Delaware
|
26-2940963
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.) | |
10005 Muirlands Blvd. Suite G, Irvine, California
|
92618
|
|
(Address of Principal Executive Offices)
|
(Zip Code) |
PART I – FINANCIAL INFORMATION (UNAUDITED) | |||
ITEM 1. | |||
1 | |||
2 | |||
3 | |||
4 | |||
5 | |||
6 | |||
ITEM 2. | 13 | ||
ITEM 3. | 18 | ||
ITEM 4. | 18 | ||
PART II – OTHER INFORMATION | |||
ITEM 1. | 19 | ||
ITEM 2. | 19 | ||
ITEM 3. | 19 | ||
ITEM 4. | 19 | ||
ITEM 5 | 19 | ||
ITEM 6 | 19 | ||
20 |
ChromaDex Corporation and Subsidiaries
|
||||||||
Condensed Consolidated Balance Sheets (Unaudited)
|
||||||||
October 1, 2011 and January 1, 2011
|
||||||||
Assets
|
October 1,
2011
|
January 1,
2011
|
||||||
Current Assets
|
||||||||
Cash
|
$ | 2,069,308 | $ | 2,226,459 | ||||
Trade receivables, less allowance for doubtful accounts October 1, 2011 $14,000; January 1, 2011 $18,000
|
648,832 | 1,001,563 | ||||||
Inventories
|
2,500,798 | 1,423,035 | ||||||
Prepaid expenses and other assets
|
613,724 | 243,967 | ||||||
Total current assets
|
5,832,662 | 4,895,024 | ||||||
Leasehold Improvements and Equipment, net
|
1,182,453 | 1,303,108 | ||||||
Deposits and Other Noncurrent Assets
|
||||||||
Deposits
|
43,160 | 31,415 | ||||||
Intangible assets, net
|
248,012 | 277,855 | ||||||
Total deposits and other noncurrent assets
|
291,172 | 309,270 | ||||||
Total assets
|
$ | 7,306,287 | $ | 6,507,402 | ||||
Liabilities and Stockholders' Equity
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$ | 1,306,547 | $ | 514,598 | ||||
Accrued expenses
|
712,473 | 371,020 | ||||||
Current maturities of capital lease obligations
|
70,876 | 78,577 | ||||||
Customer deposits and other
|
239,754 | 112,427 | ||||||
Deferred rent, current
|
59,933 | 62,664 | ||||||
Total current liabilities
|
2,389,583 | 1,139,286 | ||||||
Capital lease obligations, less current maturities
|
147,884 | 198,071 | ||||||
Deferred rent, less current
|
215,739 | 233,822 | ||||||
Stockholders' Equity
|
||||||||
Common stock, $.001 par value; authorized 150,000,000 shares; issued and outstanding October 1, 2011 72,939,996 shares; January 1, 2011 60,875,325 shares
|
72,940 | 60,875 | ||||||
Additional paid-in capital
|
20,043,209 | 15,034,550 | ||||||
Accumulated deficit
|
(15,563,068 | ) | (10,159,202 | ) | ||||
Total stockholders' equity
|
4,553,081 | 4,936,223 | ||||||
Total liabilities and stockholders' equity
|
$ | 7,306,287 | $ | 6,507,402 |
ChromaDex Corporation and Subsidiaries
|
||||||||
Condensed Consolidated Statements of Operations (Unaudited)
|
||||||||
For the Three Month Periods Ended October 1, 2011 and October 2, 2010
|
||||||||
October 1,
2011
|
October 2,
2010
|
|||||||
Sales
|
$ | 1,827,568 | $ | 1,562,352 | ||||
Cost of sales
|
1,361,101 | 1,059,626 | ||||||
Gross profit
|
466,467 | 502,726 | ||||||
Operating expenses:
|
||||||||
Sales and marketing
|
650,516 | 235,582 | ||||||
General and administrative
|
2,213,636 | 1,140,815 | ||||||
Operating expenses
|
2,864,152 | 1,376,397 | ||||||
Operating loss
|
(2,397,685 | ) | (873,671 | ) | ||||
Nonoperating income (expenses):
|
||||||||
Interest income
|
295 | 578 | ||||||
Interest expense
|
(7,522 | ) | (10,130 | ) | ||||
Nonoperating expenses
|
(7,227 | ) | (9,552 | ) | ||||
Net loss
|
$ | (2,404,912 | ) | $ | (883,223 | ) | ||
Basic and Diluted loss per common share
|
$ | (0.03 | ) | $ | (0.01 | ) | ||
Basic and Diluted weighted average common shares outstanding
|
70,625,913 | 60,118,183 |
Condensed Consolidated Statements of Operations (Unaudited)
|
||||||||
For the Nine Month Periods Ended October 1, 2011 and October 2, 2010
|
||||||||
October 1,
2011
|
October 2,
2010
|
|||||||
Sales
|
$ | 6,304,789 | $ | 5,533,805 | ||||
Cost of sales
|
4,237,008 | 3,437,417 | ||||||
Gross profit
|
2,067,781 | 2,096,388 | ||||||
Operating expenses:
|
||||||||
Sales and marketing
|
1,661,998 | 688,552 | ||||||
General and administrative
|
5,786,204 | 2,535,386 | ||||||
Operating expenses
|
7,448,202 | 3,223,938 | ||||||
Operating loss
|
(5,380,421 | ) | (1,127,550 | ) | ||||
Nonoperating income (expenses):
|
||||||||
Interest income
|
1,159 | 1,095 | ||||||
Interest expense
|
(24,604 | ) | (26,555 | ) | ||||
Nonoperating expenses
|
(23,445 | ) | (25,460 | ) | ||||
Net loss
|
$ | (5,403,866 | ) | $ | (1,153,010 | ) | ||
Basic and Diluted loss per common share
|
$ | (0.08 | ) | $ | (0.03 | ) | ||
Basic and Diluted weighted average common shares outstanding
