4.09
Outstanding at June 30, 2022		10,866	$	4.22	6.2	$	3	*
Outstanding at September 30, 2022									Outstanding at September 30, 2022	9,023	$	4.25	6.3	$	—	*

Exercisable at June 30, 2022		7,451	$	4.11	4.7	$	—	*
Exercisable at September 30, 2022									Exercisable at September 30, 2022	6,112	$	4.42	5.0	$	—	*

*The aggregate intrinsic values in the table above are based on the Company’s stock price of ~~$1.67,~~$1.23, which is the closing price of the Company’s stock on the last day of business for the period ended ~~June~~September 30, 2022.

Restricted Stock Units

The following table summarizes activity of restricted stock units during the ~~six~~nine months ended ~~June~~September 30, 2022:


(In thousands except per share fair value)	(In thousands except per share fair value)	Number of RSUs	Weighted Average Fair Value		(In thousands except per share fair value)	Number of RSUs	Weighted Average Fair Value
Unvested shares at December 31, 2021	Unvested shares at December 31, 2021	115	$	10.21	Unvested shares at December 31, 2021	115	$	10.21
Granted	Granted	518	2.34		Granted	690	2.17
Vested	Vested	(29)	11.83		Vested	(43)	11.10
Forfeited	Forfeited	(11)	11.02		Forfeited	(14)	9.85
Unvested shares at June 30, 2022		593	$	3.24
Unvested shares at September 30, 2022					Unvested shares at September 30, 2022	748	$	2.75

Expected to vest at June 30, 2022		593	$	3.24
Expected to vest at September 30, 2022					Expected to vest at September 30, 2022	748	$	2.75

Total Share-Based Compensation

Total share-based compensation expense was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2022		2021		2022		2021
Share-based compensation expense	Share-based compensation expense									Share-based compensation expense
Cost of sales	Cost of sales	$	73	$	58	$	130	$	98	Cost of sales	$	73	$	58	$	203	$	156
Sales and marketing	Sales and marketing	399		454		720		842		Sales and marketing	414		456		1,134		1,298
Research and development	Research and development	253		220		478		358		Research and development	252		275		730		633
General and administrative	General and administrative	571		884		1,856		1,602		General and administrative	490		1,033		2,346		2,635
Total	Total	$	1,296	$	1,616	$	3,184	$	2,900	Total	$	1,229	$	1,822	$	4,413	$	4,722

In future periods, the Company expects to recognize approximately ~~$8.7~~$6.2 million and $1.7 million in share-based compensation expense for unvested options and unvested restricted stock units, respectively, that were outstanding as of ~~June~~September 30, 2022. Future share-based compensation expense will be recognized over ~~1.9~~1.8 and ~~2.2~~1.9 weighted average years for unvested options and restricted stock units, respectively. The Company also has total unrecognized share-based compensation expense of $1.0 million pertaining to the Joint Venture. Such expense will only be recognized if Blue Hat Registration is achieved, the timing of which is uncertain as of September 30, 2022.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 10. Commitments and Contingencies

Legal proceedings

1. Elysium Health, LLC

(A) California Action

On December 29, 2016, ChromaDex 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 (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 filed a fifth amended complaint that added an individual, Mark Morris, as a defendant. Elysium and Morris (Defendants) moved to dismiss on December 21, 2018. The court denied Defendants’ motion on February 4, 2019. Defendants filed their answer to ChromaDex’s fifth amended complaint on February 19, 2019. ChromaDex 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 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 and Elysium (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 (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, ChromaDex’s claims asserted in the California Action, among other allegations, were that (i) Elysium breached the Supply Agreement, dated June 26, 2014, by and between ChromaDex and Elysium (pTeroPure® Supply Agreement), by failing to make payments to ChromaDex for purchases of pTeroPure® and by improper disclosure of confidential ChromaDex information pursuant to the pTeroPure® Supply Agreement, (ii) Elysium breached the Niagen® Supply Agreement, by failing to make payments to ChromaDex for purchases of Niagen®, (iii) Defendants willfully and maliciously misappropriated ChromaDex 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 documents and information, (v) Morris breached his fiduciary duty to ChromaDex by lying to and competing with ChromaDex while still employed there, and (vi) Elysium aided and abetted Morris’s breach of fiduciary duty. ChromaDex sought 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’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.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Elysium’s claims alleged in the California Action were that (i) ChromaDex breached the Niagen® Supply Agreement by not issuing certain refunds or credits to Elysium, (ii) ChromaDex fraudulently induced Elysium into entering into the License Agreement, (iv) ChromaDex’s conduct constitutes misuse of its patent rights, and (v) ChromaDex was unjustly enriched by the royalties Elysium paid pursuant to the License Agreement. Elysium sought damages for ChromaDex’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 has engaged in patent misuse.

On January 17, 2020, Elysium moved to substitute its counsel. 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 2019 coronavirus disease ("COVID-19" or "COVID") pandemic and ongoing private mediation efforts, the parties jointly stipulated to adjourn the trial date. The court vacated the trial date on March 20, 2020. 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. On November 4, 2020, the parties submitted a joint status report indicating that they will propose a new trial date as soon as the court announces that it will resume jury trials. On November 18, 2020, the court set trial to begin on September 21, 2021.

On December 11, 2020, Elysium filed a “Notice of Correction of Depositions” related to the depositions of its chief executive officer, Eric Marcotulli, and chief operating officer, Daniel Alminana, both taken in March 2019. On March 8, 2021, based in part on information that Elysium submitted under seal with that notice, ChromaDex filed a motion for sanctions or, in the alternative, reconsideration of the court’s January 16, 2020 order regarding summary judgment, in which ChromaDex moved to dismiss Elysium’s third, fourth, and fifth counterclaims. Elysium’s opposition brief was filed on March 22, 2021. ChromaDex filed its reply brief on March 29, 2021. On April 27, 2021, the court denied ChromaDex, Inc’s motion for terminating sanctions, but concluded that the evidence at issue in the motion will be admissible at trial.

The jury trial portion of the case commenced on September 21, 2021. The jury returned a verdict on September 27, 2021. The verdict found (i) Elysium liable for breaches of the Niagen® and pTeroPure® Supply Agreements for failing to pay for purchases of the ingredients totaling approximately $3.0 million, (ii) Mark Morris liable for breach of a confidentiality agreement, requiring him to disgorge approximately $17,307, (iii) ChromaDex liable for breaching the Niagen® Supply Agreement for not issuing certain refunds or credits to Elysium in the amount of $625,000, and (iv) ChromaDex liable for fraudulent inducement of the Licensing Agreement in the amount of $250,000, along with $1,025,000 in punitive damages arising from the same counterclaim. On October 25, 2021, ChromaDex informed the court that it would request prejudgment interest on the approximately $3.0 million in damages awarded by the jury for Elysium’s breaches of the Niagen® and pTeroPure® Supply Agreements. Elysium’s opposition brief was filed on January 24, 2022, and ChromaDex, Inc.’s reply brief was filed on January 31, 2022. On February 10, 2022, the court denied ChromaDex Inc.’s motion for prejudgment interest.

On February 18, 2022, ChromaDex, Inc. and Elysium jointly filed a notice informing the court that ChromaDex, Inc. had filed in the U.S. District Court for the Southern District of New York (SDNY Court) a motion to enforce a settlement agreement between ChromaDex, Inc. and Elysium that ChromaDex, Inc. asserts would materially affect the California Action. On April 22, 2022, ChromaDex, Inc. and Elysium jointly filed a notice informing the court that the SDNY Court had granted ChromaDex, Inc.’s motion to enforce the settlement agreement. On April 29, 2022, ChromaDex, Inc. filed a notice informing the court that the SDNY Court had dismissed the SDNY action with prejudice pursuant to the settlement agreement. On August 22, 2022, ChromaDex, Inc. filed a motion for entry of judgment pursuant to Federal Rule of Civil Procedure 54(b) on the basis that the settlement agreement was enforceable and resolved the claims and counterclaims tried to the jury in the California Action. Elysium’s opposition brief was filed on August 29, 2022, and ChromaDex, Inc.’s reply brief was filed on September 2, 2022. On September 13, 2022, the court denied ChromaDex, Inc.’s motion for entry of judgment pursuant to Rule 54(b).

On September 28, 2022, ChromaDex, Inc., Elysium, and Mark Morris filed a joint stipulation requesting that the court stay the California Action pending the final resolution of ChromaDex, Inc.’s appeal in the U.S. Court of Appeals for the Federal Circuit captioned ChromaDex, Inc. v. Elysium Health, Inc., No. 2022-1116 (the “Federal Circuit Appeal”). On September 28, 2022, the court issued an order staying the California Action pending the final resolution of the Federal Circuit Appeal.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(B) Southern District of New York Action

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 (Elysium SDNY Complaint). Elysium Health alleged in the Elysium SDNY Complaint that ChromaDex 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 averred that the citizen petition made Elysium Health’s product appear dangerous, while casting ChromaDex’s own product as safe. The Elysium SDNY Complaint asserted four claims for relief: (i) false advertising under the Lanham Act, 15 U.S.C. § 1125(a); (ii) trade libel; (iii) deceptive business practices under New York General Business Law § 349; and (iv) tortious interference with prospective economic relations. On October 26, 2017, ChromaDex 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 filed its reply on November 9, 2017.

On October 26, 2017, ChromaDex filed a complaint in the United States District Court for the Southern District of New York against Elysium Health (ChromaDex SDNY Complaint). ChromaDex 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); (ii) unfair competition under 15 U.S.C. § 1125(a); (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. ChromaDex 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’ 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’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’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 15 U.S.C. § 1125(a); and (iii) deceptive practices under New York General Business Law § 349. ChromaDex answered Elysium’s counterclaims on November 2, 2018.

ChromaDex 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. § 1125(a). On April 10, 2019, Elysium Health answered the amended complaint and filed amended counterclaims, also adding new claims against ChromaDex for false advertising and unfair competition under the Lanham Act, 15 U.S.C. § 1125(a). On July 1, 2019, Elysium Health filed further amended counterclaims, adding new claims under the Copyright Act §§ 106 & 501. On February 9, 2020, ChromaDex 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. On March 12, 2020, Elysium Health answered the second amended complaint. On March 13, 2020, ChromaDex filed an answer and objection to Elysium Health’s third amended counterclaims.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

On December 14, 2020, Elysium Health filed a motion to supplement and amend its counterclaims to add claims regarding alleged advertising related to COVID, to add an allegation about a change to the ChromaDex website, and to remove its copyright infringement claim under the Copyright Act. On January 19, 2021, the Court denied Elysium Health’s motion to add claims regarding alleged advertising related to COVID. The Court granted the unopposed requests to add an allegation about a change to ChromaDex’s website and to remove Elysium’s Copyright Act claim. Pursuant to the Court’s order, Elysium filed fourth amended counterclaims on April 21, 2021.

All discovery closed on April 23, 2021. The Court vacated a previously scheduled joint pretrial order and trial date because of COVID-19, and the Court has informed the Parties that trial date will be rescheduled in November or December 2021.

Both parties filed dispositive and Daubert motions on June 4, 2021. Opposition papers were filed by both parties on June 25, 2021, and reply papers were filed on July 9, 2021. On January 10, 2022, both parties appeared for oral argument on the dispositive and Daubert motions.

On February 3, 2022, ChromaDex reached a settlement in order to resolve the SDNY action in its entirety as well as the claims tried to the jury in the Central District of California (the “Settlement Agreement”). Shortly thereafter, before the parties could notify the Court, the Court issued a ruling on the pending dispositive and Daubert motions, dismissing ChromaDex’s SDNY complaint in its entirety on the grounds that ChromaDex’s damages were uncertain, and dismissing some of Elysium’s claims. Elysium then asserted that a settlement had not been reached. ChromaDex thereafter filed a motion to enforce the Settlement Agreement in its entirety on February 16, 2022. Elysium’s opposition to that motion was filed on March 2, 2022, and ChromaDex’s reply was filed on March 9, 2022. On April 19, 2022, the Court concluded that a settlement had been reached and granted ChromaDex’s motion to enforce the Settlement Agreement. On April 28, 2022, pursuant to the Settlement Agreement, the Court dismissed the entire action with prejudice. On May 11, 2022, Elysium filed a notice of appeal. On May 25, 2022, ChromaDex filed a notice of cross-appeal. Elysium filed its opening brief on August 24, 2022. ChromaDex’s brief is due on November 22, 2022.

The Company is unable to predict the outcome of the Elysium SDNY Complaint or any possible appeals and, at this time, cannot reasonably estimate the possible loss or range of loss with respect to the legal proceeding discussed herein. As of ~~June~~September 30, 2022, ChromaDex did not accrue a potential loss for the Elysium SDNY Complaint because ChromaDex believes that the allegations are without merit and thus it is not probable that a liability has been incurred.

On September 17, 2018, 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 infringes U.S. Patent Nos. 8,197,807 (‘807 Patent) and 8,383,086 (‘086 Patent) that comprise compositions containing isolated nicotinamide riboside held by Dartmouth and licensed exclusively to ChromaDex 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) 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 filed an opposition brief on November 21, 2018 detailing the issues with Elysium’s motion to stay. In particular, ChromaDex 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 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’s prediction, ChromaDex 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.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

On November 1, 2019, ChromaDex 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. The joint status report was submitted on January 30, 2020. On February 4, 2020, the Delaware court issued an order granting ChromaDex’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 served infringement contentions. Elysium filed a Second Amended Answer on July 10, 2020.

On April 24, 2020, ChromaDex 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’s motion for leave to amend and moved to dismiss ChromaDex for alleged lack of standing. ChromaDex 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. The Court held a hearing on the motion for leave to amend the complaint and Elysium’s motion to dismiss on September 16, 2020. On December 15, 2020, the Court entered orders (i) granting in part and denying in part Elysium’s motion to dismiss ChromaDex for alleged lack of standing; and (ii) denying ChromaDex’s motion for leave to amend. ChromaDex filed a motion for reargument on December 29, 2020. Elysium filed a response to the motion for reargument on January 28, 2021. ChromaDex filed a motion for leave to file a reply on February 8, 2021. Elysium filed a response to the motion for leave to file a reply on February 12, 2021. ChromaDex filed a reply to the motion for leave to file a reply on February 19, 2021. The Court granted the motion for leave to file the reply on April 26, 2021, and denied the motion for reargument on April 27, 2021.

On July 22, 2020 the parties filed a Joint Claim Construction Chart and respective motions for claim construction. The parties filed a Joint Claim Construction Brief on November 5, 2020. The Court held a Markman hearing on claim-construction issues on December 17, 2020. The Court entered a claim-construction ruling on January 5, 2021.

Fact discovery closed on January 26, 2021. Opening expert reports were served on February 9, 2021. Responsive expert reports were served on March 9, 2021. Reply expert reports were served on March 30, 2021. Both parties filed dispositive and Daubert motions on April 27, 2021.

On September 21, 2021, the Court granted Elysium’s motion for summary judgment that the claims of the ‘807 and ‘086 patents are invalid based on patent-ineligible subject matter. ChromaDex filed a notice of appeal on November 2, 2021. ChromaDex’s opening brief was filed on February 2, 2022. Elysium’s response brief was filed on April 11, 2022. ChromaDex’s reply brief was filed on May 9, 2022. Oral argument has ~~not yet~~ been ~~scheduled.~~scheduled for December 6, 2022. If the appeal is unsuccessful, or, if on remand the Court dismisses ChromaDex’s claims for some other reason, ~~that could reduce or eliminate~~it will impact any competitive advantage the Company may otherwise have had.

2. Thorne Research, Inc.

(A) Inter Partes Review Proceedings

On or around September 28, 2020, Thorne Research, Inc. (Thorne) provided notice to ChromaDex that it intended to terminate its March 25, 2019 Supply Agreement and subsequent amendments with ChromaDex, effective as of December 31, 2020. A discussion between ChromaDex and Thorne followed, and Thorne asserted that it could challenge the ‘086 Patent in an inter partes review (IPR) proceeding on the basis of prior art, but would be willing to enter into a mutual existence agreement that would permit Thorne to source NR from a third party. Thorne did not offer substantive information supporting a prior art claim or about the nature of the threatened IPR.

