Exhibit 99.1
Sale of Operating Assets
On September 5, 2017, ChromaDex Corporation (“ChromaDex”), ChromaDex, Inc., a wholly-owned subsidiary of ChromaDex, and ChromaDex Analytics, Inc., a wholly-owned subsidiary of ChromaDex, Inc. (collectively, the “Company”), sold operating assets that are used or held for use in connection with the Company’s quality verification program testing or seals and analytical chemistry and microbiology testing business for food and food related products (the “Lab Business”) to Covance Laboratories Inc. (“Covance”) pursuant to an asset purchase agreement. Pursuant to the terms of the asset purchase agreement, the Company will receive total consideration equal to $7.5 million, subject to certain escrow provisions. In addition, the Company is eligible to receive an additional earnout payment from Covance up to $1.0 million, subject to certain escrow provisions.
Pro Forma Information
The accompanying unaudited pro forma condensed consolidated statements of operations of the Company for the years ended December 31, 2016, January 2, 2016 and January 3, 2015 and the six months ended July 1, 2017 are presented as if the Lab Business sale had occurred on December 29, 2013, the beginning of the earliest period presented. The accompanying unaudited pro forma condensed consolidated balance sheet of the Company as of July 1, 2017 is presented as if the Lab Business sale had occurred on July 1, 2017. The pro forma adjustments related to the Lab Business sale do not reflect the final purchase price or final asset and liability balances of the Lab Business. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed consolidated financial information. The unaudited pro forma financial information is not necessarily indicative of the results of operations or financial position that might have been achieved for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position that may occur in the future.
The historical consolidated financial information has been adjusted in the unaudited pro forma financial information to give effect to pro forma events that are (1) directly attributable to the disposal, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results.
The following is a brief description of the amounts recorded under each of the column headings in the unaudited pro forma consolidated statements of operations and balance sheet:
Historical
This column reflects the Company’s historical audited operating results for the years ended December 31, 2016, January 2, 2016 and January 3, 2015 and the historical and unaudited operating results of continuing operations and financial condition as of and for the six months ended July 1, 2017 prior to any adjustment for the Lab Business sale described above.
Disposal
This column reflects the elimination of the historical operating results of the Lab Business for the years ended December 31, 2016, January 2, 2016 and January 3, 2015 and the six months ended July 1, 2017 at the amounts that have been reflected in the Company’s condensed consolidated statements of operations for those periods. These amounts are based on the best available information and certain assumptions that the Company's management believe are reasonable. These amounts do not include allocations of corporate overhead expenses included in general and administrative expenses. The disposal column on the unaudited pro forma condensed consolidated balance sheet as of July 1, 2017 reflects the value of operating assets and liabilities included in the sale of the Lab Business as of that date. Net operating obligations of approximately $0.5 million as of July 1, 2017 were not assumed by Covance in its purchase of the Lab Business and these obligations are expected to be paid or collected by the Company within a year.
Pro Forma Adjustments
This column on the unaudited pro forma condensed consolidated balance sheet reflects the pro forma effect of the receipt and use of the cash consideration from the Lab Business sale.