|
66,190,731 | 44,193,266 |
ChromaDex Corporation and Subsidiaries
|
||||||||||||||||||||
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
|
||||||||||||||||||||
Nine Months Ended October 1, 2011
|
||||||||||||||||||||
Additional
|
Total
|
|||||||||||||||||||
Common Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance, January 1, 2011
|
60,875,325 | $ | 60,875 | $ | 15,034,550 | $ | (10,159,202 | ) | $ | 4,936,223 | ||||||||||
Share-based compensation
|
- | - | 737,019 | - | 737,019 | |||||||||||||||
Exercise of stock options
|
29,149 | 29 | 19,319 | - | 19,348 | |||||||||||||||
Exercise of warrants
|
2,285,709 | 2,286 | 477,713 | - | 479,999 | |||||||||||||||
Net loss
|
- | - | - | (1,156,385 | ) | (1,156,385 | ) | |||||||||||||
Balance, April 2, 2011
|
63,190,183 | 63,190 | 16,268,601 | (11,315,587 | ) | 5,016,204 | ||||||||||||||
Share-based compensation
|
- | - | 768,704 | - | 768,704 | |||||||||||||||
Exercise of stock options
|
14,099 | 14 | 7,036 | - | 7,050 | |||||||||||||||
Exercise of warrants
|
2,514,284 | 2,514 | 525,485 | - | 527,999 | |||||||||||||||
Net loss
|
- | - | - | (1,842,569 | ) | (1,842,569 | ) | |||||||||||||
Balance, July 2, 2011
|
65,718,566 | 65,718 | 17,569,826 | (13,158,156 | ) | 4,477,388 | ||||||||||||||
Share-based compensation
|
- | - | 964,104 | - | 964,104 | |||||||||||||||
Exercise of warrants
|
7,221,430 | 7,222 | 1,509,279 | - | 1,516,501 | |||||||||||||||
Net loss
|
- | - | - | (2,404,912 | ) | (2,404,912 | ) | |||||||||||||
Balance, October 1, 2011
|
72,939,996 | $ | 72,940 | $ | 20,043,209 | $ | (15,563,068 | ) | $ | 4,553,081 |
ChromaDex Corporation and Subsidiaries
|
||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
||||||||
For the Nine Month Periods Ended October 1, 2011 and October 2, 2010
|
||||||||
October 1,
2011
|
October 2,
2010
|
|||||||
Cash Flows From Operating Activities
|
||||||||
Net loss
|
$ | (5,403,866 | ) | $ | (1,153,010 | ) | ||
Adjustments to reconcile net loss to net cash (used in) operating activities:
|
||||||||
Depreciation
|
247,024 | 232,786 | ||||||
Amortization of intangibles
|
55,843 | 55,053 | ||||||
Share-based compensation expense
|
2,469,827 | 706,221 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Trade receivables
|
352,731 | (86,376 | ) | |||||
Inventories
|
(1,077,763 | ) | (545,563 | ) | ||||
Prepaid expenses and other assets
|
(381,502 | ) | (171,821 | ) | ||||
Accounts payable
|
791,949 | 267,294 | ||||||
Accrued expenses
|
341,453 | 113,244 | ||||||
Customer deposits and other
|
127,327 | (37,866 | ) | |||||
Deferred rent
|
(20,814 | ) | (16,497 | ) | ||||
Due to officers
|
- | (1,178,206 | ) | |||||
Net cash (used in) operating activities
|
(2,497,791 | ) | (1,814,741 | ) | ||||
Cash Flows From Investing Activities
|
||||||||
Purchases of leasehold improvements and equipment
|
(126,369 | ) | (124,759 | ) | ||||
Purchase of intangible assets
|
(26,000 | ) | (30,000 | ) | ||||
Net cash (used in) investing activities
|
(152,369 | ) | (154,759 | ) | ||||
Cash Flows From Financing Activities
|
||||||||
Proceeds from issuance of common stock
|
- | 3,486,626 | ||||||
Proceeds from exercise of stock options
|
26,398 | - | ||||||
Proceeds from exercise of warrants
|
2,524,499 | 1,041,749 | ||||||
Principal payments on capital leases
|
(57,888 | ) | (44,621 | ) | ||||
Net cash provided by financing activities
|
2,493,009 | 4,483,754 | ||||||
Net increase (decrease) in cash
|
(157,151 | ) | 2,514,254 | |||||
Cash Beginning of Period
|
2,226,459 | 471,378 | ||||||
Cash Ending of Period
|
$ | 2,069,308 | $ | 2,985,632 | ||||
Supplemental Disclosures of Cash Flow Information
|
||||||||
Cash payments for interest
|
$ | 24,604 | $ | 26,555 | ||||
Supplemental Schedule of Noncash Investing Activity
|
||||||||
Capital lease obligation incurred for the purchase of equipment
|
$ | - | $ | 264,958 |
Note 2: Earnings Per Share
|
||||||||||||||||
Three Months Ending
|
Nine Months Ending
|
|||||||||||||||
October 1, 2011
|
October 2, 2010
|
October 1, 2011
|
October 2, 2010
|
|||||||||||||
Basic average common shares outstanding
|
70,625,913 | 60,118,183 | 66,190,731 | 44,193,266 | ||||||||||||
Warrants and options in the money, net
|
7,673,885 | 18,713,678 | 7,891,916 | 17,825,933 | ||||||||||||
Weighted average common shares outstanding assuming dilution
|
78,299,798 | 78,831,861 | 74,082,647 | 62,019,199 |
October 1,
2011
|
January 1,
2011
|
|||||||
Laboratory equipment
|