On December 1, 2020, Thorne filed a petition for IPR of the ‘086 Patent. Dartmouth’s preliminary response to the petition was filed on March 15, 2021. On June 10, 2021, the Patent Trial and Appeal Board (PTAB) issued a decision instituting an IPR on the ‘086 Patent. On September 21, 2021, Dartmouth filed its Patent Owner Response. On December 21, 2021, Thorne filed its reply. Oral argument was held on March 15, 2022. On May 31, 2022, the PTAB issued a final written decision holding that the challenged claim was unpatentable. On August 2, 2022, Dartmouth filed a notice of appeal.

On February 1, 2021, Thorne filed a petition for IPR of the ‘807 Patent. Dartmouth’s preliminary response to the petition was filed on May 18, 2021. On August 12, 2021, the Patent Trial and Appeal Board (PTAB) issued a decision instituting an IPR on the ‘807 Patent. On November 9, 2021, Dartmouth filed its Patent Owner Response. On February 15, 2022, Thorne filed its reply. Oral argument was held on May 17, 2022. AOn August 10, 2022, the PTAB issued a final written decision ~~had~~holding that the challenged claims were not ~~yet been rendered.~~unpatentable. On October 12, 2022, Thorne filed a notice of appeal.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

On May 12, 2021, ChromaDex and Trustees of Dartmouth College filed a patent infringement complaint in the United States District Court for the Southern District of New York. The complaint alleges that certain of Thorne’s dietary supplements containing isolated NR infringe the ‘807 and ‘086 Patents, which claim compositions containing isolated nicotinamide riboside and are held by Dartmouth and licensed exclusively to ChromaDex. On July 6, 2021, Thorne filed an answer and counterclaims to the complaint. The answer asserts various affirmative defenses and denies that Plaintiffs are entitled to any relief. The counterclaims seek declaratory judgment of patent invalidity for the ‘807 and ‘086 Patents. On July 8, 2021, the parties filed a proposed stipulation and order staying the matter pending issuance of the institution decision in the ‘807 Patent IPR. On July 9, 2021, the Court granted the stipulation and order to stay. On August 19, 2021, the parties filed a proposed stipulation and order staying the matter pending issuance of final written decisions in the IPRs. On August 20, 2021, the Court granted the stipulation and order to stay. On August 24, 2022, the parties filed a status report agreeing to continue to stay until fourteen days after the deadline to appeal the final written notice decision in the ‘807 Patent IPR. On October 26, 2022, the parties filed a further status report agreeing to continue the stay through resolution of the appeals.

3. Erica Martinez

(A) California Action

On October 1, 2021, Erica Martinez, a former employee of ChromaDex, filed a complaint in the Orange County Superior Court alleging claims against ChromaDex for: (1) disability discrimination, (2) failure to accommodate a disability, (3) failure to engage in the interactive process, (4) retaliation for taking California Family Rights Act leave, and (5) failure to prevent discrimination and harassment. Martinez’s allegations are based primarily upon Martinez’s claim that her son was allegedly diagnosed with Autism Spectrum Disorder in or around July 17, 2019, and ChromaDex allegedly retaliated against, and ultimately terminated, her for taking time off to care for her son and attend his doctors’ appointments. ChromaDex has not been served with the Summons and Complaint. The parties have settled this matter and the request for dismissal, with prejudice, of Martinez’s claims was entered on January 25, 2022. The resolution of such matter was not material to the Company.

4. Lynda Power

(A) Florida Action

On April 18, 2022, Lynda Power, a citizen of the state of Florida, filed a complaint in the United States District Court for the Middle District of Florida, Orlando Division alleging claims against the Company for (1) product liability (2) personal injury (3) strict liability and (4) negligence. Power's allegations are based primarily upon Power's claim that she suffered an adverse event after consuming the Company’s products. On April 26, 2022, the Court ordered Power to serve an amended complaint due to the failure to properly plead subject matter jurisdiction. On May 6, 2022, Power filed an amended complaint. On May 11, 2022, the Court issued another order that Power had not properly pleaded subject matter jurisdiction. On May 23, 2022, Power filed a second amended complaint. ~~There has been no request for~~On August 2, 2022, the Magistrate Judge issued a Report and Recommendation on Power’s motion to proceed in forma pauperis, which included an ~~issuance~~analysis of the second amended complaint. The Report and Recommendation recommended that the Court (i) deny the motion to proceed in forma pauperis, (ii) dismiss the second amended complaint with prejudice, and (iii) direct the Clerk of the Court to close the file. On August 2, 2022, Power filed an objection to the Report and Recommendation.

On September 20, 2022, the Court (i) dismissed the complaint without prejudice, but without leave to amend (ii) denied the motion to proceed in forma pauperis, and (iii) directed the Clerk of the Court to close the file. On October 11, 2022, Power filed a ~~summons.~~ motion to extend the time to object to the Report and Recommendation. On October 28, 2022, the Court denied the motion to extend.

As of ~~August 10,~~November 2, 2022, the Company has not been served with the complaint. The Company believes these claims are without merit, will aggressively defend itself, and does not anticipate that the ultimate resolution of this matter will be material to the Company’s operations, financial condition, or cash flows.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

5. Other

(A) Rejuvenation Therapeutics

On September 15, 2020, the Company received a letter from a customer, Rejuvenation Therapeutics Corp. (Rejuvenation), and has received subsequent correspondence, requesting a full refund of approximately $1.6 million of Niagen® it purchased, alleging breaches of the supply agreement between the parties. ~~As of June 30, 2022, the Company has recorded a return liability of approximately $0.5 million, which the Company offered to settle in good faith.~~ On May 13, 2021, Rejuvenation filed a complaint in the Superior Court of the State of California, County of Orange, asserting causes of action for Concealment and Negligent Misrepresentation. On July 20, 2021, Rejuvenation filed an amended complaint adding a claim for Declaratory Relief. The Company filed a demurrer on September 3, 2021. On February 1, 2022, the Court sustained ChromaDex’s demurrer in its entirety with leave to amend as to the claims for Concealment and Negligent Misrepresentation, and without leave to amend as to the claim for Declaratory Relief. On February 16, 2022, Rejuvenation filed a Second Amended Complaint, asserting causes of action for Fraud and Negligent Misrepresentation. On May 16, 2022, ChromaDex filed a demurrer to the Second Amended Complaint. On June 23, 2022, Rejuvenation filed for a motion for leave to file a third amended complaint. ~~Both~~On October 21, 2022, the ~~demurrer~~parties reached a settlement on confidential terms and motion for leave to amend are scheduled to be heard on September 27, 2022. The Company believes these claims are without merit and will aggressively defend itself if a reasonable settlement cannot be reached. The Company doesthe resolution was not ~~anticipate that the ultimate resolution of this matter will be~~ material to the ~~Company’s operations, financial condition or cash flows.~~Company.

6. Contingencies

(A) In September 2019, the Company received a letter from a licensor stating that the Company owed the licensor $1.6 million plus interest for sublicense fees as a result of the Company entering into a 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.

(B) On November 17, 2020, the Company received a warning letter (the Letter) from the United States Food and Drug Administration (FDA) and Federal Trade Commission (FTC). The Letter references statements issued by the Company relating to preclinical and clinical research results involving nicotinamide riboside and COVID-19. The statements were included in press releases and referenced in social media posts.

On November 18, 2020, the Company provided a response to the Letter stating that the Company disagrees with the assertion in the Letter that the Company’s products are intended to mitigate, prevent, treat, diagnose or cure COVID-19 in violation of certain sections of the Federal Food, Drug, and Cosmetic Act or that they were unsubstantiated under the FTC Act, but rather accurately reflected the state of the science and the results of scientific research. Nonetheless, the Company also responded that it had deleted social media references to the studies and removed related press releases from its website.

On April 30, 2021, the Company received an additional warning letter (the Second Letter) from only the FTC. The Second Letter references the original Letter, and cites additional statements issued by the Company and certain officers and advisors of the Company relating to nicotinamide riboside and scientific studies related to COVID-19. The Second Letter asserts that such statements contain coronavirus-related prevention or treatment claims and are deceptive in violation of the Federal Trade Commission Act.

On May 4, 2021, the Company provided a response to the Second Letter stating that it had removed the social posts from its accounts identified in the Second Letter and requested that third parties remove the post from their accounts that were identified in the Second Letter. The Company stated that the press release identified in the Second Letter is appropriate and not a deceptive act or practice under applicable law. The Company affirmed its belief in the need to accurately report on the scientific results of its studies to its investors and welcomed the opportunity to discuss its research and development program with the FTC and receive guidance on future releases.

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

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 11. Employee Retention Tax Credit

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (ERTC): a refundable tax credit against certain employment taxes for qualifying businesses keeping employees on their payroll during the COVID-19 pandemic. The ERTC was subsequently amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Consolidated Appropriation Act of 2021, and the American Rescue Plan Act of 2021, all of which amended and extended the ERTC availability and guidelines under the CARES Act. During the third quarter of 2022, the Company evaluated its eligibility for the ERTC and is eligible to claim a refundable tax credit against the employer share of Social Security taxes equal to fifty percent (50%) of the qualified wages paid to employees between March 27, 2020 and December 31, 2020 and seventy percent (70%) of the qualified wages paid to employees between January 1, 2021 and September 30, 2021. For fiscal year 2020, qualified wages are limited to $10,000 annually per employee for a maximum allowable ERTC per employee of $5,000 annually and qualified wages are limited to $10,000 per calendar quarter in 2021 for a maximum allowable ERTC per employee of $7,000 for each calendar quarter in 2021.

The Company qualified for the ERTC in the last three quarters of 2020 and all three quarters of 2021 and filed a claim for the credit in August 2022. During the quarter ended September 30, 2022, the Company recorded an aggregate benefit of approximately $2.1 million in Other income, net - Employee Retention Tax Credit in its Unaudited Condensed Consolidated Statements of Operations to reflect the ERTC for all eligible quarters. The receivable for the ERTC benefit is included within Prepaid expenses and other current assets on the Company’s Unaudited Condensed Consolidated Balance Sheets at September 30, 2022.

ChromaDex Corporation and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Note ~~11.~~12. Subsequent Events

Securities Purchase Agreement and Registration Rights Agreement - Related Parties

On September 30, 2022, the Company entered into a Securities Purchase Agreement with Pioneer Step Holdings Limited (Pioneer Step), Champion River Ventures Limited (Champion) and Robert Fried (collectively, the “Purchasers”) pursuant to which the Company agreed to sell and issue approximately 2.5 million shares of common stock at a price of $1.25 per share (the “Financing”). Champion is indirectly owned by Li Ka-Shing and Pioneer Step is indirectly owned by Solina Chau, and each of Mr. Ka-Shing and Ms. Chau own through affiliated entities more than 5% of the Company’s common stock. Pursuant to previous agreements, each of Pioneer Step and Champion have appointed a member of the Company’s Board. Mr. Fried is the Company’s Chief Executive Officer. The transaction and related agreements were approved by the Audit Committee of the Board in accordance with the Company’s Related-Persons Transaction Policy. On October 7, 2022, the Company closed the Financing and received proceeds of approximately $2.9 million, net of offering costs of $0.2 million.

In connection with the Financing, on September 30, 2022, the Company also entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), pursuant to which the Company agreed to (i) file one or more registration statements with the SEC to cover the resale of the shares of Common Stock issued to the Purchasers, (ii) use reasonable best efforts to have all such registration statements declared effective within the timeframes set forth in the Registration Rights Agreement, and (iii) use commercially reasonable efforts to keep such registration statements effective during the timeframes set forth in the Registration Rights Agreement. In the event that such registration statements are not filed or declared effective within the timeframes set forth in the Registration Rights Agreement, any such effective registration statements subsequently become unavailable, or the Purchasers are unable to sell the shares of Common Stock issued pursuant to the Financing due to failure by the Company to satisfy the current public information requirement of Rule 144 under the Securities Act, the Company would be required to pay liquidated damages to the Purchasers equal to 1.0% of the aggregate purchase price per month for each default (up to a maximum of 5.0% of such aggregate purchase price).

NHSc Agreement

On October 10, 2022, the Company and Société des Produits Nestlé SA, a société anonyme organized under the laws of Switzerland (NHSc), as successor-in-interest to NESTEC Ltd., entered into an amended and restated supply agreement (the “Supply Agreement”), which amends and restates the supply agreement, dated December 19, 2018, entered into by the Company and NESTEC Ltd. Pursuant to the Supply Agreement, NHSc and its affiliates will exclusively purchase nicotinamide riboside chloride (NRCL) from the Company and NHSc and its affiliates will have the non-exclusive right to manufacture, market, distribute, and sell products using NRCL for human use in the (i) medical nutritional, (ii) functional food and beverage and (iii) multi-ingredient dietary supplements categories sold under one of the NHSc brands (the “Approved Products”) world-wide, but excluding certain countries and ingredient combinations. The term of the Supply Agreement is five years, unless earlier terminated, and is subject to automatic extensions provided certain minimum purchases by NHSc are met.

As consideration for the rights granted to NHSc under the Supply Agreement, NHSc agreed to an initial purchase commitment of NRCL equal to approximately $2.0 million. The Supply Agreement additionally provides for NHSc to pay a royalty to the Company at tiered percentage rates in the low-single digits based on worldwide annual net sales of the Approved Products, subject to certain deductions. Furthermore, the Supply Agreement provides for NHSc to pay the Company two separate one-time milestone payments in the low seven figures depending on whether NHSc achieves certain net sales targets in any contract year.

~~The~~In connection with the entry into the Supply Agreement, the Company ~~has evaluated subsequent events through~~entered into a Securities Purchase Agreement with NHSc, pursuant to which NHSc agreed to purchase 3.8 million shares of common stock at a price of $1.31 which is equal to the ~~filing date~~volume weighted average price of ~~this Form 10-Q to ensure that this filing includes all appropriate footnote disclosure of events both recognized in~~ the ~~financial statements as of~~Company’s common stock for the ten trading days preceding October 10, 2022 (the “Securities Purchase Agreement”). ~~June 30, 2022, and events which occurred subsequently but were not recognized in the financial statements.~~ On ~~August 5,~~October 17, 2022, the Company ~~filed a claim for a refund from~~closed the ~~U.S. Treasury in the amount~~Securities Purchase Agreement and received proceeds of approximately ~~$2.5~~$4.8 million representing the anticipated Employee Retention Tax Credit (ERTC) available to it under the CARES Act. The ERTC is available to companies that retained employees on its payroll without receiving services due to fully, or partially, suspending operations during fiscal years 2020 and 2021 due to orders from an appropriate governmental authority, which limited commerce, travel, or group meetings due to COVID-19. The employee retention tax credits will be recorded as an offset to the related employee expenses within the appropriate financial statement line item. Beyond this, there were no further subsequent events which required recognition, adjustment to or disclosure in the financial statements.

, net of offering costs of $0.2 million.

2426

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with the ~~condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements and notes thereto included in this Form 10-Q and the Consolidated Financial Statements and notes thereto in our 2021 Annual Report on Form 10-K. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.

Growth and percentage comparisons made herein generally refer to the three and ~~six~~nine months ended ~~June~~September 30, 2022 compared with the three and ~~six~~nine months ended ~~June~~September 30, 2021 unless otherwise noted. Unless 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.

Special Note Regarding Forward Looking Statements

Certain statements in this 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, as amended, 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 “expects,” “anticipates,” “intends,” “estimates,” “plans,” “potential,” “possible,” “probable,” “believes,” “seeks,” “may,” “will,” “should,” “could,” “predicts,” “projects,” “continue,” “would” or the negative of such terms or other similar 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 set forth below in Part II, Item 1A, “Risk Factors” and our financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 14, 2022 (Annual Report).

Company Overview

We are a global bioscience company dedicated to healthy aging. Our team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), an essential coenzyme that is a key regulator of cellular metabolism and is found in every cell of the human body. NAD+ levels in humans have been shown to decline by more than 50% from young adulthood to middle age. In addition to age, other factors linked to NAD+ depletion include poor diet, excess alcohol consumption and a number of disease states. NAD+ levels may be increased through supplementation with NAD+ precursors, such as nicotinamide riboside (NR), calorie restriction and moderate exercise.

