| Commitments and Contingencies | Legal
proceedings On
December 29, 2016, ChromaDex, Inc. filed a complaint (the “Complaint”) in the United States District Court for the
Central District of California, naming Elysium Health, Inc. as defendant. Among other allegations, ChromaDex, Inc. alleges in
the Complaint that (i) Elysium breached the Supply Agreement, dated June 26, 2014, by and between ChromaDex, Inc. and Elysium
Health, LLC (“Elysium”) (the “pTeroPure® Supply Agreement”), by failing to make payments to ChromaDex,
Inc. for purchases of pTeroPure® pursuant to the pTeroPure® Supply Agreement, (ii) Elysium breached the Supply Agreement,
dated February 3, 2014, by and between ChromaDex, Inc. and Elysium, as amended (the “NIAGEN® Supply Agreement”),
by failing to make payments to ChromaDex, Inc. for purchases of NIAGEN® pursuant to the NIAGEN® Supply Agreement, (iii) Elysium
breached the Trademark License and Royalty Agreement, dated February 3, 2014, by and between ChromaDex, Inc. and Elysium (the
“License Agreement”), by failing to make payments to ChromaDex, Inc. for royalties due pursuant to the License Agreement
and (iv) certain officers of Elysium made false promises and representations to induce ChromaDex, Inc. into providing large supplies
of pTeroPure® and NIAGEN® to Elysium pursuant to the pTeroPure® Supply Agreement and NIAGEN® Supply Agreement. ChromaDex,
Inc. is seeking punitive damages, money damages and interest. On
January 25, 2017, Elysium filed an answer and counterclaims (the “Counterclaim”) in response to the Complaint. Among
other allegations, Elysium alleges in the Counterclaim that (i) ChromaDex, Inc. breached the NIAGEN® Supply Agreement by not
issuing certain refunds or credits to Elysium and for violating certain confidential information provisions, (ii) ChromaDex, Inc.
breached the implied covenant of good faith and fair dealing pursuant to the NIAGEN® Supply Agreement, (iii) ChromaDex, Inc.
breached certain confidential provisions of the pTeroPure® Supply Agreement, (iv) ChromaDex, Inc. fraudulently induced Elysium
into entering into the License Agreement (the “Fraud Claim”), (v) ChromaDex, Inc.’s conduct constitutes misuse
of its patent rights (the “Patent Claim”) and (vi) ChromaDex, Inc. has engaged in unlawful or unfair competition under
California state law (the “Unfair Competition Claim”). Elysium is seeking damages for ChromaDex, Inc.’s alleged
breaches of the NIAGEN® Supply Agreement and pTeroPure® 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. On
February 15, 2017, ChromaDex, Inc. filed an amended complaint (the “Amended Complaint”). In the Amended Complaint,
ChromaDex, Inc. re-alleges the claims in the Complaint, and also alleges that Elysium willfully and maliciously misappropriated
ChromaDex, Inc.’s trade secrets. On February 15, 2017, ChromaDex, Inc. also filed a motion to dismiss the Fraud Claim, the
Patent Claim and the Unfair Competition Claim. On March 1, 2017, Elysium filed a motion to dismiss ChromaDex, Inc.'s fraud and
trade secret misappropriation causes of action. On March 6, 2017, Elysium filed a first amended counterclaim. On March 20, 2017,
ChromaDex, Inc. moved to dismiss Elysium's amended fraud, patent misuse and the Unfair Competition Claim. The hearing on both
motions to dismiss is set for May 15, 2017. While ChromaDex, Inc. expresses no opinion as to the ultimate outcome of this matter,
ChromaDex, Inc. believes Elysium’s allegations are without merit and will vigorously defend against them. As
of April 1, 2017, ChromaDex, Inc. did not accrue a potential loss for the Counterclaim because ChromaDex, Inc. believes that the
allegations are without merit and thus it is not probable that a liability had been incurred, and the amount of loss cannot be
reasonably estimated. From
time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe that there is no
other litigation pending that is likely to have, individually or in the aggregate, a material adverse effect on our financial
condition or results of operations. Employment
agreement with Robert Fried On
March 12, 2017, the Company entered into an Employment Agreement (the "Fried Agreement") with Robert Fried. Mr. Fried
is entitled to receive certain severance payments per the terms of the Fried Agreement. The key terms of the Fried Agreement,
including the severance terms are as follows: Mr.
Fried is entitled to: (i) an annual base salary of $300,000; (ii) an annual cash bonus equal to (a) 1% of net direct-to-consumer
sales of products with nicotinamide riboside as a lead ingredient by the Company plus (b) 2% of direct to consumer net sales of
products with nicotinamide riboside as a lead ingredient for the portion of such sales that exceeded prior year sales plus (c)
1% of the gross profit derived from nicotinamide riboside ingredient sales to dietary supplement producers; (iii) an option to
purchase up to 500,000 shares of Common Stock under the ChromaDex Second Amended and Restated 2007 Equity Incentive Plan or any
subsequent equity plan, subject to monthly vesting over a three-year period; and (iv) 166,667 shares of restricted Common Stock,
subject to annual vesting over a three-year period. Subject
to requisite stockholder approval and Mr. Fried’s continuous service through such date, Mr. Fried is also eligible to receive
(i) on March 12, 2018, 166,667 shares of restricted Common Stock, subject to annual vesting over a two-year period, (ii) on March
12, 2019, 166,666 shares of restricted Common Stock that vest in full on the one year anniversary of the grant date and (iii)
up to 500,000 shares of fully-vested restricted Common Stock that will be granted upon the achievement of certain performance
goals. Any unvested options or shares of restricted stock will vest in full upon (a) a change in control of the Company, (b) Mr.
Fried’s death, (c) Mr. Fried’s disability, (d) termination by the Company of Mr. Fried’s employment without
cause or (e) Mr. Fried’s resignation for good reason, subject in each case to Mr. Fried’s continuous service as an
employee or consultant of the Company or any of its subsidiaries though such event. The
severance terms of the Fried Agreement provide that if (i) Mr. Fried’s employment is terminated by the Company without cause,
for death or disability, or Mr. Fried resigns for good reason, or (ii) (a) a change in control of the Company occurs and (b) within
one month prior to the date of such change in control or twelve months after the date of such change in control R. Fried’s
employment is terminated by the Company other than for cause, then, subject to executing a release, Mr. Fried will receive (w)
continuation of his base salary for 12 months, (x) health care continuation coverage payments premiums for 12 months, (y) a prorated
annual cash bonus earned for the fiscal year in which such termination or resignation occurs, and (z) an extended exercise period
for his options |