$ | 2,359,169 | $ | 2,336,954 | ||||
Leasehold improvements
|
403,971 | 372,943 | ||||||
Computer equipment
|
301,980 | 248,374 | ||||||
Furniture and fixtures
|
18,313 | 18,313 | ||||||
Office equipment
|
7,877 | 3,445 | ||||||
Construction in progress
|
100,057 | 86,294 | ||||||
3,191,367 | 3,066,323 | |||||||
Less accumulated depreciation
|
2,008,914 | 1,763,215 | ||||||
$ | 1,182,453 | $ | 1,303,108 |
Nine Months Ended October 1, 2011
|
2011
|
|||
Volatility
|
31.55 | % | ||
Expected dividends
|
0.00 | % | ||
Expected term
|
5.8 years
|
|||
Risk-free rate
|
2.21 | % |
Weighted Average
|
||||||||||||||||
Number of
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Outstanding at January 1, 2011
|
12,926,131 | $ | 1.52 | |||||||||||||
Options Granted
|
1,387,177 | 1.57 | ||||||||||||||
Options Classification from Employee to Non-Employee
|
(67,500 | ) | 1.55 | |||||||||||||
Options Exercised
|
(43,248 | ) | 0.61 | |||||||||||||
Options Forfeited
|
(352,803 | ) | 1.48 | |||||||||||||
Outstanding at October 1, 2011
|
13,849,757 | $ | 1.53 | 7.02 | $ | 165,463 | ||||||||||
Exercisable at October 1, 2011
|
6,044,998 | $ | 1.47 | 6.58 | $ | 107,381 |
Weighted Average
|
||||||||||||||||
Number of
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Outstanding at January 1, 2011
|
1,000,000 | $ | 1.65 | |||||||||||||
Options Granted
|
200,000 | 1.59 | ||||||||||||||
Options Exercised
|
- | - | ||||||||||||||
Options Forfeited
|
- | - | ||||||||||||||
Outstanding at October 1, 2011
|
1,200,000 | $ | 1.64 | 9.18 | $ | - | ||||||||||
Exercisable at October 1, 2011
|
- | $ | - | - | $ | - |
Weighted Average
|
||||||||
Award-Date
|
||||||||
Shares
|
Fair Value
|
|||||||
Unvested shares at January 1, 2011
|
1,000,000 | $ | 1.27 | |||||
Granted
|
- | - | ||||||
Vested
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Unvested shares at October 1, 2011
|
1,000,000 | $ | 1.27 | |||||
Expected to Vest as of October 1, 2011
|
1,000,000 | $ | 1.27 |
Weighted Average
|
||||||||||||||||
Remaining
|
Aggregate
|
|||||||||||||||
Number of
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Outstanding at January 1, 2011
|
1,097,300 | $ | 1.23 | |||||||||||||
Options Granted
|
- | - | ||||||||||||||
Options Classification from Employee to Non-Employee
|
67,500 | 1.55 | ||||||||||||||
Options Exercised
|
- | - | ||||||||||||||
Options Forfeited
|
- | - | ||||||||||||||
Outstanding at October 1, 2011
|
1,164,800 | $ | 1.25 | 6.63 | $ | 94,400 | ||||||||||
Exercisable at October 1, 2011
|
839,879 | $ | 1.16 | 5.97 | $ | 90,600 |
Weighted Average
|
||||||||
Award-Date
|
||||||||
Shares
|
Fair Value
|
|||||||
Unvested shares at January 1, 2011
|
- | $ | - | |||||
Granted
|
670,000 | 1.47 | ||||||
Vested
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Unvested shares at October 1, 2011
|
670,000 | $ | 1.47 | |||||
Expected to Vest as of October 1, 2011
|
670,000 | $ | 1.47 |
Warrants granted
in connection with :
|
Weighted Average
Exercise Prices
|
Number Outstanding
And Exercisable
At October 1, 2011
|
Weighted Average
Remaining Contractual Life
|
|||||||||
2008 Private Placement Equity Offering
|
$ | 3.00 | 1,718,350 | 1.55 | ||||||||
2010 Private Placement Equity Offering
|
$ | 0.21 | 8,553,564 | 1.64 | ||||||||
$ | 0.68 | 10,271,914 | 1.62 |
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Exhibit No. | Description of Exhibits | |
10.1
|
||
10.2
|
||
31.1
|
||
31.2
|
||
32.1
|
||
101
|
The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2011, filed with the Securities and Exchange Commission on November 10, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Notes to Condensed Consolidated Financial Statements.
|
*
|
This Exhibit has been separately filed with the Commission pursuant to an application for confidential treatment. The confidential portions of this Exhibit have been omitted and are marked by an asterisk.
|
ChromaDex Corporation
(Registrant)
|
|||
Date: November 10, 2011
|
By:
|
/s/ THOMAS C. VARVARO | |
Thomas C. Varvaro | |||
Duly Authorized Officer and Chief Financial Officer | |||
1 | ||
ARTICLE 1.
|
DEFINITIONS
|
1 |
ARTICLE 2.
|
GRANTS
|
3 |
ARTICLE 3.
|
CONSIDERATION
|
4 |
ARTICLE 4.
|
REPORTS, RECORDS AND PAYMENTS
|
7 |
ARTICLE 5.
|
PATENT MATTERS
|
9 |
ARTICLE 6.
|
GOVERNMENTAL MATTERS
|
11 |
ARTICLE 7.
|
TERMINATION OF THE AGREEMENT
|
11 |
ARTICLE 8.
|
LIMITED WARRANTY AND INDEMNIFICATION
|
12 |
ARTICLE 9.
|
USE OF NAMES AND TRADEMARKS
|
13 |
ARTICLE 10.