In 2013, we commercialized Niagen®, a proprietary form of NR, a novel form of vitamin B3. Data from numerous preclinical studies and human clinical trials show that NR is a highly efficient NAD+ precursor that significantly raises NAD+ levels in blood and tissue. Niagen® is confirmed safe for human consumption as a dietary supplement and food ingredient. Niagen® has twice been successfully reviewed under the U.S. Food and Drug Administration’s (FDA) new dietary ingredient (NDI) notification program, it 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 Australia. Niagen® has also been approved for inclusion in medical foods by both the Brazilian Health Regulatory Agency (ANVISA) and the Food Standards Australia New Zealand (FSANZ). Clinical studies of Niagen® have demonstrated a variety of outcomes including increased NAD+ levels, altered body composition, increased cellular metabolism and increased energy production. Niagen® is protected by patents to which we are the owner or have exclusive rights.

While best known for its role in cellular energy production, NAD+ is also thought to play an important role in healthy aging. Many 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+. To date, there are over 450 published human clinical studies related to NAD+ and its impact on health. These areas of study include understanding NAD+’s role in Alzheimer’s disease, Parkinson’s disease, neuropathy, sarcopenia, liver disease and heart failure.

2527

We are among the world leaders in the emerging NAD+ space. Through our ChromaDex External Research Program (CERP), we have amassed more than 250 research 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, the Mayo Clinic, Chiba University and Sun Yat-sen University. The results of the 250+ research agreements have allowed CERP to help produce the trusted science behind Niagen® and continue to advance the understanding of NAD+ in health, diseases, and aging. We value and encourage strong scientific rigor behind our products and seek to continually develop additional relationships in pursuit of this. CERP is a vital component of our research and development platform along with our scientific advisory board. Our scientific advisory board supports the technical and intellectual property needs of investigators, presents research at conferences, and helps build and support the NAD+ and healthy aging research community.

Our scientific advisory board is led by Chairman Dr. Roger Kornberg, Nobel Laureate Stanford Professor, Dr. Charles Brenner, one of the world’s recognized experts in NAD+ and discoverer of NR as a NAD+ precursor, Dr. Rudy Tanzi, the co-chair of the department of neurology at Harvard Medical School, Sir John Walker, Nobel Laureate and Emeritus Director, MRC Mitochondrial Biology Unit in the University of Cambridge, England, Dr. Bruce German, Chairman of food, nutrition and health at the University of California, Davis, Dr. Brunie Felding, Associate Professor, Department of Molecular Medicine at Scripps Research Institute, California Campus, and Dr. David Katz, the Founder and former director of Yale University’s Yale-Griffin Prevention Research Center; President and Founder of the non-profit True Health Initiative; and Founder and Chief Executive Officer of Diet ID, Inc.

Impact of COVID-19

The worldwide outbreak of COVID-19 continues to drive global uncertainty and disruption, which has created headwinds for our business. Authorities have imposed, and businesses and individuals have implemented, numerous measures to try to contain the virus or treat its impact, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, store closures and reduced operating hours, and vaccine requirements. These measures have impacted and may further impact our workforce and operations and those of our respective suppliers and partners.

Our primary focus throughout the COVID-19 pandemic has remained ensuring the health and safety of our employees through office closures or implementing enhanced safety protocols to ensure the well-being of our employees. We have adapted and have been able to successfully conduct business virtually.

Under the Coronavirus Aid, Relief, and Economic Security Act the employee retention tax credit (ERTC) was established and subsequently amended by other Acts. During the third quarter of 2022, we evaluated our eligibility for the ERTC and determined that we qualified in all three quarters of 2020 and the first three quarters in 2021. As a result, during August 2022, we filed a claim for the ERTC. As of September 30, 2022, we recognized approximately $2.1 million in Other income - Employee Retention Tax Credit in our Unaudited Condensed Consolidated Statements of Operations to reflect the ERTC. For further discussion, see Note 11, Employee Retention Tax Credit.

The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and severity of the pandemic; surges related to new variants; the actions taken to contain the virus or treat its impact; other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption; and how quickly and to what extent normal economic and operating conditions can resume. Additional impacts and risks may arise that we are not aware of or able to respond to effectively. We are similarly unable to predict the extent of the impact of the pandemic on our customers, suppliers, and other partners, but a material effect on these parties could also materially adversely affect us. The impact of COVID-19 can also exacerbate other risks discussed in Part II, Item 1A Risk Factors and throughout this report.

Supply chain disruptions, inflation and changing prices

We have experienced, and could in the future experience, global supply chain delays including challenges with transportation, logistics and production lead-times, as well as labor shortages and cost inflation. In the first quarter of 2021, we experienced delays due to global components and packaging shortages for our consumer products across our supply chain. These supply chain challenges were addressed in the second quarter of 2021 and we have otherwise not encountered any major disruptions in our supply chain. Supply chain delays, among other factors such as store closures, have impacted our sales to partners in international markets. It is our intention to maintain adequate safety stocks to support our growth and we currently believe we have adequate inventory on hand to meet current demands.

We have also ~~recently~~ experienced inflation in labor, raw materials, transportation and other costs. Inflation can ~~also~~ have a long-term impact as increasing costs may ~~impact~~affect our ability to maintain satisfactory margins. We may be unsuccessful in passing these increases on to our customers or finding other mitigating solutions. Furthermore, increases in inflation may not be matched by growth in consumer income, which ~~also~~ could have a negative impact on customer spending. If customer sales diminish, we may be required to scale back production volumes which could negatively impact any economies of scale we have previously benefited from. We have also seen changing prices due to other macroeconomic factors including rising interest rates, fluctuations in currency exchange rates and geopolitical uncertainties such as those surrounding Russia’s invasion of Ukraine. We will continue to monitor changing prices and inflationary pressures closely as conditions may become more challenging due to ongoing and uncertain economic factors.

Recent Activities

Joint Venture Agreement ~~with Related Parties~~

On May 19, 2022, we entered into an agreement to form a joint venture (the ~~“JV”~~“May JV Agreement”) to expand our market strategy to include opportunities in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan (the “Territory”)~~, subject to the terms and satisfaction of the conditions contained therein.~~. The May JV ~~agreement is~~Agreement was among us, Crystal Lake Developments Limited (Crystal Lake), Pioneer Idea Holdings Limited (Pioneer Idea), and Hong Kong (China) Taikuk Group Ltd (Taikuk). Crystal Lake is indirectly wholly-owned by Li ~~Ka Shing,~~Ka-Shing, and Pioneer Idea is indirectly owned by Solina Chau, and each of Mr. LiKa-Shing and Ms. Chau own through affiliated entities more than 5% of ~~our~~the Company’s common stock. On September 30, 2022, we entered into a Termination Agreement for the purpose of terminating the May JV Agreement. The ~~business~~Termination Agreement was approved by the Audit Committee of the Board in accordance with the our Related-Persons Transaction Policy.

In connection with the Termination Agreement, on September 30, 2022, Asia Pacific Scientific, Inc., our indirect wholly owned subsidiary, and Hong Kong (China) Taikuk Group Ltd (Taikuk) entered into a shareholders agreement (the “Shareholders Agreement”) pursuant to which Taikuk has agreed to contribute $1.0 million (the “Subscription Price”) in exchange for an 11% non-voting equity interest in ChromaDex Asia Pacific Ventures Limited, a subsidiary of Asia Pacific Scientific, Inc. (the “Joint Venture” or “JV”). Additionally, we shall pay $1.0 million in cash to Taikuk (the “Taikuk Fee”) upon the closing of the Shareholders Agreement (the “Closing”). We have mutually agreed with Taikuk that no exchange of funds for the Taikuk Fee and Subscription Price was necessary and, accordingly, no cash has or will exchange hands related to these provisions of the Shareholders Agreement.

The purpose of the JV ~~will be~~is to ~~market, sell and distribute~~commercialize Tru Niagen® and other products containing ~~NR (the “Products”)~~nicotinamide riboside to be developed by us in the ordinary course (the “Products”) in the Territory.

The ~~JV agreement will have~~Shareholders Agreement has an initial term of 20 years, unless earlier terminated. ~~Crystal Lake, Pioneer Idea and Taikuk have each agreed to contribute $1.8 million, $1.2 million and $1.0 million, respectively into~~We indirectly own an 89% equity interest (and all of the ~~JV. In addition, we have agreed to pay $1.0 million to Taikuk and Taikuk will receive an additional 5% non-voting equity interest~~voting interests) in the JV for introducing the parties. Following the closing of the formation of the JV (the “Closing”), each of the parties will hold the following interest in the JV: us (71%), Crystal Lake (10.8%), Pioneer Idea (7.2%) and ~~Taikuk (a 11% non-voting interest). We will~~ have the right to elect all three directors of the five directors in the JV, and Pioneer Idea will have the right to elect the other two directors, with each director having one vote. Certain material corporate actions will require unanimous approval of the board of the JV. ~~The Closing is subject to certain customary closing conditions and is expected to occur by the end of the third quarter of 2022.~~

Prior to being able to commercialize the Products in the Territory, the JV will have to obtain all applicable regulatory approvals, including “Blue Hat” or health food registration with the ~~PRC~~Peoples Republic of China State Administration for Market Regulation for Products in ~~the~~our name ~~of the Company~~ or ~~its~~our designee (collectively, the “Blue Hat Registration”). ~~Prior to the JV obtaining the~~Upon completion of Blue Hat Registration, we ~~will supply the Products~~shall make a payment of $1.0 million in cash to ~~the JV who will appoint a third party sub-distributor to sell the Products in the Territory. Once Blue~~Taikuk (the “Blue Hat Registration ~~is obtained, we will license to the JV certain intellectual property relating to the Products for the JV to manufacture and sell the Products in the Territory.~~Fee”). If the Blue Hat Registration is not obtained within 24 months of the Closing (which ~~deadline for obtaining the Blue Hat Registration~~ may be extended by an additional 12 months upon consent of the parties), the JV may repurchase the 11% non-voting interest ~~owned~~purchased by Taikuk for ~~two dollars. As~~$1 (the “Right of Repurchase”). The Right of Repurchase functions as a performance vesting condition under ASC 718 and the 11% non-voting equity interest is accounted for as nonemployee share-based compensation. The equity interest will only vest if Blue Hat Registration is achieved, at which time the minority interest will be recorded. Consequently, no amounts related to the Blue Hat Registration Fee or the 11% non-voting interest have been recognized in the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022.

Once Blue Hat Registration is complete and certain distribution agreements relating to the commercialization of the Products in the Territory are assigned and entered into (the “Distribution Agreements”), Taikuk would be entitled to certain royalty payments based on our and the JV’s net revenue for sales of the Products in the Territory under the Distribution Agreements. Operating activity under the JV ~~has~~was not ~~yet launched.~~material during the three months ended September 30, 2022.

Securities Purchase Agreement and Registration Rights Agreement - Related Parties

On September 30, 2022, we entered into a Securities Purchase Agreement with Pioneer Step Holdings Limited (Pioneer Step), Champion River Ventures Limited (Champion) and Robert Fried (collectively, the “Purchasers”) pursuant to which we agreed to sell and issue approximately 2.5 million shares of common stock at a price of $1.25 per share (the “Financing”). Champion and Pioneer Step are related parties. Mr. Fried is our Chief Executive Officer. The transaction and related agreements were approved by the Audit Committee of the Board in accordance with our Related-Persons Transaction Policy. On October 7, 2022, we closed the Financing and received proceeds of approximately $2.9 million, net of offering costs of $0.2 million. Additionally, in connection with the Financing, we entered into a Registration Rights Agreement with the Purchasers. In the event of certain specified defaults under the agreement, we would be required to pay liquidating damages to the Purchasers equal to 1.0% of the aggregate purchase price per month for each default (up to a maximum of 5.0% of such aggregate purchase price). For further discussion, see Note 12, Subsequent Events.

NHSc Agreement

On October 10, 2022, we and Société des Produits Nestlé SA, a société anonyme organized under the laws of Switzerland (NHSc), as successor-in-interest to NESTEC Ltd., entered into an amended and restated supply agreement (the “Supply Agreement”), which amends and restates the supply agreement, dated December 19, 2018, entered into by us and NESTEC Ltd. Pursuant to the Supply Agreement, NHSc and its affiliates will exclusively purchase nicotinamide riboside chloride (NRCL) from us and NHSc and its affiliates will have the non-exclusive right to manufacture, market, distribute, and sell products using NRCL for human use in the (i) medical nutritional, (ii) functional food and beverage and (iii) multi-ingredient dietary supplements categories sold under one of the NHSc brands (the “Approved Products”) world-wide, but excluding certain countries and ingredient combinations. The term of the Supply Agreement is five years, unless earlier terminated, and is subject to automatic extensions provided certain minimum purchases by NHSc are met.

As consideration for the rights granted to NHSc under the Supply Agreement, NHSc agreed to an initial purchase commitment of NRCL equal to approximately $2 million. The Supply Agreement additionally provides for NHSc to pay a royalty to us at tiered percentage rates in the low-single digits based on worldwide annual net sales of the Approved Products, subject to certain deductions. Furthermore, the Supply Agreement provides for NHSc to pay us two separate one-time milestone payments in the low seven figures depending on whether NHSc achieves certain net sales targets in any contract year.

In connection with the entry into the Supply Agreement, we entered into a Securities Purchase Agreement with NHSc, pursuant to which NHSc agreed to purchase 3.8 million shares of common stock at a price of $1.31 which is equal to the volume weighted average price of our common stock for the ten trading days preceding October 10, 2022 (the “Securities Purchase Agreement”). On October 17, 2022, we closed the Securities Purchase Agreement and received proceeds of approximately $4.8 million, net of offering costs of $0.2 million.

Financial Condition and Results of Operations

The 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 making 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. On an 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.

As of ~~June~~September 30, 2022, our cash and cash equivalents totaled approximately ~~$17.1~~$13.3 million, of which ~~$16.9~~$13.1 million was unrestricted.Subsequent to September 30, 2022, we closed two separate securities purchase agreements and received proceeds of approximately $7.7 million, net of offering costs of $0.4 million. For further discussion of the securities purchase agreements, see Note 12, Subsequent Events. We anticipate that our current unrestricted cash and cash equivalents, cash generated from the securities purchase agreements and cash to be generated from net sales will be sufficient to meet our financial obligations as they become due over at least the next twelve months. ~~Additionally, we have begun implementing plans to minimize expenses and reduce our cash burn rate for the second half of fiscal year 2022.~~ 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.

In June 2020, we entered into an At Market Issuance Sales Agreement (the Sales Agreement) with B. Riley FBR, Inc. (B. Riley FBR) and Raymond James & Associates, Inc. (“Raymond James” and together with B. Riley FBR, the “Sales Agents”) under which ChromaDex may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through the Sales Agents (ATM Facility). As of ~~June~~September 30, 2022, approximately $47.8 million remains available under the ATM Facility. Our potential use of the ATM facility is subject to the satisfaction of various conditions in the ATM Facility agreement as well market conditions. As a result, our ability to rely on the ATM Facility to raise liquidity is limited to a material extent.

Additional capital may come from other public and/or private stock or debt offerings, borrowings under lines of credit or other sources. These additional funds may not be available on favorable terms, or at all. 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 other macroeconomic factors such as rising interest rates, inflation and geopolitical uncertainties, 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. 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.

We currently have three operating segments which offer differentiated services. Through our Consumer Products segment we provide finished dietary supplement products that contain the Company's proprietary ingredients directly to consumers and distributors. We deliver Niagen® as the sole active ingredient in our consumer product Tru Niagen® which is offered in both convenient capsules and stickpacks. ~~Additionally, beginning~~We additionally offer consumer products containing Niagen® in ~~April 2022, we launched our new consumer product,~~combination with other nutrients, such as, but not limited to, Tru Niagen® ~~Immune, a combination of immune-boosting nutrition with Niagen® in capsule form.~~Immune. Our ingredients segment develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw material to the manufacturers of consumer products. ~~Finally, our~~Our Analytical Reference Standards and Services segment focuses on natural product fine chemicals, known as phytochemicals, and related research and development services. The results of these segments and our consolidated operations are detailed in the discussion that follows.