ChromaDex Corporation and Subsidiaries | | | | | |
| | | | | |
| Unaudited Pro Forma Condensed Consolidated Balance Sheet | | | |
| (in thousands) | | | | | |
| | | | | | |
| As of July 1, 2017 | | | | | |
| | | | | | |
| | | | | Notes | |
| Assets | | | | | |
| | | | | | |
| Current Assets | | | | | |
| Cash | $14,139 | | $6,550 | (A) | $20,689 |
| Trade receivables, net of allowances | 4,579 | | | | 4,579 |
| Inventories | 7,794 | | | | 7,794 |
| Prepaid expenses and other assets | 865 | (19) | | | 846 |
| Total current assets | 27,377 | (19) | 6,550 | | 33,908 |
| | | | | | |
| Leasehold Improvements and Equipment, net | 3,373 | (1,473) | | (B) | 1,900 |
| Deposits | 402 | (20) | | | 382 |
| Intangible assets, net | 1,768 | | | | 1,768 |
| Other receivables | - | | 950 | (A) | 950 |
| | | | | | |
| Total assets | $32,920 | $(1,512) | $7,500 | | $38,908 |
| | | | | | |
| Liabilities and Stockholders' Equity | | | | | |
| | | | | | |
| Current Liabilities | | | | | |
| Accounts payable | $3,132 | | $700 | (C) | $3,832 |
| Accrued expenses | 2,111 | | | | 2,111 |
| Current maturities of capital lease obligations | 299 | | | | 299 |
| Customer deposits and other | 504 | | | | 504 |
| Deferred rent, current | 114 | (33) | | | 81 |
| Due to officer | 100 | | | | 100 |
| Total current liabilities | 6,260 | (33) | 700 | | 6,927 |
| | | | | | |
| Capital lease obligations, less current maturities | 393 | | | | 393 |
| Deferred rent, less current | 548 | (184) | | | 364 |
| | | | | | |
| Total liabilities | 7,201 | (217) | 700 | | 7,684 |
| | | | | | |
| Commitments and contingencies | | | | | |
| | | | | | |
| Stockholders' Equity | | | | | |
| Common stock, $.001 par value | 45 | | | | 45 |
| Additional paid-in capital | 75,590 | | | | 75,590 |
| Accumulated deficit | (49,916) | | 5,505 | (C) | (44,411) |
| Total stockholders' equity | 25,719 | - | 5,505 | | 31,224 |
| Total liabilities and stockholders' equity | $32,920 | $(217) | $6,205 | | $38,908 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
| ChromaDex Corporation and Subsidiaries | | | | |
| | | | | |
| Unaudited Pro Forma Condensed Consolidated Statements of Operations | | |
| (in thousands, except for per share amounts) | | | | |
| | | | | |
| For the Six Month Period Ended July 1, 2017 | | | | |
| | | | | |
| | | | | |
| | | | | |
| Sales, net | $9,756 | $(2,170) | | $7,586 |
| Cost of sales | 5,741 | (1,882) | | 3,859 |
| | | | | |
| Gross profit | 4,015 | (288) | - | 3,727 |
| | | | | |
| Operating expenses: | | | | |
| Sales and marketing | 1,324 | (369) | | 955 |
| Research and development | 1,514 | - | | 1,514 |
| General and administrative | 5,041 | (106) | | 4,935 |
| Other | 746 | - | | 746 |
| Operating expenses | 8,625 | (475) | - | 8,150 |
| | | | | |
| Operating loss | (4,610) | 187 | - | (4,423) |
| | | | | |
| Nonoperating expense: | | | | |
| Interest expense, net | (83) | 19 | | (64) |
| Nonoperating expenses | (83) | 19 | - | (64) |
| | | | | |
| Net loss | $(4,693) | $206 | $- | $(4,487) |
| | | | | |
| Basic and diluted loss per common share | $(0.12) | $0.01 | $- | $(0.11) |
| | | | | |
| Basic weighted average common shares outstanding | 40,076 | 40,076 | 40,076 | 40,076 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
| ChromaDex Corporation and Subsidiaries | | | | |
| | | | | |
| Unaudited Pro Forma Condensed Consolidated Statements of Operations | | |
| (in thousands, except for per share amounts) | | | | |
| | | | | |
| For the Year Ended December 31, 2016 | | | | |
| | | | | |
| | | | | |
| | | | | |
| Sales, net | $26,811 | $(5,146) | | $21,665 |
| Cost of sales | 14,890 | (3,616) | | 11,274 |
| | | | | |
| Gross profit | 11,921 | (1,530) | - | 10,391 |
| | | | | |
| Operating expenses: | | | | |
| Sales and marketing | 2,250 | (692) | | 1,558 |
| Research and development | 2,523 | - | | 2,523 |
| General and administrative | 9,393 | (179) | | 9,214 |
| Operating expenses | 14,166 | (871) | - | 13,295 |
| | | | | |
| Operating income (loss) | (2,245) | (659) | - | (2,904) |
| | | | | |