|
MISCELLANEOUS PROVISIONS
|
14 |
APPENDIX A - DEVELOPMENT REPORT
|
18 | |
APPENDIX B – COMMERCIALIZATION REPORT
|
21 | |
APPENDIX C – PATENTS AND APPLICATIONS
|
24 |
Fee payable to Cornell:
|
Date:
|
$ [*]
|
2011 to 2012
|
$ [*]
|
2013 to 2015
|
$ [*]
|
2016 to 2018
|
$ [*]
|
each year thereafter
|
Amount
|
Date or Event
|
$[*]
|
First sale of Licensed Product as a Cosmetic ingredient
|
$[*]
|
Submission of Notification for New Dietary Ingredient for Licensed Product or GRAS self affirmation
|
$[*]
|
Submission of IND for Licensed Product
|
$[*]
|
Initiation of Phase II Trial of Licensed Product
|
$[*]
|
Initiation of Phase III Trial of Licensed Product
|
$[*]
|
FDA approval of Licensed Product
|
Percentage of Sublicensee fee payable to Cornell
|
Events achieved by LICENSEE prior to issuance of Sublicense by LICENSEE
|
[*]%
|
Prior to submission of Notification for New Dietary
|
Year of
Commercial Sale
|
Minimum Annual Royalty
|
First
|
$[*]
|
Second
|
$[*]
|
Third and following
|
$[*]
|
(A)
|
LICENSEE can demonstrate by written records was previously known to it;
|
(B)
|
is now, or becomes in the future, public knowledge other than through acts or omissions of LICENSEE;
|
(C)
|
is lawfully obtained by LICENSEE from sources independent of Cornell; or
|
(D)
|
is required to be disclosed by law or a court of competent jurisdiction; and
|
CHROMADEX CORPORATION:
|
CORNELL UNIVERSITY:
|
|
By: /s/ William Spengler
|
By: /s/ Brian Kelly
|
|
(Signature of an authorized officer)
|
(Signature of an authorized officer)
|
|
Name: William Spengler
|
Name: Brian Kelly
|
|
Title: President
|
Title: Director Technology Commercialization and Liason
|
|
Date: 7/12/2011
|
Date: July 12, 2011
|
|
ATTEST:
|
ATTEST:
|
|
By: /s/ Frank Jaksch
|
By: /s/ Carol J. Dempster
|
|
(Signature of a witness)
|
(Signature of a witness)
|
|
Name: Frank Jaksch
|
Name: Carol J. Dempster
|
|
Date: 7/12/2011
|
Date: July 12, 2011
|
Company Name
|
CCTEC Agreement No
|
Your Reference No
|
Reporting Period ( mm / dd / yyyy )
From ___/ ___/___ Through ___/ ___/___
|
EXPECTED or ACTUAL ( mm / dd / yyyy )
Date of first sale of
Licensed Product(s) ___/ ___/___
|
|
Please Check One
Your Company Has: [ ] less than 500 employees worldwide [ ] 500 or more employees worldwide
|
1. Summary of work completed during the reporting period
|
|
2. Summary of work in progress
|
|
3. Current schedule of anticipated events or milestones, e.g. First round of financing, Phase 1 Clinical trials, etc.
|
|
4. Market plans for Introduction of Licensed Product(s)
|
|
5. Summary of resources (dollar value) spent in the reporting period.
|
|
6. Pipeline for Licensed Products
|
|||
Product Name
|
Developmental Stage
|
||
Product Name
|
Developmental Stage
|
||
Product Name
|
Developmental Stage
|
||
Product Name
|
Developmental Stage
|
Report Prepared & Approved By
|
||
Name ( Please Print )
|
Title
|
Email
|
Signature
|
Date ( mm / dd / yyyy )
___/ ___/___
|
Company Name
|
CCTEC Agreement No
|
Your Reference No
|
Reporting Period ( mm / dd / yyyy )
From ___/ ___/___ Through ___/ ___/___
|
EXPECTED or ACTUAL ( mm / dd / yyyy )
Date of first sale of
Licensed Product(s) ___/ ___/___
|
|
Please list all trade names for product(s) incorporating licensed rights whether or not you had sales during this reporting period.
|
CCTEC Docket #
|
Country
|
Number of Units Sold
|
Gross Sales by Country
|
Net Sales by Country*
( A )
|
Royalty Rate*
( B )
|
Total Royalties by Country
( A * B )
|
|
* Please refer to the license agreement for:
· applicable royalty rate, please provide as decimal;
· how Net Sales should be calculated;
· applicable share of sublicense fees;
· application of minimum royalty rate
· If sales were in a currency other than United States Dollars, please specify exchange rate used
|
Royalty Subtotal
|
||||||
Minimum Royalty Payment*
|
|||||||
Total Royalty Owed
|
|||||||
Total Sublicense Fees*
(if applicable)
|
|||||||
Total Payment
|
Sublicense Activity (if applicable)
|
|||||
Number of sublicenses granted during the reporting period
|
Number of sublicenses terminated or expired during the reporting period
|
||||
Granted Sub-Licensee Company Name(s) (please list below)
|
Terminated Sub-Licensee Company Name(s) (please list below)
|
||||
|
|||||
|
|||||
|
|||||
|
|||||
|
|||||
Total Number of active sublicenses during reporting period
|
Other Licensed Products in the pipeline
|
|||
Product Name
|
|
Developmental Stage
|
|
Product Name
|
|
Developmental Stage
|
|
Product Name
|
|
Developmental Stage
|
|
Product Name
|
|
Developmental Stage
|
Are Licensed Product(s) Manufactured in the US? Yes No
|
|||
If No, please list countries where Licensed Product(s) is manufactured
|
|||
Product Name
|
|
Countries
|
|
Product Name
|
|
Countries
|
|
Product Name
|
|
Countries
|
|
Product Name
|
|
Countries
|
Report Prepared & Approved By
|
||
Name ( Please Print )
|
Title
|
Email
|
Signature
|
Date ( mm / dd / yyyy )
___/ ___/___
|
Cornell Reference
|
Country of Filing
|
Application No
|
3787-02-US
|
United States
|
11/601,714
|
3787-04-CN
|
China
|
200680051368.4
|
3787-05-EP
|
Europe
|
6837837
|
3787-06-IN
|
India
|
4525/DELNP/2008
|
DEFINITIONS
|
2
|
|
2.
|
GRANT
|
6
|
3.
|
SUBLICENSES
|
8
|
4.
|
PAYMENT TERMS
|
8
|
5.
|
LICENSE ISSUE FEE
|
10
|
6.
|
LICENSE MAINTENANCE FEE
|
10
|
7.
|
PAYMENTS ON SUBLICENSES
|
10
|
8.
|
ROYALTIES AND MINIMUM ANNUAL ROYALTIES
|
10
|
9.
|
MILESTONE PAYMENTS
|
11
|
10.
|
DUE DILIGENCE
|
11
|
11.
|
PROGRESS AND ROYALTY REPORTS
|
12
|
12.
|
BOOKS AND RECORDS
|
14
|
13.
|
LIFE OF THE AGREEMENT
|
14
|
14.
|
TERMINATION BY THE REGENTS
|
15
|
15.
|
TERMINATION BY LICENSEE
|
15
|
16.
|
USE OF NAMES AND TRADEMARKS
|
16
|
17.
|
LIMITED WARRANTY
|
16
|
18.