Our consolidated net sales and net loss for the three and ~~six~~nine months ended on ~~June~~September 30, 2022 and 2021 are as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2022		2021		2022		2021

Net sales	Net sales	$	16,732	$	17,699	$	33,991	$	32,382	Net sales	$	17,063	$	17,308	$	51,054	$	49,690
Net loss	Net loss	(6,397)		(5,566)		(14,137)		(12,947)		Net loss	(985)		(8,856)		(15,122)		(21,803)

Basic and diluted loss per common share	Basic and diluted loss per common share	$	(0.09)	$	(0.08)	$	(0.21)	$	(0.20)	Basic and diluted loss per common share	$	(0.01)	$	(0.13)	$	(0.22)	$	(0.33)

During the three and nine months ended September 30, 2022, we recognized $2.1 million in Other income related to the ERTC. Excluding the ERTC, our net loss for the three and nine months ended September 30, 2022 is $(3.1) million and $(17.2) million, respectively, and basic and diluted loss per common share is $(0.04) and $(0.25), respectively.

Net Sales

Net sales consist of gross sales less discounts and returns. The following table sets forth our total net sales by reportable segment:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		% Change		2022		2021		% Change		(In thousands)	2022		2021		% Change		2022		2021		% Change
Net sales:	Net sales:													Net sales:
Consumer Products	Consumer Products	$	14,520	$	15,396	(6)	%	$	29,457	$	27,833	6	%	Consumer Products	$	14,561	$	14,772	(1)	%	$	44,018	$	42,605	3	%
Ingredients	Ingredients	1,464		1,504		(3)	%	2,891		2,819		3	%	Ingredients	1,819		1,789		2	%	4,710		4,608		2	%
Analytical reference standards and services	Analytical reference standards and services	748		799		(6)	%	1,643		1,730		(5)	%	Analytical reference standards and services	683		747		(9)	%	2,326		2,477		(6)	%
Total net sales	Total net sales	$	16,732	$	17,699	(5)	%	$	33,991	$	32,382	5	%	Total net sales	$	17,063	$	17,308	(1)	%	$	51,054	$	49,690	3	%

Total net sales ~~decreased approximately 5%~~remained relatively flat for the three months ended ~~June~~September 30, 2022 compared to the same period in 2021, declining approximately 1%, while total net sales ~~increased approximately 5%~~ for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same period in ~~2021.~~2021 increased approximately 3%. Changes in sales for the periods indicated were driven by the following:

•Tru Niagen® sales ~~for our Consumer Products segment decreased $0.9 million, or (6)%, for~~continue to see steady e-commerce growth during the three and nine months ended ~~June~~September 30, 2022 with approximately $0.8 million and $3.4 million in higher sales compared to the same ~~period~~periods in ~~the prior year. The decrease is related to the initial shelf stocking in Wal-Mart to support our launch in the prior year quarter driving increased sales for the three months ended June 30,~~ 2021, paired with a decline in sales to A.S. Watson, a related party, of $1.4 million for the three months ended June 30, 2022 compared to the prior year quarter to better align purchases with anticipated consumer demand during the key selling season in late 2022. These declines wererespectively. This growth was largely offset by ~~higher e-commerce~~declines in business-to-business sales ~~of approximately $1.4 million for~~to our distributor partners during the three and nine months ended ~~June~~September 30, 2022 with approximately $1.0 million and $1.6 million lower sales compared to the same ~~period~~periods in ~~2021. For the six months ended June 30,~~2021, respectively. Our distributor partners have experienced lower growth during fiscal year 2022 ~~total consumer product~~due to COVID-19 headwinds and other macroeconomic factors. We remain committed to working with these partners to collectively maximize sales ~~increased $1.6 million, or 6%, compared~~while simultaneously continuing to ~~the same period in 2021. The higher sales were primarily related to increased~~grow our e-commerce ~~sales of $2.6 million, largely offset by lower sales to Wal-Mart, following the initial shelf stocking sales in 2021.~~channels.

•Total ingredient sales remained relatively ~~stable with a decrease of~~flat, increasing approximately ~~$40~~$30 thousand, or ~~(3)%~~2%, for the three months ended ~~June~~September 30, 2022 and ~~an increase of $72~~$102 thousand, or 3%2%, for the ~~six~~nine months ended ~~June~~September 30, 2022, each compared to the ~~corresponding~~same periods in ~~2021. For~~2021, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, we continue to see modest growth in Niagen® ingredient sales ~~increased $173 thousand and $101 thousand, respectively,~~ compared to the ~~corresponding~~same periods in 2021, ~~while~~which are being partially offset by slight declines for all other ingredient sales ~~decreased $213 thousand and $29 thousand, respectively, during the same periods.~~due to demand from customers.

•Analytical reference standards and services segment sales decreased ~~$51~~$64 thousand and ~~$87~~$151 thousand for the three and ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same periods in 2021, respectively. The ~~decreased~~decline in sales are generally attributable to lower demand for research and development ~~sales~~services throughout 2022 compared to 2021, primarily due to the timing of project requests from customers.

2932

Cost of Sales

Cost of sales include raw materials, labor, overhead, and delivery costs. The following table sets forth our total cost of sales by reportable segment:


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		Amount				% of net sales				Amount				% of net sales					Amount				% of net sales				Amount				% of net sales
(In thousands)	(In thousands)	2022		2021		2022		2021		2022		2021		2022		2021		(In thousands)	2022		2021		2022		2021		2022		2021		2022		2021
Cost of sales:	Cost of sales:																	Cost of sales:
Consumer Products	Consumer Products	$	5,218	$	5,547	36	%	36	%	$	10,470	$	9,750	36	%	35	%	Consumer Products	$	5,224	$	5,253	36	%	36	%	$	15,694	$	15,003	36	%	35	%
Ingredients	Ingredients	681		675		47		45		1,403		1,238		49		44		Ingredients	899		732		49		41		2,302		1,970		49		43
Analytical reference standards and services	Analytical reference standards and services	791		667		106		83		1,544		1,350		94		78		Analytical reference standards and services	733		745		107		100		2,277		2,095		98		85
Total cost of sales	Total cost of sales	$	6,690	$	6,889	40	%	39	%	$	13,417	$	12,338	39	%	38	%	Total cost of sales	$	6,856	$	6,730	40	%	39	%	$	20,273	$	19,068	40	%	38	%

~~Overall,~~Generally, cost of sales, as a percentage of net sales, ~~slightly increased~~saw slight increases during the three and ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same periods in 2021. Changes in cost of sales, as a percentage of net sales, were primarily driven by the following:

•Cost of sales, as a percentage of net sales, for our consumer products segment remained ~~substantially similar~~flat for the three months ended ~~June~~September 30, 2022 and 2021 and increased ~~approximately~~roughly 1% for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same period in 2021. The minor increase is ~~primarily~~ attributable to increases in our supply chain headcount, including overall wage inflation, and other inflationary pressures, partially offset by a shift in our business mix as we experienced elevated e-commerce sales which provide higher ~~business-to-business sales~~gross margins during the ~~six~~nine months ended ~~June~~September 30, ~~2021 resulting in greater cost saving benefits from economies of scale on our overall supply chain overhead costs~~2022 compared to the same period in ~~the current year.~~2021.

•Cost of sales, as a percentage of net sales, for our ingredients segment increased 2%8% and 5%6% for the three and ~~six~~nine months ended ~~June~~September 30, 2022, compared to the ~~comparable~~same periods in 2021, respectively. The increase is primarily a result of higher supply chain overhead costs, as we modestly increased headcount to scale the business and were impacted by overall wage inflation, paired with higher costs of raw materials.

•Cost of sales, as a percentage of net sales, for the analytical reference standards and services segment increased ~~23%~~7% and ~~16%~~13% for the three and ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same periods in 2021, respectively. Cost of sales for our analytical reference standards and services segment are largely driven by fixed supply chain overhead costs which do not increase in proportion to sales. ~~During the first six months of~~Additionally, during fiscal year 2022, we increased our supply chain headcount in order to scale the business and were impacted by overall wage inflation, increasing ~~our~~these overheads costs. Accordingly, ~~as sales decreased and our~~due to the increased head count for supply chain labor ~~head count increased~~paired with a decrease in sales during 2022, we experienced lower labor and overhead utilization rates resulting in ~~increased~~higher cost of sales, as a percentage of net sales, compared to 2021.

Gross Profit

Gross profit is net sales less the cost of sales and is affected by a number of factors, including business and product mix, competitive pricing and costs of products, labor, overhead, services and delivery. The following table sets forth our total gross profit by reportable segment:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		% Change		2022		2021		% Change		(In thousands)	2022		2021		% Change		2022		2021		% Change
Gross profit:	Gross profit:													Gross profit:
Consumer Products	Consumer Products	$	9,302	$	9,849	(6)	%	$	18,987	$	18,083	5	%	Consumer Products	$	9,337	$	9,519	(2)	%	$	28,324	$	27,602	3	%
Ingredients	Ingredients	783		829		(6)		1,488		1,581		(6)		Ingredients	920		1,057		(13)		2,408		2,638		(9)
Analytical reference standards and services	Analytical reference standards and services	(43)		132		(133)		99		380		(74)		Analytical reference standards and services	(50)		2		(2,600)		49		382		(87)
Total gross profit	Total gross profit	$	10,042	$	10,810	(7)	%	$	20,574	$	20,044	3	%	Total gross profit	$	10,207	$	10,578	(4)	%	$	30,781	$	30,622	1	%

For details supporting the changes in gross profit, refer to the discussions above regarding changes in both our net sales and cost of sales for each segment.

3033

Operating Expenses-Sales and Marketing

Sales and marketing expenses consist of salaries, advertising, public relations and marketing expenses. Sales and marketing expenses by reportable segment were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		% Change		2022		2021		% Change		(In thousands)	2022		2021		% Change		2022		2021		% Change
Sales and marketing expenses:	Sales and marketing expenses:													Sales and marketing expenses:
Consumer Products	Consumer Products	$	7,864	$	6,190	27	%	$	15,938	$	12,301	30	%	Consumer Products	$	5,696	$	7,067	(19)	%	$	21,634	$	19,368	12	%
Ingredients	Ingredients	—		1		(100)		24		11		118		Ingredients	12		10		20		36		21		71
Analytical reference standards and services	Analytical reference standards and services	157		41		283		296		178		66		Analytical reference standards and services	160		144		11		456		322		42
Total sales and marketing expenses	Total sales and marketing expenses	$	8,021	$	6,232	29	%	$	16,258	$	12,490	30	%	Total sales and marketing expenses	$	5,868	$	7,221	(19)	%	$	22,126	$	19,711	12	%

•During fiscal year 2022, for our consumer products segment, we launched a direct marketing campaign spanning multiple platforms including Amazon marketplaces, televised commercials, social media, public relations and other customer awareness and acquisition programs in addition to increasing our ~~staffing. These focused~~marketing headcount and overall wage inflation. Beginning in the third quarter of 2022, we pivoted our marketing efforts ~~drove increased sales and marketing expense of approximately $1.7 million and $3.6 million for~~to focus on the ~~three and six months ended June 30, 2022, respectively, compared to the same periods in 2021. We anticipate these expenses will decrease during the second half of 2022 as we shift our focus to~~most efficient distribution channels and marketing ~~campaigns, coupled~~campaigns. In line with ~~overall~~this shift, we saw a decline in marketing expense ~~management.~~of $1.4 million for the three months ended September 30, 2022, compared to the same period in 2021. While our marketing efforts in the first half of 2022 helped drive our increased e-commerce sales, we ultimately increased marketing expense by approximately $2.3 million for the nine months ended September 30, 2022, compared to the same period in 2021. Going into the fourth quarter of 2022, we plan to continue our focus on the most efficient distribution channels and marketing campaigns.

•For the ingredients segment, selling and marketing ~~expenses were~~expense was nominal during the three months ended ~~June~~September 30, 2022 and 2021. ~~Sales~~During the nine months ended September 30, 2022 sales and marketing expense increased ~~during the six months ended June 30, 2022~~ compared to the same period in the prior year largely due to higher commissionable sales for other ingredients.

•For the analytical reference standards and services segment, total selling and marketing ~~expenses~~expense increased marginally during the three months ended September 30, 2022, and approximately $0.1 million for ~~each of~~ the ~~three and six~~nine months ended ~~June~~September 30, 2022, ~~respectively,~~ compared to the same periods in 2021. The increase was primarily driven by headcount increases.

Operating Expenses-Research and Development

Research and development (R&D) expenses consist primarily of headcount, clinical trials, product development and process development expenses. Research and development expenses by reportable segment were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2022		2021		% Change		2022		2021		% Change		(In thousands)	2022		2021		% Change		2022		2021		% Change
R&D expenses:	R&D expenses:													R&D expenses:
Consumer Products	Consumer Products	$	1,113	$	926	20	%	$	2,115	$	1,644	29	%	Consumer Products	$	1,089	$	895	22	%	$	3,204	$	2,539	26	%
Ingredients	Ingredients	132		78		69		208		147		41		Ingredients	135		101		34		343		248		38
Total R&D expenses	Total R&D expenses	$	1,245	$	1,004	24	%	$	2,323	$	1,791	30	%	Total R&D expenses	$	1,224	$	996	23	%	$	3,547	$	2,787	27	%

We allocate R&D expenses related to our Niagen® branded ingredient to the consumer products and ingredients segment, based on revenues recorded. Overall, we had higher R&D expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2022 compared to the comparable period in 2021 due to increased ~~staffing of research scientists,~~headcount, share-based compensation and timing of projects.

3134

Operating Expenses-General and Administrative

General and administrative expense consists of general company administration, legal, royalties, IT, accounting and executive management expenses. General and administrative expenses are not allocated by segment and instead are classified under our Corporate and Other category. General and administrative expense for the periods indicated were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	(In thousands)	2022	2021	% Change		2022	2021	% Change		(In thousands)	2022		2021		% Change		2022		2021		% Change

General and administrative	General and administrative	7,163	9,128	(22)	%	16,112	18,679	(14)	%	General and administrative	$	6,180	$	11,202	(45)	%	$	22,292	$	29,881	(25)	%

The decline in general and administrative expense for the three ~~and six~~ months ended ~~June~~September 30, 2022, compared to the comparable ~~periods~~period in 2021, was primarily driven by $4.4 million of lower legal expense paired with $0.5 million of lower share-based compensation expense. The decline in general and administrative expense for the nine months ended September 30, 2022, compared to the comparable period in 2021, was also driven by lower legal expense of ~~$2.4~~$9.5 million ~~and $5.1 million related to litigation~~ which was partially offset by increased investments in technology and increased ~~staffing~~headcount in key functional areas to support ~~growth.~~growth, along with overall wage inflation. For additional details regarding our litigation see Note 10, Commitments and Contingencies, Legal Proceedings in the Notes to the Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Income Taxes

Deferred 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. At ~~June~~September 30, 2022 and ~~June~~September 30, 2021, we 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 and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. 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

Depreciation expense was approximately ~~$0.4~~$0.6 million and $0.7 million for ~~both of~~ the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021.~~2021, respectively. We depreciate our assets on a straight-line basis, based on the estimated useful lives of the respective assets.

Amortization expense of intangible assets was approximately ~~$99 thousand~~$0.1 million and $0.2 million for the ~~six~~nine months ended ~~June~~September 30, 2022 ~~compared to $121 thousand for the six months ended June 30, 2021.~~and 2021, respectively. We amortize intangible assets using a straight-line method, generally over 10 years. For 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.

Amortization expense of right of use assets for the ~~six~~nine months ended ~~June~~September 30, 2022 was approximately ~~$0.5~~$0.6 million as compared to ~~$0.3~~$0.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021.

Liquidity and Capital Resources

From inception through ~~June~~September 30, 2022, we have incurred aggregate losses of approximately ~~$183.1~~$184.1 million. These losses are primarily due to expenses associated with the development and expansion of our operations and investments to protect our intellectual property, including litigation-related expenses. Historically, these operations have been financed through capital contributions, the issuance of common stock and warrants through private placements and the issuance of debt.