| Nonoperating expense: | | | | |
| Interest expense, net | (370) | 36 | | (334) |
| Loss on debt extinguishment | (313) | - | | (313) |
| Nonoperating expenses | (683) | 36 | - | (647) |
| | | | | |
| Net income (loss) | $(2,928) | $(623) | $- | $(3,551) |
| | | | | |
| Basic and diluted loss per common share | $(0.08) | $(0.02) | $- | $(0.10) |
| | | | | |
| Basic weighted average common shares outstanding | 37,294 | 37,294 | 37,294 | 37,294 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
| ChromaDex Corporation and Subsidiaries | | | | |
| | | | | |
| Unaudited Pro Forma Condensed Consolidated Statements of Operations | | |
| (in thousands, except for per share amounts) | | | | |
| | | | | |
| For the Year Ended January 2, 2016 | | | | |
| | | | | |
| | | | | |
| | | | | |
| Sales, net | $22,014 | $(4,129) | | $17,885 |
| Cost of sales | 13,533 | (3,183) | | 10,350 |
| | | | | |
| Gross profit | 8,481 | (946) | - | 7,535 |
| | | | | |
| Operating expenses: | | | | |
| Sales and marketing | 2,327 | (819) | | 1,508 |
| Research and development | 892 | - | | 892 |
| General and administrative | 7,416 | (215) | | 7,201 |
| Operating expenses | 10,635 | (1,034) | - | 9,601 |
| | | | | |
| Operating loss | (2,154) | 88 | - | (2,066) |
| | | | | |
| Nonoperating expense: | | | | |
| Interest expense, net | (613) | 46 | | (567) |
| Nonoperating expenses | (613) | 46 | - | (567) |
| | | | | |
| Loss before income taxes | (2,767) | 134 | - | (2,633) |
| Provision for income taxes | (4) | - | - | (4) |
| | | | | |
| Net loss | $(2,771) | $134 | $- | $(2,637) |
| | | | | |
| Basic and diluted loss per common share | $(0.08) | $0.00 | $- | $(0.07) |
| | | | | |
| Basic weighted average common shares outstanding | 35,877 | 35,877 | 35,877 | 35,877 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
| ChromaDex Corporation and Subsidiaries | | | | |
| | | | | |
| Unaudited Pro Forma Condensed Consolidated Statements of Operations | | |
| (in thousands, except for per share amounts) | | | | |
| | | | | |
| For the Year Ended January 3, 2015 | | | | |
| | | | | |
| | | | | |
| | | | | |
| Sales, net | $15,313 | $(3,452) | | $11,861 |
| Cost of sales | 9,987 | (3,132) | | 6,855 |
| | | | | |
| Gross profit | 5,326 | (320) | - | 5,006 |
| | | | | |
| Operating expenses: | | | | |
| Sales and marketing | 2,136 | (654) | | 1,482 |
| Research and development | 514 | - | | 514 |
| General and administrative | 7,861 | (212) | | 7,649 |
| Loss from investment in affiliate | 46 | - | | 46 |
| Operating expenses | 10,557 | (866) | - | 9,691 |
| | | | | |
| Operating loss | (5,231) | 546 | - | (4,685) |
| | | | | |
| Nonoperating expense: | | | | |
| Interest expense, net | (157) | 33 | | (124) |
| Nonoperating expenses | (157) | 33 | - | (124) |
| | | | | |
| Net loss | $(5,388) | $579 | $- | $(4,809) |
| | | | | |
| Basic and diluted loss per common share | $(0.15) | $0.02 | $- | $(0.14) |
| | | | | |
| Basic weighted average common shares outstanding | 35,486 | 35,486 | 35,486 | 35,486 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
ChromaDex Corporation and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Financial Information
(A) Total consideration for the Lab Business sale is as follows (in thousands):
| Cash payment upon closing of sale | $6,550 |
| Other cash payment to be held in escrow to satisfy any indemnification claims | 950 |
| Additional earnout payment up to $1.0 million * | - |
| Total consideration | $7,500 |
* Additional earnout payment is considered as gain contingency and is not recognized until received.
(B) Leasehold improvements and equipment included in the sale of the Lab Business consisted of following:
| Leasehold improvements and equipment | $3,477 |
| Less accumulated depreciation | (2,004) |
| Leasehold improvements and equipment, net | $1,473 |
(C) The gain from disposal of the Lab Business is as follows (in thousands):
| Total consideration | $7,500 |
| Net assets sold | (1,295) |
| Estimated transaction costs, legal and other | (700) |
| Gain from disposal | $5,505 |