|
LIMITATION OF LIABILITY
|
17
|
19.
|
PATENT PROSECUTION AND MAINTENANCE
|
17
|
20.
|
PATENT MARKING
|
18
|
21.
|
PATENT INFRINGEMENT
|
19
|
22.
|
INDEMNIFICATION
|
20
|
23.
|
NOTICES
|
21
|
24.
|
ASSIGNABILITY
|
22
|
25.
|
WAIVER
|
22
|
26.
|
FORCE MAJEURE
|
22
|
27.
|
GOVERNING LAWS; VENUE; ATTORNEYS’ FEES
|
23
|
28.
|
GOVERNMENT APPROVAL OR REGISTRATION
|
23
|
29.
|
COMPLIANCE WITH LAWS
|
23
|
30.
|
CONFIDENTIALITY
|
23
|
31.
|
MISCELLANEOUS
|
25
|
1.
|
DEFINITIONS
|
1.11.1
|
Credits or allowances actually granted to customers for rejections, returns, prompt payment, volume and other trade discounts, retroactive price reductions or billing corrections;
|
1.11.2
|
Freight, transport, packing and insurance charges associated with transportation;
|
1.11.3
|
Taxes (including without limitation sales, value-added or excise taxes, but excluding income taxes), surcharges, tariffs, import/export duties and other governmental charges based on Sales, transportation, delivery, use, production, exportation or importation of Licensed Products when included in the gross invoice price;
|
1.11.4
|
Normal and customary discounts (including wholesaler’s discounts), rebates and charge backs that are paid, allowed or credited to customers, third-party payers, managed care organizations, healthcare systems, or administrators, as permitted by applicable law; and
|
1.11.5
|
Rebates and discounts paid, credited or allowed pursuant to applicable law, including Government mandated rebates and discounts.
|
1.12.1
|
except in the instances described in Paragraphs 1.12.2 and 1.12.3 of this Paragraph, the Net Invoice Price;
|
1.12.2
|
for any Relationship-Influenced Sale of a Licensed Product, Net Sales shall be based only on the Net Invoice Price at which the Relationship-Influenced Sale Purchaser re-Sells such Licensed Product to a Third Party (and the Relationship-Influenced Sale itself shall not be deemed a Sale); and
|
1.12.3
|
in those instances where Licensed Product is not Sold, but is otherwise commercially exploited by the Licensee, an Affiliate of the Licensee, or a Sublicensee, the Net Sales for such Licensed Product shall be the Net Invoice Price of such Licensed Product Sold to Third Parties in similar quantities by the Licensee, an Affiliate of the Licensee or a Sublicensee, as applicable.
|
|
(i)
|
“A” is the total of Net Sales of each Licensed Product contained within or used in the Combination Product when Sold separately; and
|
|
(ii)
|
“B” is the total of Net Sales of all Combination Product Components contained within or used in the Combination Product when Sold separately,
|
|
C/(C+D) x Net Sales, calculated without regard to this formula, of the Licensed Product that is the Cornbination Product,
|
|
Where:
|
|
(i)
|
“C” is the total of Net Sales of each Licensed Product contained within or used in the Combination Product when Sold separately; and
|
|
(ii)
|
“D” is the difference between the Nets Sales of the Combination Product and the Net Sales of the Licensed Product when sold separately,
|
|
1 - C/(C+D) x Net Sales, calculated without regard to this formula, of the Licensed Product that is the Combination Product.
|
|
Where:
|
|
(i)
|
“C” is the total of Net Sales of the Combination Product Components contained within or used in the Combination Product when Sold separately; and
|
|
(ii)
|
“D” is the difference between the Nets Sales of the Combination Product and the Net Sales of the Combination Product Components when sold separately.
|
2.
|
GRANT
|
3.
|
SUBLICENSES
|
4.
|
PAYMENT TERMS
|
5.
|
LICENSE ISSUE FEE
|
6.
|
LICENSE MAINTENANCE FEE
|
7.
|
PAYMENTS ON SUBLICENSES
|
7.1.1
|
[*] percent ([*]%) of Attributed Income from Sublicense Agreements executed prior to dosing of 1st patient in Phase I clinical study of a Licensed Product and [*]% of Attributed Income from Sublicense Agreements executed after dosing of 1st patient in Phase I clinical trial of a Licensed Product; and
|
7.1.2
|
[*] percent ([*] %) of Net Sales of each Licensed Product Sold by a Sublicensee or its Affiliates (“Sublicensee Royalties”).
|
8.
|
ROYALTIES AND MINIMUM ANNUAL ROYALTIES
|
9.
|
MILESTONE PAYMENTS
|
9.1.1
|
[*] dollars ($[*]) upon dosing of the 1st patient in the first Licensee sponsored Phase II clinical trial in the United States, or a foreign equivalent;
|
9.1.2
|
[*]dollars ($[*]) upon dosing of the 1st patient in the first Licensee sponsored Phase III clinical trial in the United States, or a foreign equivalent; and
|
9.1.3
|
[*] dollars ($[*]) upon Regulatory Approval in the United States, or a foreign equivalent.
|
10.
|
DUE DILIGENCE
|
10.3.1
|
complete a Phase I clinical trial for a Licensed Product in the United States or foreign equivalent within [*] ([*]) years of the Effective Date;
|
10.3.2
|
submit an application for regulatory approval covering a Licensed Product in the United States or foreign equivalent within [*] ([*]) year(s) from the Effective Date;
|
10.3.3
|
market a Licensed Product in the United States within [*] ([*]) months of receiving approval of such Licensed Product in the United States,
|
11.
|
PROGRESS AND ROYALTY REPORTS
|
11.2.1
|
summary of work completed as of the submission date of the progress report;
|
11.2.2
|
summary of work in progress as of the submission date of the progress report;
|
11.2.3
|
current schedule of anticipated events and milestones, including those event and milestones specified in Article 10 (Due Diligence);
|
11.2.4
|
market plans for introduction of Licensed Products including the anticipated and actual market introduction dates of each Licensed Product; and
|
11.2.5
|
Sublicensees’ activities relating to the above items, if there are any Sublicensees.