Our 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 long-term business plan. There can be no assurance that any such financing will be available on terms favorable to us or at all. Without adequate financing we may have to 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 us.

3235

As of ~~June~~September 30, 2022, we had cash and cash equivalents of ~~$17.1~~$13.3 million, no material off-balance sheet arrangements and no outstanding borrowings under our line of credit with Western Alliance ~~Bank,~~Bank. Additionally, as of September 30, 2022, we had purchase obligations of ~~$15.1~~$11.7 million related to inventory purchase commitments ~~to be paid over approximately one year~~ and future minimum lease obligations of ~~$5.3~~$5.0 million to be paid over approximately nine months and six ~~years.~~ years, respectively. Subsequent to September 30, 2022, we closed two separate securities purchase agreements and received proceeds of approximately $7.7 million, net of offering costs of $0.4 million. For further discussion of the securities purchase agreements, see Note 12, Subsequent Events in the Notes to the Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We anticipate that our current unrestricted cash and cash equivalents of ~~$16.9~~$13.1 million, cash generated from the securities purchase agreements and cash to be generated from net sales will be sufficient to meet our financial obligations as they become due over at least the next twelve months and beyond. However, we may seek additional funds to support both our short-term and long-term operating objectives, either through additional equity or debt financings or collaborative agreements or from other sources. Furthermore, in June 2020, we filed a $125.0 million registration statement on Form S-3 with the Commission, utilizing a “shelf” registration process. Under this shelf registration process, we may sell securities from time to time, including up to $50.0 million, pursuant to the ATM Facility, of which approximately $47.8 million remains available as of ~~June~~September 30, 2022. Our potential use of the ATM facility is subject to the satisfaction of various conditions in the ATM Facility agreement as well market conditions. As a result, our ability to rely on the ATM Facility to raise liquidity is limited to a material extent.

As a result of the COVID-19 pandemic and other macroeconomic factors such as rising interest rates, inflation and geopolitical uncertainties, 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. 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.

Net cash used in operating activities: Cash used in operating activities is net loss adjusted for certain non-cash items and changes in operating assets and liabilities. Net cash used in operating activities was approximately ~~$11.0~~$14.8 million and ~~$13.3~~$19.2 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. The decrease in cash used for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~June~~September 30, 2021, of ~~$2.3~~$4.4 million was primarily driven by improvements in our net loss of $4.6 million, excluding Other income from the ~~timing~~Employee Retention Tax Credit of ~~collections for our trade receivables accounting for $4.3~~$2.1 million, which was partially offset by ~~increases~~changes in ~~our inventories of $1.7 million.~~working capital.

We expect our operating cash flows to fluctuate significantly in future periods as a result of fluctuations in our operating results, shipment timetables, trade receivable collections, inventory management and the timing of our payments, among other factors.

Cash used in investing activities: Investing cash flows consist primarily of capital expenditures and investment activities. Cash used in investing activities was approximately ~~$110 thousand~~$0.2 million for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to ~~$311 thousand~~$0.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021. The decrease in cash used during the ~~six~~nine months ended ~~June~~September 30, 2022 of ~~$201~~$245 thousand compared to the same period in 2021 is attributable to fewer purchases of leasehold improvements and equipment.

Net cash used in and provided by financing activities: Financing cash flows consist primarily of proceeds from issuance of our common stock, exercise of stock options through employee equity incentive plans and repayment of short-term and long-term debt. Cash used in financing activities was approximately $7$25 thousand for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to net cash provided by financing activities of approximately ~~$35.7~~$36.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021. The difference in cash activities is largely attributable to proceeds from the issuance of common stock pursuant to the Securities Purchase Agreement with EverFund, the ATM Facility transaction, as well as the exercise of employee stock options, all of which occurred during the ~~six~~nine months ended ~~June~~September 30, 2021 ~~with~~and no similar financing activity occurred during the ~~six~~nine months ended ~~June~~September 30, 2022.

Critical Account Estimates

There have been no changes to critical accounting estimates from those disclosed in our 2021 Form 10-K.

3336

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the supervision of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June~~September 30, 2022, our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s ~~second~~third fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

For a description of our legal proceedings, see Note 10, Commitments and Contingencies, Legal Proceedings in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. Current investors and potential investors should consider carefully the risks and uncertainties described below and in our Annual Report, together with all other information contained in this Quarterly Report on Form 10-Q and our Annual Report, including our financial statements, the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making investment decisions with respect to our common stock. If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. Under these circumstances, the trading price and value of our common stock could decline, and you may lose all or part of your investment. The risks and uncertainties described in this Quarterly Report on Form 10-Q and in our Annual Report are not the only ones facing our Company. Additional risks and uncertainties of which we are not presently aware, or that we currently consider immaterial, may also impair our business operations.

3437

Table of Contents

Summary of Risk Factors

We are providing the following summary of the risk factors contained in our Form 10-Q to enhance the readability and accessibility of our risk factor disclosures. We encourage our stockholders to carefully review the risk factors contained in this Form 10-Q in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from recent results or from our anticipated future results.

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

▪Global, market and economic conditions may negatively impact our business, financial condition and share price.

▪We have a history of operating losses, may need additional financing to meet our future long-term capital requirements and may be unable to raise sufficient capital on favorable terms or at all.

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

▪Our future success largely depends on sales of our Tru Niagen® product.

▪The success of our consumer product and ingredient business is linked to the size and growth rate of the vitamin, mineral and dietary supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.

▪The future growth and profitability of our consumer product business will depend in large part upon the effectiveness and efficiency of our marketing efforts and our ability to select effective markets and media in which to market and advertise.

▪Many of our competitors are larger and have greater financial and other resources than we do.

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

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

▪Our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements, result in our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our common stock to decline.

▪Our business could be negatively impacted by cyber security incidents or threats, including without limitation a material interruption to our operations including our clinical trials, harm to our reputation, significant fines, penalties and liabilities, regulatory investigations or actions, breach or triggering of data protection laws, privacy policies and data protection obligations, or a loss of revenue, customers or sales.

▪Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our business.

▪We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating income.

▪We utilize ingredients and components for our products from foreign suppliers, and may be negatively affected by the risks associated with international trade and importation issues.

▪We rely on single or a limited number of third-party suppliers for the raw materials required to produce our products.

▪Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which would have a material and adverse effect on us.

▪Our patents and licenses may be subject to challenge on validity grounds, and our patent applications may be rejected.

▪We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from developing our products, require us to obtain licenses from third parties or to develop non-infringing alternatives and subject us to substantial monetary damages.

▪We are currently engaged in substantial and complex litigation with Elysium Health, Inc. and Elysium Health LLC (collectively, “Elysium”), the outcome of which could materially harm our business and financial results.

▪Changes in government regulation or in practices relating to the pharmaceutical, dietary supplement, food and cosmetic industry could decrease the need for the services we provide.

3538

Table of Contents

▪Compliance with stringent and changing global privacy and data security laws and regulations could result in additional costs and liabilities to us or inhibit our ability to collect and, if applicable, process data globally, and the failure or perceived failure to comply with such laws and regulations could have a material adverse effect on our business, financial condition or results of operations.

▪The market price of our common stock may be volatile and adversely affected by several factors.

▪We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.

▪We have a significant number of outstanding options and unvested restricted stock units. Future sales of these shares could adversely affect the market price of our common stock.

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

▪We may become involved in securities class action litigation that could divert management’s attention and harm our business.

Risks Related to our Company and our Business

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

As previously disclosed, we face risks related to the ongoing COVID-19 pandemic, including the emergence of new variant strains with varying degrees of resistance to vaccines, and these variant strains’ impacts. COVID-19 has spread across the globe since 2020 and is impacting economic activity worldwide. COVID-19 has caused supply chain and market disruptions and volatility in the global capital markets, and has caused an economic slowdown. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders, vaccine mandates and recommendations to practice social distancing. The duration of these measures is unknown, may be extended and additional measures may be imposed, in light of the varied surge in cases, which could negatively impact our sales volumes.

The potential effects of COVID-19 include, but are not limited to, the following:

•Reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending due to economic uncertainty, which may adversely affect our results of operations by reducing our sales, margins and/or net income as a result of a slowdown in customer orders.

•Reduced demand for our products due to store closures and reduced operating hours of our customers, leading to declines in our production volumes which may negatively impact any economies of scale we previously benefited from.

•Disruptions in supply chain, leading to inadequate levels of inventory that may lower our sales and/or rising inflationary pressures that may increase our cost of goods.

For example, our retail business, including sales to A.S. Watson group and other partners in international markets, has been impacted by the effects of COVID-19 due to strict government lockdowns, store closures and reduced operating hours. Additionally, global supply chains have increasingly been impacted by COVID-19, including challenges with transportation, logistics and production lead-times, as well as labor shortages and cost inflation.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this section. The ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

3639

Table of Contents

Global, market and economic conditions may negatively impact our business, financial condition and share price.

Concerns over inflation, geopolitical issues, the U.S. financial markets, foreign exchange rates, capital and exchange controls, unstable global credit markets and financial conditions and the COVID-19 pandemic, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly and more dilutive. In addition, there is a risk that one or more of our current or future service providers, manufacturers, suppliers and other partners could be negatively affected by difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.

In addition, we face several risks associated with international business and are subject to global events beyond our control, including war, public health crises, such as pandemics and epidemics, trade disputes, economic sanctions, trade wars and their collateral impacts and other international events. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results of operations. There may be changes to our business if there is instability, disruption or destruction in a significant geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease. In February 2022, armed conflict escalated between Russia and Ukraine. The sanctions announced by the U.S. and other countries, following Russia’s invasion of Ukraine against Russia to date include restrictions on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia. The U.S. and other countries could impose wider sanctions and take other actions should the conflict further escalate. It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could impact our business, financial condition and results of operations.

We have a history of operating losses, may need additional financing to meet our future long-term capital requirements and may be unable to raise sufficient capital on favorable terms or at all.

We have recorded a net loss of approximately ~~$14.1~~$15.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and we have a history of losses and may continue to incur operating and net losses for the foreseeable future. We incurred net losses of approximately $27.1 million and $19.9 million for the years ended December 31, 2021 and December 31, 2020, respectively. As of ~~June~~September 30, 2022, our accumulated deficit was approximately ~~$183.1~~$184.1 million. We have not achieved profitability on an annual basis. We may not be able to reach a level of revenue to continue to achieve and sustain profitability. If our revenues grow slower than anticipated, or if operating expenses exceed expectations, then we may not be able to achieve and sustain profitability in the near future or at all, which may depress our stock price.

As of ~~June~~September 30, 2022, our cash and cash equivalents totaled approximately ~~$17.1~~$13.3 million, of which ~~$16.9~~$13.1 million was unrestricted, and we had no borrowings outstanding under our line of credit up to $10.0 million, subject to certain terms and conditions, with Western Alliance Bank. WeSubsequent to September 30, 2022, we closed two separate securities purchase agreements and received proceeds of approximately $7.7 million, net of offering costs of $0.4 million. For further discussion of the securities purchase agreements, see Note 12, Subsequent Events in the Notes to the Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. However, we may require additional funds, either through additional equity or debt financings, including pursuant to the At Market Issuance Sales Agreement, dated as of June 12, 2020, with B. Riley FBR, Inc. and Raymond James & Associates, Inc. (ATM Facility), or collaborative agreements or from other sources. We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all. Further, 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. 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. 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.

3740

Table of Contents

Our material cash requirements will depend on many factors.

Our material cash requirements will depend on many factors, including:

•the revenues generated by sales of our products;

•the costs associated with expanding our sales and marketing efforts, including efforts to hire independent agents and sales representatives and obtain required regulatory approvals and clearances;

•the expenses we incur in developing and commercializing our products, including the cost of obtaining and maintaining regulatory approvals; and

•unanticipated general and administrative expenses.

Because of these factors, we may seek to raise additional capital within the next twelve months both to meet our projected operating plans after the next twelve months and to fund our longer term strategic objectives. Additional capital may come from public and private equity or debt offerings, borrowings under lines of credit or other sources. These additional funds may not be available on favorable terms, or at all. There can be no assurance we will be successful in raising these additional funds. Furthermore, 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 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, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. Any of these events could adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition.

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

A.S. Watson Group accounted for approximately 12.0% of our sales during the ~~six~~nine months ended ~~June~~September 30, 2022. Any interruption in our relationship or decline in our business with this customer or other customers upon whom we become highly dependent could cause harm to our business. Factors that could influence our relationship with our customers upon whom we may become highly dependent include:

•our ability to maintain our products at prices that are competitive with those of our competitors;

•our ability to maintain quality levels for our products sufficient to meet the expectations of our customers;

•our ability to produce, ship and deliver a sufficient quantity of our products in a timely manner to meet the needs of our customers;

•our ability to continue to develop and launch new products that our customers feel meet their needs and requirements, with respect to cost, timeliness, features, performance and other factors;

•our ability to provide timely, responsive and accurate customer support to our customers; and

•the ability of our customers to effectively deliver, market and increase sales of their own products based on ours.

Our future success largely depends on sales of our Tru Niagen® product.

As a consumer-focused company, we expect to generate a significant percentage of our future revenue from sales of our Tru Niagen® product. As a result, the market acceptance of Tru Niagen® is critical to our continued success, and if we are unable to expand market acceptance and increase consumer awareness of Tru Niagen® our business, results of operations, financial condition, liquidity and growth prospects would be materially adversely affected.

3841

Table of Contents

Decline in the state of the global economy and financial market conditions could adversely affect our ability to conduct business and our results of operations.

Global economic and financial market conditions, including disruptions in the credit markets and the impact of the global economic deterioration may materially impact our customers and other parties with whom we do business. For example, the COVID-19 pandemic and actions taken to slow its spread, have caused the global credit and financial markets to experience 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. These conditions could negatively affect our future sales of our ingredient lines as many consumers consider the purchase of nutritional products discretionary. Decline in general economic and financial market conditions could materially adversely affect our financial condition and results of operations. Specifically, the impact of these volatile and negative conditions may include decreased demand for our products and services, a decrease in our ability to accurately forecast future product trends and demand, and a negative impact on our ability to timely collect receivables from our customers. The foregoing economic conditions may lead to increased levels of bankruptcies, restructurings and liquidations for our customers, scaling back of research and development expenditures, delays in planned projects and shifts in business strategies for many of our customers. Such events could, in turn, adversely affect our business through loss of sales.

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

As changes in our business environment occur we may adjust our business strategies to meet these changes or we may otherwise decide to restructure our operations or businesses or assets. In addition, external events including changing technology, changing consumer patterns and changes in macroeconomic conditions may impair the value of our assets. When these changes or events occur, we may incur costs to change our business strategy and may need to write down the value of assets. In any of these events, our costs may increase, we may have significant charges associated with the write-down of assets or returns on new investments may be lower than prior to the change in strategy or restructuring. For example, we may not be successful in developing our consumer product business for sales of Tru Niagen® products, and our sales may decrease despite us incurring increased costs related to marketing such products.

The success of our consumer product and ingredient business is linked to the size and growth rate of the vitamin, mineral and dietary supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.

An adverse change in the size or growth rate of the vitamin, mineral and dietary supplement market could have a material adverse effect on our business. Underlying market conditions are subject to change based on economic conditions, consumer preferences and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative.

The future growth and profitability of our consumer product business will depend in large part upon the effectiveness and efficiency of our marketing efforts and our ability to select effective markets and media in which to market and advertise.

Our consumer products business success depends on our ability to attract and retain customers, which significantly depends on our marketing practices. Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing efforts, including our ability to:

•create greater awareness of our brand;

•identify the most effective and efficient levels of spending in each market, media and specific media vehicle;

•determine the appropriate creative messages and media mix for advertising, marketing and promotional expenditures;

•effectively manage marketing costs (including creative and media) to maintain acceptable customer acquisition costs;

•acquire cost-effective television advertising;

•select the most effective markets, media and specific media vehicles in which to market and advertise; and

•convert consumer inquiries into actual orders.

3942

Table of Contents

We face significant competition, including changes in pricing.