|
11.6.1
|
the gross invoice prices and Net Sales of Licensed Products Sold or otherwise exploited (itemizing the applicable gross proceeds and any deductions therefrom), and any Attributed Income (itemizing the applicable gross proceeds and any deductions therefrom) due to the Licensee;
|
11.6.2
|
the quantity of each type of Licensed Product Sold or otherwise exploited;
|
11.6.3
|
the country in which each Licensed Product was made, used or Sold or otherwise exploited;
|
11.6.4
|
the Earned Royalties, in United States dollars, payable with respect to Net Sales;
|
11.6.5
|
the Sublicense Fees, in United States dollars, payable with respect to Attributed Income;
|
11.6.6
|
the method used to calculate the Eamed Royalty, specifying all deductions taken and the dollar amount °leach such deduction;
|
11.6.7
|
the exchange rates used, if any;
|
11.6.8
|
the amount of the cash and the amount of the cash equivalent of any non-cash consideration including the method used to calculate the non-cash consideration;
|
11.6.9
|
for each Licensed Product, the specific Patent Rights identified by UC Case Number and Technology Rights exercised by the Licensee or any Affiliate, Joint Venture or Sublicensee in the course of making, using, selling, offering for Sale or importing such Licensed Product; and
|
11.6.10
|
any other information reasonably necessary to confirm Licensee’s calculation of its financial obligations hereunder.
|
12.
|
BOOKS AND RECORDS
|
13.
|
LIFE OF THE AGREEMENT
|
Article 1
|
Definitions
|
|
Paragraph 3.3
|
Survival of Sublicenses
|
|
Paragraph 4.8
|
Late Payments
|
|
Article 5
|
License Issue Fee
|
|
Article 12
|
Books and Records
|
|
Article 13
|
Life of the Agreement
|
|
Article 16
|
Disposition of Licensed Products on Hand Upon Termination or Expiration
|
|
Article 17
|
Use of Names and Trademarks
|
|
Article 18
|
Limited Warranty
|
|
Article 19
|
Limitation of Liability
|
|
Article 23
|
Indemnification
|
|
Article 24
|
Notices
|
|
Article 28
|
Governing Laws; Venue; Attorneys Fees
|
|
Article 31
|
Confidentiality
|
14.
|
TERMINATION BY THE REGENTS
|
15.
|
TERMINATION BY LICENSEE
|
16.
|
USE OF NAMES AND TRADEMARKS
|
17.
|
LIMITED WARRANTY
|
17.1.1
|
It has the lawful right to grant the rights and licenses under this Agreement.
|
18.2
|
Except as expressly set forth in this Agreement, this license and the associated Invention, Patent Rights, and Licensed Products are provided by The Regents WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY OF ANY KIND, EXPRESS OR IMPLIED. THE REGENTS MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY THAT THE INVENTION, PATENT RIGHTS, OR LICENSED PRODUCTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHTS.
|
18.3
|
Except as otherwise expressly set forth in this Agreement, this Agreement does not:
|
18.
|
LIMITATION OF LIABILITY
|
19.
|
PATENT PROSECUTION AND MAINTENANCE
|
20.
|
PATENT MARKING
|
21.
|
PATENT INFRINGEMENT
|
22.
|
INDEMNIFICATION
|
22.2.1
|
Commercial Form General Liability Insurance (contractual liability included) with limits as follows:
|
Each Occurrence
|
$[*]
|
Products/Completed Operations Aggregate
|
$[*]
|
Personal and Advertising Injury
|
$[*]
|
General Aggregate (commercial form only)
|
$[*]
|
22.2.2
|
Worker’s Compensation as legally required in the jurisdiction in which the Licensee is doing business.
|
·
|
Provide for [*] ([*]) days’ ([*] ([*]) days for non-payment of premium) advance written notice to The Regents of any cancellation of insurance coverage; the Licensee will promptly notify The Regents of any material modification of the insurance coverage;
|
·
|
Indicate that The Regents has been endorsed as an additional insured under the coverage described above in Paragraph 24.2.1; and
|
·
|
Include a provision that the coverage will be primary and will not participate with, nor will be excess over, any valid and collectable insurance or program of self-insurance maintained by The Regents.
|
23.
|
NOTICES
|
23.1.1
|
on the date of delivery if delivered in person;
|
23.1.2
|
on the date of mailing if mailed by first-class certified mail, postage paid; or
|
23.1.3
|
on the date of mailing if mailed by any global express carrier service that requires the recipient to sign the documents demonstrating the delivery of such notice or payment.
|
In the case of Licensee: | ChromaDex, Inc.,
10005 Muirlands Blvd, Suite G
Irvine, CA 102618
United States of America.
Attention:______________
|
|
In the case of The Regents:
|
The Regents of the University of California
Innovation Alliances and Services
1111 Franklin Street, 5th Floor
Oakland, CA 94607-5200
Attention: Executive Director
Research Administration and Technology Transfer
RE: UC Case No. 2011-432
|
|
With a copy to: | Ronnie Hanecak
Assistant Vice Chancellor
Research and Technology Alliances
Office of Technology Alliances
5171 California Avenue, Suite 150
Irvine, CA 92697-7700
RE: UC Case 2011-432
|
24.
|
ASSIGNABILITY
|
25.
|
WAIVER
|
26.
|
FORCE MAJEURE
|
27.
|
GOVERNING LAWS; VENUE; ATTORNEYS’ FEES
|
28.
|
GOVERNMENT APPROVAL OR REGISTRATION
|
29.
|
COMPLIANCE WITH LAWS
|
30.
|
CONFIDENTIALITY
|
30.4.1
|
that recipient can demonstrate by written records was previously known to it prior to its disclosure by the disclosing party;
|
30.4.2
|
that recipient can demonstrate by written records is now, or becomes in the future, public knowledge other than through acts or omissions of recipient;
|
30.4.3
|
that recipient can demonstrate by written records was obtained lawfully and without restrictions on the recipient from sources independent of the disclosing party; and
|
30.4.4
|
that The Regents is required to disclose pursuant to the California Public Records Act or other applicable law.
|
31.
|
MISCELLANEOUS
|
CHROMADEX INC.,
|
THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
|
By: /s/ Frank Jaksch
|
By: /s/ Ronnie Hanecak
|
Name: Frank Jaksch
|
Name: Ronnie Hanecak
|
Title: CEO
|
Title: Assistant Vice Chancellor
Office of Technology Alliances
|
Date: 9/7/2011
|
Date: September 8, 2011
|
UC Case Number
|
United States Application Number or
United States Patent Number
|
Filing or Issue Date
|
2011-432
|
61484977
|
5/11/2011
|
/s/ FRANK L. JAKSCH JR
Frank L. Jaksch Jr.
Chief Executive Officer
|
/s/ THOMAS C. VARVARO
Thomas C. Varvaro
Chief Financial Officer
|
/s/ FRANK L. JAKSCH JR
Frank L. Jaksch Jr.
Chief Executive Officer
/s/ THOMAS C. VARVARO
Thomas C. Varvaro
Chief Financial Officer
|
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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) (USD $) | Oct. 01, 2011 | Jan. 01, 2011 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Trade receivables, less allowance for doubtful accounts | $ 14,000 | $ 18,000 |
Common Stock, Par Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 150,000,000 | 150,000,000 |
Common Stock, Shares, Issued | 72,939,996 | 60,875,325 |
Common Stock, Shares, Outstanding | 72,939,996 | 60,875,325 |
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2011 | Oct. 02, 2010 | Oct. 01, 2011 | Oct. 02, 2010 | |
Income Statement [Abstract] | ||||
Sales | $ 1,827,568 | $ 1,562,352 | $ 6,304,789 | $ 5,533,805 |
Cost of sales | 1,361,101 | 1,059,626 | 4,237,008 | 3,437,417 |
Gross profit | 466,467 | 502,726 | 2,067,781 | 2,096,388 |
Operating expenses: | ||||
Sales and marketing | 650,516 | 235,582 | 1,661,998 | 688,552 |
General and administrative | 2,213,636 | 1,140,815 | 5,786,204 | 2,535,386 |
Operating expenses | 2,864,152 | 1,376,397 | 7,448,202 | 3,223,938 |
Operating loss | (2,397,685) | (873,671) | (5,380,421) | (1,127,550) |
Nonoperating income (expenses): | ||||
Interest income | 295 | 578 | 1,159 | 1,095 |
Interest expense | 7,522 | 10,130 | 24,604 | 26,555 |
Nonoperating expenses | (7,227) | (9,552) | (23,445) | (25,460) |
Net loss | $ (2,404,912) | $ (883,223) | $ (5,403,866) | $ (1,153,010) |
Basic and Diluted loss per common share | $ (0.03) | $ (0.01) | $ (0.08) | $ (0.03) |
Basic and Diluted weighted average common shares outstanding | 70,625,913 | 60,118,183 | 66,190,731 | 44,193,266 |
Document and Entity Information (USD $) | 9 Months Ended | |
---|---|---|
Oct. 01, 2011 | Nov. 10, 2011 | |
Document And Entity Information | ||
Entity Registrant Name | ChromaDex Corp. | |
Entity Central Index Key | 0001386570 | |
Document Type | 10-Q | |
Document Period End Date | Oct. 01, 2011 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 80,631,655 | |
Entity Common Stock, Shares Outstanding | 72,939,996 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 |
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Warrants | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 01, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6.Warrants | At October 1, 2011, the following warrants were outstanding and exercisable:
|
Nature of Business and Significant Accounting Policies | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 01, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2.Nature of Business and Significant Accounting Policies | Nature of business: The Company is a natural products company that provides proprietary, science-based solutions and ingredients to the dietary supplement, food and beverage, cosmetic and pharmaceutical industries. The Company supplies ingredients, phytochemical reference standards, and related phytochemical products and services. The Company recently launched its BluScience retail consumer line based on its proprietary ingredients. The Company provides these products and services at various terms with payment terms of primarily net 30 days.
Basis of presentation: The financial statements and accompanying notes have been prepared on a consolidated basis and reflect the consolidated financial position of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated from these financial statements. The Company's fiscal year ends on the Saturday closest to December 31, and the Companys normal fiscal quarters end on the Saturday 13 weeks after the last fiscal year end or fiscal quarter end. Every fifth or sixth fiscal year, the inclusion of an extra week occurs due to the Companys floating year-end date. The fiscal year 2014 will include 53 weeks instead of the normal 52 weeks.
Advertising: The Company expenses the production costs of advertising the first time the advertising takes place. Advertising expense for the nine month periods ended October 1, 2011 and October 2, 2010 were $215,003 and $88,938, respectively.
Earnings per share: Potentially dilutive common shares consist of the incremental common shares issuable upon the exercise of common stock options and warrants for all periods. For all periods presented, the basic and diluted shares reported are equal because the common shares equivalents are anti-dilutive. Below is a tabulation of the potentially dilutive securities that were in the money for the periods ended October 1, 2011 and October 2, 2010.
Total warrants and options that were not in the money at October 1, 2011 and October 2, 2010 were 17,095,835 and 13,636,832 respectively.
|
Income Taxes | 9 Months Ended |
---|---|
Oct. 01, 2011 | |
Notes to Financial Statements | |
Note 8. Income Taxes | At October 1, 2011 and January 1, 2011, the Company maintained a full valuation allowance against the entire net deferred income tax balance after considering relevant factors, including recent operating results, the likelihood of the utilization of net operating loss tax carry forwards, and the ability to generate future taxable income. The Company expects to maintain a full valuation allowance on its entire net deferred tax assets in 2011, resulting in an effective tax rate of zero for the three and nine months ended October 1, 2011. |
Management's Plans for Continuing Operations | 9 Months Ended |
---|---|
Oct. 01, 2011 | |
Notes to Financial Statements | |
Note 7.Management's Plans for Continuing Operations | The Company has incurred a net loss of $5,403,866 for the nine month period ended October 1, 2011 and a net loss of $1,153,010 for the nine month period ended October 2, 2010. The loss for the nine month period ended October 1, 2011 is largely due to increased selling, general and administrative expenses related to an increase in share-based compensation expenses. Our share-based compensation expense increased to $2,469,827 for the nine month period ended October 1, 2011 from $706,221 for the nine month period ended October 2, 2010. This large increase in share-based compensation expense was largely due to stock options that were granted following consummation of the 2010 Private Placement and was also the result of the Company issuing restricted stock to certain employees and consultants. The Company will continue to incur significant share-based compensation expenses over the next two years. In addition, management has invested heavily in additional personnel and marketing expenses for the development and launch of new retail products containing proprietary ingredients, such as pterostilbene.