The markets for our products and services are both competitive and price sensitive. Many of our competitors have significant financial, operations, sales and marketing resources and experience in research and development. Competitors could develop new technologies that compete with our products and services or even render our products obsolete. If a competitor develops superior technology or cost-effective alternatives to our products and services, our business could be seriously harmed.

The markets for some of our products are also subject to specific competitive risks because these markets are highly price competitive. Our competitors have competed in the past by lowering prices on certain products. If they do so again, we may be forced to respond by lowering our prices. This would reduce sales revenues and increase losses. Failure to anticipate and respond to price competition may also impact sales and aggravate losses.

We believe that customers in our markets display a significant amount of loyalty to their supplier of a particular product. To the extent we are not the first to develop, offer and/or supply new products, customers may buy from our competitors or make materials themselves, causing our competitive position to suffer.

Many of our competitors are larger and have greater financial and other resources than we do.

Our products compete and will compete with other similar products produced by our competitors. These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distributional, personnel and other resources than we possess. Using these resources, these companies can implement extensive advertising and promotional campaigns, both generally and in response to specific marketing efforts by competitors, and enter into new markets more rapidly to introduce new products. In certain instances, competitors with greater financial resources also may be able to enter a market in direct competition with us, offering attractive marketing tools to encourage the sale of products that compete with our products or present cost features that consumers may find attractive.

Litigation may harm our business.

Substantial, complex or extended litigation could cause us to incur significant costs and distract our management. For example, lawsuits by employees, stockholders, collaborators, distributors, customers, competitors or others could be very costly and substantially disrupt our business. Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes on terms favorable to us. As further described in Note 10, Commitments and Contingencies, Contingencies in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we are currently involved in substantial and complex litigation. Unexpected results could cause us to have financial exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to address these liabilities, therefore impacting profits.

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

Our analytical reference standards and services segment customers include researchers at pharmaceutical and biotechnology companies, chemical and related companies, academic institutions, government laboratories and private foundations. Fluctuations in the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products. Our customers determine their research and development budgets based on several factors, including the need to develop new products, the availability of governmental and other funding, competition and the general availability of resources. As we continue to expand our international operations, we expect research and development spending levels in markets outside of the United States will become increasingly important to us.

Research and development budgets fluctuate due to changes in available resources, spending priorities, general economic conditions, institutional and governmental budgetary limitations and mergers of pharmaceutical and biotechnology companies. Our business could be harmed by any significant decrease in life science and high technology research and development expenditures by our customers. In particular, a small portion of our sales has been to researchers whose funding is dependent on grants from government agencies such as the United States National Institute of Health, the National Science Foundation, the National Cancer Institute and similar agencies or organizations. Government funding of research and development is subject to the political process, which is often unpredictable. Other departments, such as Homeland Security or Defense, or general efforts to reduce the United States federal budget deficit could be viewed by the government as a higher priority. Any shift away from funding of life science and high technology research and development or delays surrounding the approval of governmental budget proposals may cause our customers to delay or forego purchases of our products and services, which could seriously damage our business.

4043

Table of Contents

Some of our customers receive funds from approved grants at a particular time of year, many times set by government budget cycles. In the past, such grants have been frozen for extended periods or have otherwise become unavailable to various institutions without notice. The timing of the receipt of grant funds may affect the timing of purchase decisions by our customers and, as a result, cause fluctuations in our sales and operating results.

Risks Related to our Operations

We depend on key personnel, the loss of any of which could negatively affect our business.

We depend greatly on the services of Robert N. Fried, who is our Chief Executive Officer. We also depend greatly on other key employees, including key scientific and marketing personnel. In general, only highly qualified and trained scientists have the necessary skills to develop our products and provide our services. Only marketing personnel with specific experience and knowledge in health care are able to effectively market our products. In addition, some of our manufacturing, quality control, safety and compliance, information technology, sales and e-commerce related positions are highly technical as well. We face intense competition for these professionals from our competitors, customers, marketing partners and other companies throughout the industries in which we compete. Our success will depend, in part, upon our ability to attract and retain additional skilled personnel, which will require substantial additional funds. There can be no assurance that we will be able to find and attract additional qualified employees or retain any such personnel. Our inability to hire qualified personnel, the loss of services of our key personnel, or the loss of services of executive officers or key employees that may be hired in the future may have a material and adverse effect on our business.

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

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

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

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

•the decision by significant customers to reduce purchases;

•disputes and litigation with competitors;

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

•technical difficulties;

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

•regulation by federal, state or local governments; and

•general economic conditions as well as economic conditions specific to the healthcare industry.

For example, our operating results may be harmed by the effect of the COVID-19 pandemic on global economic conditions. As a result of our limited operating history and the nature of the markets in which we compete, it is extremely difficult for us to make accurate forecasts. We have based our current and future expense levels largely on our investment plans and estimates of future events although certain of our expense levels are, to a large extent, fixed. Assuming our products reach the market, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have a material and adverse effect on our business, results of operations and financial condition. Due to the foregoing factors, our revenues and operating results are and will remain difficult to forecast.

4144

Table of Contents

We may need to increase the size of our organization, and we can provide no assurance that we will successfully expand operations or manage growth effectively.

Our significant increase in the scope and the scale of our product launches, including the hiring of additional personnel, has resulted in significantly higher operating expenses. As a result, we anticipate that our operating expenses will continue to increase. Expansion of our operations may also cause a significant demand on our management, finances and other resources. Our ability to manage the anticipated future growth, should it occur, will depend upon a significant expansion of our accounting and other internal management systems and the implementation and subsequent improvement of a variety of systems, procedures and controls. There can be no assurance that significant problems in these areas will not occur. Any failure to expand these areas and implement and improve such systems, procedures and controls in an efficient manner at a pace consistent with our business could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that our attempts to expand our marketing, sales, manufacturing and customer support efforts will be successful or will result in additional sales or profitability in any future period. As a result of the expansion of our operations and the anticipated increase in our operating expenses, as well as the difficulty in forecasting revenue levels, we expect to continue to experience significant fluctuations in our results of operations.

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

The insurance industry has become more selective in offering some types of insurance, such as product liability, product recall, property and directors’ and officers’ liability insurance. Our current insurance program is consistent with both our past level of coverage and our risk management policies. However, we cannot assure you that we will be able to obtain comparable insurance coverage on favorable terms, or at all, in the future. Certain of our customers as well as prospective customers require that we maintain minimum levels of coverage for our products. Lack of coverage or coverage below these minimum required levels could cause these customers to materially change business terms or to cease doing business with us entirely.

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

In cases where our contracts are structured as fixed price or fee-for-service with a cap, we bear the financial risk if we initially underprice our contracts or otherwise overrun our cost estimates. Such underpricing or significant cost overruns could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may not be successful in acquiring complementary businesses or products on favorable terms.

As part of our business strategy, we intend to consider acquisitions of similar or complementary businesses or products. No assurance can be given that we will be successful in identifying attractive acquisition candidates or completing acquisitions on favorable terms. In addition, any future acquisitions will be accompanied by the risks commonly associated with acquisitions. These risks include potential exposure to unknown liabilities of acquired companies or to acquisition costs and expenses, the difficulty and expense of integrating the operations and personnel of the acquired companies, the potential disruption to the business of the combined company and potential diversion of our management's time and attention, the impairment of relationships with and the possible loss of key employees and clients as a result of the changes in management, the incurrence of amortization expenses and write-downs and dilution to the shareholders of the combined company if the acquisition is made for stock of the combined company. In addition, successful completion of an acquisition may depend on consents from third parties, including regulatory authorities and private parties, which consents are beyond our control. There can be no assurance that products, technologies or businesses of acquired companies will be effectively assimilated into the business or product offerings of the combined company or will have a positive effect on the combined company's revenues or earnings. Further, the combined company may incur significant expense to complete acquisitions and to support the acquired products and businesses. Any such acquisitions may be funded with cash, debt or equity, which could have the effect of diluting or otherwise adversely affecting the holdings or the rights of our existing stockholders.

4245

Table of Contents

If we experience a significant disruption in our information technology systems or if we fail to implement new systems and software successfully, our business could be adversely affected.

We depend on information systems throughout our company to control our manufacturing processes, process orders, manage inventory, process and bill shipments and collect cash from our customers, respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment, and record and pay amounts due vendors and other creditors. ~~Due to COVID-19, most~~Most of our employees have been working remotely from home and we have depended on communication tools and remote connections to our information technology systems to conduct business virtually. If we were to experience a prolonged disruption in our information systems that involve interactions amongst employees as well as with customers and suppliers, it could result in the loss of sales and customers and/or increased costs, which could adversely affect our overall business operation.

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

To achieve commercial success for our products, we must sell our product lines and/or technologies at favorable prices. In addition to being expensive, maintaining such a sales force is time-consuming. Qualified direct sales personnel with experience in the natural products industry are in high demand, and there can be no assurance that we will be able to hire or retain an effective direct sales team. Similarly, qualified independent sales representatives both within and outside the United States are in high demand, and we may not be able to build an effective network for the distribution of our product through such representatives. There can be no assurance that we will be able to enter into contracts with representatives on terms acceptable to us. Furthermore, there can be no assurance that we will be able to build an alternate distribution framework should we attempt to do so.

We may also need to contract with third parties in order to market our products. To the extent that we enter into arrangements with third parties to perform marketing and distribution services, our product revenue could be lower and our costs higher than if we directly marketed our products. Furthermore, to the extent that we enter into co-promotion or other marketing and sales arrangements with other companies, any revenue received will depend on the skills and efforts of others, and we do not know whether these efforts will be successful. If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, independently or with others, we will not be able to generate product revenue, and may not become profitable.

Our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements, our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our common stock to decline.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable and timely financial statements and disclosures. If we identify material weaknesses in our internal controls and/or fail to establish and maintain effective controls and procedures and internal control over financial reporting it could result in material misstatements in our financial statements and/or a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

4346

Table of Contents

We are subject to financial and operating covenants in our business financing agreement with Western Alliance Bank, as amended (Credit Agreement) and any failure to comply with such covenants, or obtain waivers in the event of non-compliance, could limit our borrowing availability under the Credit Agreement, resulting in our being unable to borrow under the Credit Agreement and materially adversely impact our liquidity. In addition, our operations may not provide sufficient cash to meet the repayment obligations of debt incurred under the Credit Agreement.

The Credit Agreement contains affirmative and restrictive covenants, including covenants regarding delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, dispositions of property, business combinations or acquisitions and incurrence of additional indebtedness, among other customary covenants, in each case subject to limited exceptions.

There can be no assurance that we will be able to comply with the financial and other covenants in the Credit Agreement, and the effects of COVID-19 may make it more difficult for us to comply with such covenants. Our failure to comply with these covenants could cause us to be unable to borrow under the Credit Agreement and may constitute an event of default which, if not cured or waived, could result in the acceleration of the maturity of any indebtedness then outstanding under the Credit Agreement, which would require us to pay all amounts then outstanding. If we are unable to repay those amounts, Western Alliance Bank could proceed against the collateral granted to them to secure that debt, which would seriously harm our business. Such an event could materially adversely affect our financial condition and liquidity. Additionally, such events of non-compliance could impact the terms of any additional borrowings and/or any credit renewal terms. Any failure to comply with such covenants may be a disclosable event and may be perceived negatively. Such perception could adversely affect the market price for our common stock and our ability to obtain financing in the future.

Our business could be negatively impacted by cyber security threats, including without limitation a material interruption to our operations including our clinical trials, harm to our reputation, significant fines, penalties and liabilities, breach or triggering of data protection laws, privacy policies and data protection obligations, or a loss of customers or sales.

In the ordinary course of our business, we may collect, process, store and transmit proprietary, confidential and sensitive information, including personal information (including health information), intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other parties. We use our data centers and our networks, and those of third parties, to store and access our proprietary business and other sensitive information. We and the third parties upon which we rely may face various cyber security threats, which are prevalent and continue to increase, including, without limitation, cyber security attacks to our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information, social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats. We rely upon third parties service providers and technologies to operate critical business systems to process confidential and personal information in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, employee email, and other functions. Our ability to monitor these third-party providers information security practices is limited, and these third-parties may not have adequate information security measures in place. Ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and can lead to significant interruptions, delays, or outages in our operations, disruption of clinical trials, loss of data (including data related to clinical trials), loss of income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments). Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third-parties and infrastructure in our supply chain or our third-party partners’ supply-chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products/services) or the third-party information technology systems that support us and our services. Th~~Due to COVID-19, there~~ere may be additional cyber security threats as most of our employees work from home, utilizing network connections outside of the Company premises. These information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, data and related privacy breaches, terrorists and other external parties, including foreign private parties and state and state-sponsored actors. Any of the previously identified or similar threats could cause a security incident or other interruption and could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to data. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products and services.

4447

Table of Contents

Despite the implementation of preventative and detective security measures designed to protect against security incidents, there can be no assurance that these measures will be effective and our internal computer systems and those of our current and any future contractors, consultants, collaborators and third-party service providers, may be vulnerable to damage or interruption from a variety of sources. We may be unable to detect vulnerabilities in our information technology systems (including our products) because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify and remediate vulnerabilities, if any, in our information technology systems (including our products), our efforts may not be successful. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

The procedures and controls we use to monitor these vulnerabilities and threats and to mitigate our exposure may not be sufficient to prevent all security incidents. These incidents could result in disrupted operations, including suspension of our clinical trial activities, lost opportunities, misstated financial data, liability for stolen assets or information, theft of our intellectual property, loss of data and other personally identifiable or sensitive information, increased costs arising from the implementation of additional security protective measures, litigation and reputational damage. We may expend significant resources, fundamentally change our business activities and practices, or modify our operations, including our clinical trial activities, or information technology in an effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities.

An actual or perceived security incident suffered by us or by a third party upon whom we rely may result in: government enforcement actions that could include investigations, fines, penalties, audits and inspections; additional reporting requirements and/or oversight; temporary or permanent bans on all or some processing of personal data (which could impact our clinical trials); or orders to destroy or not use personal data; indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Further, individuals, clinical trial participants or other relevant stakeholders could sue us for our actual or perceived failure to comply with our security obligations, including, without limitation, in class action litigation. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, adversely affect our reputation or otherwise adversely affect our business. Security incidents and vulnerabilities may cause some of our customers and users to stop using our services and our failure, or perceived failure, to meet expectations with regard to the security, integrity, availability and confidentiality of our network systems and sensitive data could damage our reputation and affect our ability to retain customers, attract new customers and grow our business. Moreover, security incidents can result in the diversion of funds and interruptions, delays, or outages in our operations and services, including due to ransomware attacks and denial-of-service attacks. Failures or significant downtime of our information technology or telecommunication systems or those used by our third-party service providers could cause significant interruptions in our operations and adversely impact the confidentiality, integrity and availability of sensitive or confidential information, including preventing us from conducting clinical trials, tests or research and development activities and preventing us from managing the administrative aspects of our business.

Additionally, some applicable federal, state and foreign laws may require companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have relationships. Notifications and follow-up actions related to a security breach are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences and could impact our reputation or cause us to incur significant costs, including legal expenses and remediation costs.

Any remedial costs or other liabilities related to security incidents may not be fully insured or indemnified by other means. Our contracts may not contain limitations of liability; however, even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. Although we maintain cyber insurance, we cannot be sure that our insurance coverage will be adequate or sufficient of protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

4548

Table of Contents

Risks Related to Our Products

Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our business.

We believe the nutritional supplement market is highly dependent upon consumer perception regarding the safety, efficacy and quality of nutritional supplements generally, as well as of products distributed specifically by us. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, national media attention and other publicity regarding the consumption of nutritional supplements. We cannot assure you that future scientific research, findings, regulatory proceedings, litigation, media attention or other favorable research findings or publicity will be favorable to the nutritional supplement market or any product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, such earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and consequently on our business, results of operations, financial condition and cash flows.

Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, if accurate or with merit, could have a material adverse effect on the demand for our products, the availability and pricing of our ingredients, and our business, results of operations, financial condition and cash flows. Further, adverse public reports or other media attention regarding the safety, efficacy and quality of nutritional supplements in general, or our products specifically, or associating the consumption of nutritional supplements with illness, could have such a material adverse effect. Any such adverse public reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed and the content of such public reports and other media attention may be beyond our control.

We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating income.

As a consumer product and ingredient supplier we market and manufacture products designed for human and animal consumption. We are subject to product liability claims if the use of our products is alleged to have resulted in injury. Our products consist of ingredients classified as dietary supplements, or natural health products, and, in most cases, are not subject to pre-market regulatory approval in the United States. Some of our products contain innovative ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. In addition, the products we sell are produced by third-party manufacturers. As a marketer of products manufactured by third parties, we also may be liable for various product liability claims for products we do not manufacture. We have, and may in the future, be subject to various product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. A product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which, in turn, could have a materially adverse effect on our business, results of operations, financial condition and cash flows.

We utilize ingredients and components for our products from foreign suppliers, and may be negatively affected by the risks associated with international trade and importation issues.

We utilize ingredients and components for a number of our products from suppliers outside of the United States. Accordingly, the acquisition of these ingredients is subject to the risks generally associated with importing raw materials, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, health epidemics affecting the region of such suppliers, including COVID-19, nonconformity to specifications or laws and regulations, tariffs, trade and/or labor disputes and foreign currency fluctuations. While we have a supplier certification program and audit and inspect our suppliers’ facilities as necessary both in the United States and internationally, we cannot assure you that raw materials received from suppliers outside of the United States will conform to all specifications, laws and regulations. There have in the past been quality and safety issues in our industry with certain items imported from overseas. We may incur additional expenses and experience shipment delays due to preventative measures adopted by the U.S. governments, our suppliers and our company.

4649

Table of Contents

We may never develop any additional products to commercialize.

We have invested a substantial amount of our time and resources in developing various new products. Commercialization of these products will require additional development, clinical evaluation, regulatory approval, significant marketing efforts and substantial additional investment before they can provide us with any revenue. Despite our efforts, these products may not become commercially successful products for a number of reasons, including but not limited to:

•we may not be able to obtain regulatory approvals for our products, or the approved indication may be narrower than we seek;

•our products may not prove to be safe and effective in clinical trials;

•we may experience delays in our development program;

•any products that are approved may not be accepted in the marketplace;

•we may not have adequate financial or other resources to complete the development or to commence the commercialization of our products or will not have adequate financial or other resources to achieve significant commercialization of our products;

•we may not be able to manufacture any of our products in commercial quantities or at an acceptable cost;

•rapid technological change may make our products obsolete;

•we may be unable to effectively protect our intellectual property rights or we may become subject to claims that our activities have infringed the intellectual property rights of others; and

•we may be unable to obtain or defend patent rights for our products.

In addition, we have a supply agreement with Nestec Ltd. pursuant to which it is our exclusive customer for Niagen® for human use in the medical nutritional and functional food and beverage categories in certain territories. We may never achieve technical feasibility under the supply agreement with Nestec Ltd., and therefore our sales and profit expectations resulting from this agreement may be reduced.

We may not be able to partner with others for technological capabilities and new products and services.

Our ability to remain competitive may depend, in part, on our ability to continue to seek partners that can offer technological improvements and improve existing products and services that are offered to our customers. We are committed to attempting to keep pace with technological change, to stay abreast of technology changes and to look for partners that will develop new products and services for our customer base. We cannot assure prospective investors that we will be successful in finding partners or be able to continue to incorporate new developments in technology, to improve existing products and services, or to develop successful new products and services, nor can we be certain that newly developed products and services will perform satisfactorily or be widely accepted in the marketplace or that the costs involved in these efforts will not be substantial.

If we fail to maintain adequate quality standards for our products and services, our business may be adversely affected and our reputation harmed.

Dietary supplement, nutraceutical, food and beverage, functional food, analytical laboratories, pharmaceutical and cosmetic customers are often subject to rigorous quality standards to obtain and maintain regulatory approval of their products and the manufacturing processes that generate them. A failure to maintain, or, in some instances, upgrade our quality standards to meet our customers’ needs, could cause damage to our reputation and potentially result in substantial sales losses.

If we experience product recalls, we may incur significant and unexpected costs, and our business reputation could be adversely affected.

We may be exposed to product recalls and adverse public relations if our products are alleged to be mislabeled or to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Table of Contents

Demand for our products and services are subject to the commercial success of our customers’ products, which may vary for reasons outside our control.

Even if we are successful in securing utilization of our products in a customer’s manufacturing process, sales of many of our products and services remain dependent on the timing and volume of the customer’s production, over which we have no control. The demand for our products depends on regulatory approvals and frequently depends on the commercial success of the customer’s supported product. Regulatory processes are complex, lengthy, expensive, and can often take years to complete.

We rely on single or a limited number of third-party suppliers for the raw materials required to produce our products.

Our dependence on a limited number of third-party suppliers or on a single supplier, and the challenges we may face in obtaining adequate supplies of raw materials, involve several risks, including limited control over pricing, availability, health epidemics affecting the region of such suppliers (including the coronavirus), quality and delivery schedules. We cannot be certain that our current suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Due to COVID-19 and other worldwide macroeconomic conditions such as, but not limited to, geopolitical conflicts and unrest, labor shortages, port congestion, and government restrictions there may be delays in shipments from our suppliers. Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and commercialization of our products, or interrupt production of then existing products that are already marketed, which would have a material adverse effect on our business. For example, W.R. Grace & Co.-Conn. (Grace) is the exclusive manufacturer to us for the supply of NR. There is no guarantee that we will be able to continue to contract with Grace for the supply of NR, or that such terms will be favorable to us.

Risks Related to our Intellectual Property

Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which would have a material and adverse effect on us.

Our success depends significantly on our ability to protect our proprietary rights to the technologies used in our products. We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology, including our licensed technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, our pending United States and foreign patent applications may not issue as patents in a form that will be advantageous to us or may issue and be subsequently successfully challenged by others and invalidated. In addition, our pending patent applications include claims to material aspects of our products and procedures that are not currently protected by issued patents. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may be able to design around our patents or develop products which provide outcomes which are comparable or even superior to ours. Steps that we have taken to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with some of our officers, employees, consultants and advisors, may not provide us with meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States.

In the event a competitor infringes our licensed or pending patent or other intellectual property rights, enforcing those rights may be costly, uncertain, difficult and time consuming. Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our management’s attention. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents rights against a challenge. The failure to obtain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations and financial condition.

4851

Table of Contents

Our patents and licenses may be subject to challenge on validity grounds, and our patent applications may be rejected.

We rely on our patents, patent applications, licenses and other intellectual property rights to give us a competitive advantage. Whether a patent is valid, or whether a patent application should be granted, is a complex matter of science and law, and therefore we cannot be certain that, if challenged, our patents, patent applications and/or other intellectual property rights would be upheld nor can we be certain we will prevail in an appeal. If one or more of those patents, patent applications, licenses and other intellectual property rights are invalidated, rejected or found unenforceable and we are unable to reverse that finding through an appeal, that could reduce or eliminate any competitive advantage we might otherwise have had.

We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from developing our products, require us to obtain licenses from third parties or to develop non-infringing alternatives and subject us to substantial monetary damages.

Third parties could, in the future, assert infringement or misappropriation claims against us with respect to products we develop. Whether a product infringes a patent or misappropriates other intellectual property involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of others. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for use related to the use or manufacture of our products, and our potential competitors may assert that some aspect of our product infringes their patents. Because patent applications may take years to issue, there also may be applications now pending of which we are unaware that may later result in issued patents upon which our products could infringe. There also may be existing patents or pending patent applications of which we are unaware upon which our products may inadvertently infringe.

Any infringement or misappropriation claim could cause us to incur significant costs, place significant strain on our financial resources, divert management’s attention from our business and harm our reputation. If the relevant patents in such claim were upheld as valid and enforceable and we were found to infringe them, we could be prohibited from manufacturing or selling any product that is found to infringe unless we could obtain licenses to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain such a license on terms acceptable to us, if at all, and we may not be able to redesign our products to avoid infringement, which could materially impact our revenue. A court could also order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from making, using, or selling products, and could enter an order mandating that we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties.

The prosecution and enforcement of patents licensed to us by third parties are not within our control. Without these technologies, our products may not be successful and our business would be harmed if the patents were infringed on or misappropriated without action by such third parties.

We have obtained licenses from third parties for patents and patent application rights related to ingredients and/or the products we are developing, allowing us to use intellectual property rights owned by or licensed to these third parties. We do not control the maintenance, prosecution, enforcement or strategy for many of these patents or patent application rights and as such are dependent in part on the owners of the intellectual property rights to maintain their viability. If any third-party licensor is unable to successfully maintain, prosecute or enforce the licensed patents and/or patent application rights related to our products, we may become subject to infringement or misappropriate claims or lose our competitive advantage. Without access to these technologies or suitable design-around or alternative technology options, our ability to conduct our business could be impaired significantly.

4952

Table of Contents

We are currently engaged in substantial and complex litigation with Elysium Health, Inc. and Elysium Health LLC (collectively, "Elysium"), the outcome of which could materially harm our business and financial results.

The litigation includes multiple complaints and counterclaims by us and Elysium in venues in California and New York, as well as a patent infringement complaint filed by the Company and Trustees of Dartmouth College. For further details on this litigation, please refer to Note 10, Commitments and Contingencies, Legal Proceedings in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The litigation is substantial and complex, and it has caused and could continue to cause us to incur significant costs, as well as distract our management over an extended period. The litigation may substantially disrupt our business and we cannot assure you that we will be able to resolve the litigation on terms favorable to us. If we are unsuccessful in resolving the litigation on favorable terms to us, we may be forced to pay compensatory and punitive damages and restitution for any royalty payments that we received from Elysium, which payments could materially harm our business, or be subject to other remedies, including injunctive relief. We cannot predict the outcome of our litigation with Elysium, which could have any of the results described above or other results that could materially adversely affect our business.

We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets of others.

Some of our employees were previously employed at other dietary supplement, nutraceutical, food and beverage, functional food, analytical laboratories, pharmaceutical and cosmetic companies. We may also hire additional employees who are currently employed at other such companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors. We may be subject to claims that these employees or independent contractors have used or disclosed such other party’s trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to market existing or new products, which could severely harm our business.

Risks Related to Regulatory Approval of Our Products and Other Government Regulations

We are subject to regulation by various federal, state and foreign agencies that require us to comply with a wide variety of regulations, including those regarding the manufacture of products, advertising and product label claims, the distribution of our products and environmental matters. Failure to comply with these regulations could subject us to fines, penalties and additional costs.

Some of our operations are subject to regulation by various United States federal agencies and similar state and international agencies, including the Department of Commerce, the FDA, the FTC, the Department of Transportation and the Department of Agriculture. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, handling, sales and distribution of products. If we fail to comply with any of these regulations, we may be subject to fines or penalties, have to recall products and/or cease their manufacture and distribution, which would increase our costs and reduce our sales.

We are also subject to various federal, state, local and international laws and regulations that govern the handling, transportation, manufacture, use and sale of substances that are or could be classified as toxic or hazardous substances. Some risk of environmental damage is inherent in our operations and the products we manufacture, sell, or distribute. Any failure by us to comply with the applicable government regulations could also result in product recalls or impositions of fines and restrictions on our ability to carry on with or expand in a portion or possibly all of our operations. If we fail to comply with any or all of these regulations, we may be subject to fines or penalties, have to recall products and/or cease their manufacture and distribution, which would increase our costs and reduce our sales.

5053

Table of Contents

Government regulations of our customer’s business are extensive and are constantly changing. Changes in these regulations can significantly affect customer demand for our products and services.

The process by which our customers’ industries are regulated is controlled by government agencies and depending on the market segment can be very expensive, time consuming, and uncertain. Changes in regulations or the enforcement practices of current regulations could have a negative impact on our customers and, in turn, our business. At this time, it is unknown how the FDA will interpret and to what extent it will enforce Good Manufacturing Practices, and other regulations that will likely affect many of our customers. These uncertainties may have a material impact on our results of operations, as lack of enforcement or an interpretation of the regulations that lessens the burden of compliance for the dietary supplement marketplace may cause a reduced demand for our products and services.

Changes in government regulation or in practices relating to the pharmaceutical, dietary supplement, food and cosmetic industry could decrease the need for the services we provide.

Governmental agencies throughout the world, including in the United States, strictly regulate the pharmaceutical, dietary supplement, food and cosmetic industries. Changes in regulation, such as a relaxation in regulatory requirements or the introduction of simplified drug approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our services less competitive, could eliminate or substantially reduce the demand for our services. Also, if the government makes efforts to contain drug costs and pharmaceutical and biotechnology company profits from new drugs, or if health insurers were to change their practices with respect to reimbursements for pharmaceutical products, our customers may spend less, or reduce their spending on research and development.

If we should in the future become required to obtain regulatory approval to market and sell our goods we will not be able to generate any revenues until such approval is received.

The pharmaceutical industry is subject to stringent regulation by a wide range of authorities. While we believe that, given our present business, we are not currently required to obtain regulatory approval to market our goods because, among other things, we do not (i) produce or market any clinical devices or other products, or (ii) sell any medical products or services to the customer, we cannot predict whether regulatory clearance will be required in the future and, if so, whether such clearance will at such time be obtained for any products that we are developing or may attempt to develop. Should such regulatory approval in the future be required, our goods may be suspended or may not be able to be marketed and sold in the United States until we have completed the regulatory clearance process as and if implemented by the FDA. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product or service and would require the expenditure of substantial resources.

If regulatory clearance of a good that we propose to market and sell is granted, this clearance may be limited to those particular states and conditions for which the good is demonstrated to be safe and effective, which would limit our ability to generate revenue. We cannot ensure that any good that we develop will meet all of the applicable regulatory requirements needed to receive marketing clearance. Failure to obtain regulatory approval will prevent commercialization of our goods where such clearance is necessary. There can be no assurance that we will obtain regulatory approval of our proposed goods that may require it.

Compliance with stringent and changing global privacy and data security laws and regulations could result in additional costs and liabilities to us or inhibit our ability to collect and, if applicable, process data globally, and the failure or perceived failure to comply with such laws and regulations could have a material adverse effect on our business, financial condition or results of operations.

We collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect and share personal information and other sensitive information, including but not limited to proprietary and confidential business information, trade secrets, intellectual property, information we collect about patients in connection with clinical trials, and sensitive third-party information necessary to operate our business, for legal and marketing purposes. Accordingly, we are, or may become, subject to numerous federal, state, local, and foreign data privacy and security laws, regulations, guidance and industry standards as well as external and internal privacy and security policies, contracts and other obligations that apply to the processing of personal data by us and on our behalf. The legal framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and may remain unsettled for the foreseeable future.

5154

Table of Contents

Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the European Union’s General Data Protection Regulation (GDPR) and the United Kingdom’s GDPR (UK GDPR) imposes strict obligations on the processing of personal data, including, without limitation, and personal health data. The GDPR and UK GDPR set out extensive compliance requirements, including providing detailed disclosures about how personal data is collected and processed, demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting new rights for data subjects in regard to their personal data, as well as enhancing pre-existing rights (e.g., data subject access requests); requiring the appointment of a data protection officer in certain circumstances; mandating the appointment of representatives in the United Kingdom and/or the EEA in certain circumstances; introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. The processing of sensitive personal data, such as health information, impose heightened compliance burdens under the GDPR and the UK Data Protection Act and is a topic of active interest among foreign regulators. Moreover, the GDPR and the UK Data Protection Act increase our obligations with respect to clinical trials conducted in the EU and the UK by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial participants and investigators.

Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the European Economic Area, or EEA, to the United States. On July 16, 2020, in a case known as Schrems II, the Court of Justice of the European Union, or CJEU, invalidated the EU-US Privacy Shield Framework under which personal data could be transferred from the EEA to U.S. entities who had self-certified under the Privacy Shield scheme. While the CJEU upheld the adequacy of the Standard Contractual Clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place. Additionally, new Standard Contractual Clauses that repealed the Standard Contractual Clauses adopted under the Data Protection Directive have recently been adopted on June 4, 2021 by the European Commission. We thus are still in the process of updating all our contracts entailing the transfer of personal data outside of the European Economic Area with this new Standard Contractual Clauses. As supervisory authorities issue further guidance on personal data export mechanisms, including on the new Standard Contractual Clauses, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we conduct clinical trials, it could affect our business. ~~While the~~The President of the United States and the President of the European Commission announced on March 25, 2022 that they had reached an agreement in principle for a Trans-Atlantic Data Privacy Framework, which would allow personal data to flow freely and safely between the EU and participating U.S. ~~companies, there are some uncertainties on whether such Trans-Atlantic~~companies. On October 7, 2022, the President of the United States signed an Executive Order directing the steps that the United States will take to implement the U.S. commitments under the European Union-U.S. Data Privacy Framework ~~would be effectively adopted and if so, by when it would be applicable.~~(EU-U.S. DPF). The ~~agreement in principle now needs to be translated into legally binding commitments, which include~~Executive Order includes the adoption, by the United States, of a new set of rules and binding safeguards to limit access to data by U.S. intelligence authorities and procedures to ensure effective oversight of new privacy and civil liberties standards, as well as the implementation of a new two-tier redress system to investigate and resolve complaints by European citizens on access of data by U.S. Intelligence authorities. ~~Subject~~The Executive Order further calls on the Privacy and Civil Liberties Oversight Board to review Intelligence Community policies and procedures to ensure that they are consistent with the ~~effective implementation~~Executive Order and to conduct an annual review of ~~such commitments by~~ the ~~United States,~~redress process. In connection with the signing of this Executive Order and the directives contained therein, the European Commission ~~would further launch~~has the ~~procedure~~basis to adopt an adequacy decision, which involves a proposal from the European Commission, an opinion of the European Data Protection Board, an approval from representatives of EU countries, and the adoption of the decision by the European Commission. Accordingly, the new Trans-Atlantic Data Privacy Framework may not be adopted in a near future and thus, the transfer of personal data from the EU to the United States still entail in-depth legal analysis and heavy paperwork requirements until then.

Relatedly, following the United Kingdom’s withdrawal from the EEA and the EU, we also have to comply with the UK-specific requirements related to data protection, including with respect to transfer of personal data outside of the UK, which increases our regulatory compliance burden. The UK ~~also recently~~ updated its transfer mechanism and we will need to update all of our contracts entailing the transfer of personal data outside of the United Kingdom with this new UK-specific transfer tools.

If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal data from Europe or elsewhere. The inability to import personal data to the United States could significantly and negatively impact our business operations, including by limiting our ability to conduct clinical trial activities in Europe and elsewhere; limiting our ability to collaborate

Table of Contents

with parties that are subject to European and other data privacy and security laws; or requiring us to increase our personal data processing capabilities and infrastructure in Europe and/or elsewhere at significant expense.

~~Table of Contents~~

Additionally, in the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws. The California Consumer Privacy Act of 2018 (CCPA) imposes obligations on businesses to which it applies. These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data. The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation). In addition, it is anticipated that the California Privacy Rights Act of 2020 (CPRA), effective January 1, 2023, will expand the CCPA. For example, the CPRA establishes a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of an enforcement action. Other states have enacted data privacy laws. For example, Virginia passed the Consumer Data Protection Act, Colorado passed the Colorado Privacy Act, Connecticut passed the Connecticut Data Privacy Act and Utah passed the Utah Consumer Privacy Act all four of which differ from the CPRA and become effective in 2023. Each of these state laws adds potential compliance and risk for us with respect to data necessary to operate our business.

A United States federal privacy bill advanced to the U.S. House of Representatives on July 21, 2022. There remains considerable uncertainty regarding its path to become law. If we become subject to new data privacy laws, at the state level, the risk of enforcement action against us could increase because we may become subject to additional obligations, and the number of individuals or entities that can initiate actions against us may increase (including individuals, via a private right of action, and state actors). In addition, other data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts.

Our obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources). These obligations may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. In addition, these obligations may require us to change our business model. Collectively, these laws may increase our compliance costs and potential liability. Although we endeavor to comply with our published policies, other documentation, and all applicable privacy and security laws, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture. For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to operate our business and proceedings against us by governmental entities or others. If we fail, or are perceived to have failed, to address or comply with obligations related to data privacy and security, we could face government enforcement actions that could include investigations, fines, penalties, audits and inspections; additional reporting requirements and/or oversight; temporary or permanent bans on all or some processing of personal data; orders to destroy or not use personal data; and imprisonment of company officials. Further, individuals or other relevant stakeholders could sue us for our actual or perceived failure to comply with our data privacy and security obligations, including, without limitation, in class action litigation. Any of these events could have a material adverse effect on our reputation, business, or financial condition, and could lead to a loss of actual or prospective customers, collaborators or partners; interrupt or stop clinical trials; result in an inability to process personal data or to operate in certain jurisdictions; limit our ability to develop or commercialize our products; or require us to revise or restructure our operations. Moreover, such suits, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business or have other material adverse effects. Additionally, we expect that there will continue to be new proposed laws and regulations concerning data privacy and security, and we cannot yet determine the impact such future laws, regulations and standards may have on our business.

5356

Table of Contents

Risks Related to the Securities Markets and Ownership of our Equity Securities

The market price of our common stock may be volatile and adversely affected by several factors.

The market price of our common stock could fluctuate significantly in response to various factors and events, including, but not limited to:

•our ability to integrate operations, technology, products and services;

•our ability to execute our business plan;

•our operating results are below expectations;

•our issuance of additional securities, including debt or equity or a combination thereof,;

•announcements of technological innovations or new products by us or our competitors;

•acceptance of and demand for our products by consumers;

•media coverage regarding our industry or us;

•litigation arbitration, or other adverse non-judicial proceedings;

•disputes with or our inability to collect from significant customers;

•loss of any strategic relationship;

•industry developments, including, without limitation, changes in healthcare policies or practices;

•economic and other external factors, including effects of the COVID-19 pandemic;

•reductions in purchases from our large customers;

•period-to-period fluctuations in our financial results; and

•whether an active trading market in our common stock develops and is maintained.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our capital stock and do not anticipate paying cash dividends on our capital stock in the foreseeable future. The payment of dividends on our capital stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if the common stock price appreciates.

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

Our federal net operating losses (NOLs) generated in taxable years beginning on or prior to December 31, 2017 could expire unused. Under current law, federal NOLs incurred in taxable years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to federal tax laws. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. As a result, if we earn net taxable income, our ability to use our pre-ownership change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

5457

Table of Contents

We have a significant number of outstanding options and unvested restricted stock units. Future sales of these shares could adversely affect the market price of our common stock.

As of ~~June~~September 30, 2022, we had outstanding options for an aggregate of approximately ~~11.9~~10.1 million shares of common stock at a weighted average exercise price of ~~$4.22~~$4.25 per share and unvested restricted stock units of approximately ~~0.6~~0.7 million shares. The holders may sell many of these shares in the public markets from time to time, without limitations on the timing, amount or method of sale. As and when our stock price rises, if at all, more outstanding options will be in-the-money and the holders may exercise their options and sell a large number of shares. This could cause the market price of our common stock to decline.

Our bylaws, as amended (Bylaws) provide that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or our stockholders, (iii) any action asserting a claim against our company arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or Bylaws, or (iv) any action asserting a claim against our company governed by the internal affairs doctrine.

This choice of forum provision may limit a stockholder’s ability to bring certain claims in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than that designated in the exclusive forum provision. If a court were to find this choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

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

~~On May 19,~~During fiscal year 2022, ~~the Company~~we entered into an agreement to form a joint venture to expand the Company’s market strategy to include opportunities in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan. ~~The~~Operating activity under the joint venture ~~has~~was not ~~yet launched.~~material during the three and nine months ended September 30, 2022. Our participation in the joint venture in China is subject to general, as well as industry-specific, economic, political and legal developments and risks in China. The Chinese government exercises significant control over the Chinese economy, including but not limited to, controlling capital investments, allocating resources, setting monetary policy, controlling and monitoring foreign exchange rates, implementing and overseeing tax regulations, providing preferential treatment to certain industry segments or companies and issuing necessary licenses to conduct business. In addition, we could face additional risks resulting from changes in China’s data privacy and cybersecurity requirements. Accordingly, any adverse change in the Chinese economy, the Chinese legal system or Chinese governmental, economic or other policies could have a material adverse effect on our joint venture in China and our prospects generally.

We face additional risks in China due to China’s historically limited recognition and enforcement of contractual and intellectual property rights. We may experience difficulty enforcing our intellectual property rights in China. Unauthorized use of our technologies and intellectual property rights by partners or competitors may dilute or undermine the strength of our brands. If we cannot adequately monitor the use of our technologies and products, or enforce our intellectual property rights in China or contractual restrictions relating to use of our intellectual property by Chinese companies, our revenue could be adversely affected.

5558

Table of Contents

Our joint venture will be subject to laws and regulations applicable to foreign investment in China. There are uncertainties regarding the interpretation and enforcement of laws, rules and policies in China. Because many laws and regulations are relatively new, the interpretations of many laws, regulations and rules are not always uniform. Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas. Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic. As a result of the foregoing, it may be difficult for us to obtain swift or equitable enforcement of laws ostensibly designed to protect companies like ours, which could have a material adverse effect on our business and results of operations. There is no guarantee that we will be able to successfully launch our joint venture.

General Risks

We may become involved in securities class action litigation that could divert management’s attention and harm our business.

The stock market in general, and the stocks of early stage companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing our business.

As a public company, we may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. Projections may not be made in a timely manner or we might fail to reach expected performance levels and could materially affect the price of our shares. Any failure to meet published forward-looking statements that adversely affect the stock price could result in losses to investors, stockholder lawsuits or other litigation, sanctions or restrictions issued by the Securities and Exchange Commission.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Biden administration and Congress have proposed various U.S. federal tax law changes, which if enacted could have a material impact on our business, cash flows, financial condition or results of operations. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

5659

Table of Contents

Our shares of common stock may be thinly traded, so you may be unable to sell at or near ask prices or at all.

We cannot predict the extent to which an active public market for our common stock will develop or be sustained. This situation may be attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we have become more seasoned and viable. As a consequence, there may be periods of several days or weeks when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot assure you that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained or not diminish.

Stockholders may experience significant dilution if future equity offerings are used to fund operations or acquire complementary businesses.

If future operations or acquisitions are financed through the issuance of additional equity securities, stockholders could experience significant dilution. Securities issued in connection with future financing activities or potential acquisitions may have rights and preferences senior to the rights and preferences of our common stock. In addition, the issuance of shares of our common stock upon the exercise of outstanding options or warrants may result in dilution to our stockholders.

Environmental, social and governance matters may impact our business and reputation.

Companies across many industries are facing increased scrutiny, including by consumers, investors, employees and other stakeholders, as well as by governmental and non-governmental organizations surrounding environmental, social and governance (ESG) practices. This increased scrutiny and changing expectations with respect to the Company’s ESG practices may result in additional costs or risks. For example, standards and research regarding ESG practices could change and become more onerous for both us and our third-party suppliers and vendors to meet successfully. If we are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate. We risk damage to our brand and reputation in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies. There can be no assurance that investors will not publicly advocate for us to not make corporate governance changes or engage in corporate actions and responding to challenges could be costly and time consuming.

Developing and achieving ESG initiatives may result in increased costs in our supply chain, fulfillment, and/or corporate business operations, and could deviate from our initial estimates and have a material adverse effect on our business and financial condition. Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead. Investor advocacy groups, certain institutional investors, investment funds and other influential investors are increasingly focused on ESG practices and in recent years have placed increasing importance on the non-financial impacts of their investments. Topics taken into account in such assessments include, among others, the company’s efforts and impacts on climate change and human rights, ethics and compliance with law and the role of the Company’s board of directors in supervising various sustainability issues. In light of investors’ and other stakeholders’ increased focus on ESG matters, there can be no certainty that we will manage such issues successfully, or that we will successfully meet our investors’ or society’s ESG expectations. While our mission is to promote healthy aging, if our ESG practices do not meet investor or other industry stakeholder expectations, which continue to evolve, we may incur additional costs and our brand’s ability to attract and retain qualified employees and business may be harmed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 30, 2022, the Company entered into a Securities Purchase Agreement with certain purchasers named therein, pursuant to which the Company agreed to sell and issue an aggregate of $3.1 million of the Company’s Common Stock, par value $0.001 per share at a purchase price of $1.25 per share (the, “Financing”), which is equal to the closing price on September 29, 2022 and above the consolidated closing bid price reported by Nasdaq immediately preceding the time the Company entered into the Purchase Agreement. On October 7, 2022, the Company closed the Financing and issued 2.48 million shares of its Common Stock and received proceeds of approximately $2.9 million, net of offering costs of $0.2 million. The shares issued pursuant to the Financing were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws. The Company relied on the exemption from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder.

Table of Contents

Item 6. Exhibits


Exhibit No.						Description of Exhibits

3.1						Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to, and filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-37752) filed with the Commission on March 15, 2018)
3.2						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to, and filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 000-53290) filed with the Commission on April 12, 2016)
3.3						Amended and Restated Bylaws of the Registrant (incorporated by reference to, and filed as Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K (File No. 001-37752) filed with the Commission on March 15, 2022)
10.1						~~Joint Venture~~Shareholders Agreement, effective as of ~~May 19,~~September 30, 2022, between Hong Kong Taikuk (China) Group Ltd. and the ~~Named Parties and ChromaDex, Inc.~~Company’s named subsidiaries (incorporated by reference toas Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37752 ) filed with the ~~SEC~~Commission on ~~May 19,~~October 3, 2022)
10.2						Securities Purchase Agreement , dated September 30, 2022, by and among the Company and the Purchasers (incorporated by reference from and filed as Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-37752) filed with the Commission on October 3, 2022)
10.3						Registration Rights Agreement, dated as of September 30, 2022, by and among the Registrant and the parties thereto (incorporated by reference from and filed as Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 001-37752) filed with the Commission on October 3, 2022)
10.4						Termination Agreement, effective as of September 30, 2022, between the Named Parties and ChromaDex Corporation (incorporated by reference from and filed as Exhibit 10.4 to the Company's Current Report on Form 8-K (File No. 001-37752) filed with the Commission on October 3, 2022)
10.5						Securities Purchase Agreement, dated as of October 10, 2022, by and between the Company and the Purchaser (incorporated by reference from and filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-37752) filed with the Commission on October 11 , 2022) *
10.6						Amended and Restated Supply Agreement, dated October 10, 2022, by and between the Company, Nestec Ltd. and NHSc **v
10.7						Separation Letter Agreement, dated August 10, 2022, by and between the Company and Kevin Farr (incorporated by reference from and filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-37752) filed with the Commission on August 10, 2022)
10.8						Consultant Agreement, dated August 10, 2022, by and between the Company and Kevin Farr (incorporated by reference from and filed as Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-37752) filed with the Commission on August 10, 2022)
31.1						Certification of the Chief Executive Officer pursuant to Rule 13a-14(A) of the Securities Exchange Act of 1934, as amended❖
31.2						Certification of the Chief Financial Officer pursuant to Rule 13a-14(A) of the Securities Exchange Act of 1934, as amended❖
32.1						Certification pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes−Oxley Act of 2002)❖
101.INS						Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

v Filed herewith.

~~(1) Plan~~* Schedules and ~~related Forms were assumed by ChromaDex Corporation~~exhibits to the Agreement have been omitted pursuant to ~~Agreement~~Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

** Certain portions of this exhibit (indicated by asterisks) have been excluded pursuant to Item 601(b)(10) of Regulation S-K because they are both not material and ~~Plan of Merger, dated~~are the type that the Registrant treats as ~~of May 21, 2008, among ChromaDex Corporation (formerly Cody Resources, Inc.), CDI Acquisition, Inc. and ChromaDex, Inc.~~

private or confidential.

5861

Table of Contents

SIGNATURES

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


						CHROMADEX CORPORATION

Date: ~~August 10,~~November 2, 2022						/s/ ~~KEVIN M. FARR~~BRIANNA L. GERBER
						~~Kevin M. Farr~~Brianna L. Gerber
						SVP, Finance / Interim Chief Financial Officer

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

5962