Management has also implemented additional strategic operational structure changes, which it believes will allow the Company to achieve profitability with future growth without incurring significant additional overhead costs. Managements anticipation of future growth is largely related to the new line of proprietary ingredients offered by the Company and the demand for retail products containing these ingredients. The Company has implemented a comprehensive sales and marketing plan focused on these proprietary ingredients, as well as the retail products being launched by the Company that contain these proprietary ingredients. The Company has also expanded its marketing plan to market to the pharmaceutical and cosmetic sectors to support the Companys reference standards, analytical services and discovery libraries product lines.
Management believes it will be able to support operations of the Company with its current cash, cash equivalents and cash from operations through March 2012. In addition, as of October 1, 2011, the Company has 8,553,564 warrants outstanding with an exercise price of $0.21 per share. Assuming the full exercise of the outstanding warrants for cash, the Company would receive additional proceeds of $1,796,248. There is no guarantee that the holders of these warrants will exercise any of the outstanding warrants for cash, and the Company will not receive any proceeds from any of the outstanding warrants until they are exercised. If the Company determines that it needs additional financing to further enable its long-term strategic objectives, there can be no assurance that it will be available on terms favorable to it or at all. If adequate financing is not available, the Company may have to delay, postpone or terminate product and service expansion and curtail selling, general and administrative operations in order to maintain sufficient operating capital after March 2012. The inability to raise additional financing may have a material adverse effect on the future performance of the Company.
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Leasehold Improvements and Equipment | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 3.Leasehold Improvements and Equipment | Leasehold improvements and equipment consisted of the following:
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Note 4.Employee Equity Incentive Plan | Stock Option Plans
At the discretion of management, and with approval of the Board of Directors, the Company may grant options to purchase the Companys common stock to certain individuals from time to time. Management and the Board of Directors determine the terms of awards which include the exercise price, vesting conditions and expiration dates at the time of grant. Expiration dates for stock options are not to exceed 10 years. The Company, under its Second Amended and Restated 2007 Equity Incentive Plan, is authorized to issue stock options that total no more than 20% of the shares of common stock issued and outstanding, as determined on a fully diluted basis. Beginning in 2007, stock options were no longer issuable under the Companys 2000 Non-Qualified Incentive Stock Plan. The remaining amount available for issuance under the Second Amended and Restated 2007 Equity Incentive Plan totaled 918,927 at October 1, 2011. The stock option awards generally vest ratably over a four-year period following grant date after a passage of time. However, some stock option awards are performance based and vest based on the achievement of certain criteria established by the Company.
The fair value of the Companys stock options was estimated at the date of grant using the Black-Scholes based option valuation model. The table below outlines the weighted average assumptions for options granted to employees during the nine months ended October 1, 2011.
The Company calculated expected volatility from the volatility of publicly held companies in similar industries, as the historical volatility of the Companys common stock does not cover the period equal to the expected life of the options. The dividend yield assumption is based on the Companys history and expectation on future dividend payouts on the common stock. The risk-free interest rate is based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. The estimation process for the fair value of performance based stock options was the same as for non-performance based options.
1) Non-performance Based Stock Options
The majority of options granted by the Company are comprised of non-performance based options granted to employees. These options vest ratably over a defined period following grant date after a passage of time and do not have performance vesting requirements.
The following table summarizes non-performance based stock option activity at October 1, 2011, and changes during the nine months then ended:
The aggregate intrinsic values in the table above are before income taxes, based on the Companys closing stock price of $0.82 on the last day of business for the period ended October 1, 2011.
2) Performance Based Stock Options
The Company also grants stock option awards that are performance based and vest based on the achievement of certain criteria established by the Company. If performance criteria are not met, the compensation expenses are not recognized and the expenses that have been recognized will be reversed.
The following table summarizes performance based stock options activity at October 1, 2011 and changes during the nine months then ended:
As of October 1, 2011, there was $2,839,908 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the plans for employee stock options. That cost is expected to be recognized over a weighted average period of 1.86 years as of October 1, 2011. The weighted average fair value of options granted during the nine months ended October 1, 2011 was $0.53. The realized tax benefit from stock options for the nine months ended October 1, 2011 was $0, based on the Companys election of the with and without approach. The fair value of the options that vested during the nine months ended October 1, 2011 was $1,483,510.
Restricted Stock
Restricted stock awards granted by the Company to employees generally have two vesting conditions, a service condition for continuous employment and a stock market condition tied to the Companys stock price.
The following table summarizes activity of restricted stock awards granted to employees at October 1, 2011 and changes during the nine months then ended:
As of October 1, 2011, there was $899,501 of total unrecognized compensation expense related to restricted stock awards to employees under the plans. That cost is expected to be recognized over a period of 2.12 years as of October 1, 2011.
For the employee equity incentive plans, the Company recognized share-based compensation expense of $2,025,564 in general and administrative expenses in the statement of operations for the nine months ended October 1, 2011. The Company recognized $659,698 in share-based compensation expense for the comparable period in 2010.
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Note 5.Non-Employee Share-Based Compensation | Stock Option Plans
At the discretion of management and with approval of the Board of Directors, the Company may grant options to purchase the Companys common stock to certain individuals from time to time who are not employees of the Company. These options are granted under the Second Amended and Restated 2007 Equity Incentive Plan of the Company and are granted on the same terms as those being issued to employees. Stock options granted to non-employees are accounted for using the fair value approach. The fair value of non-employee option grants are estimated using the Black-Scholes option-pricing model and are remeasured over the vesting term until earned. The estimated fair value is expensed over the applicable service period.
The following table summarizes the activity of stock options granted to non-employees at October 1, 2011, and changes during the nine months then ended:
The aggregate intrinsic values in the table above are before income taxes, based on the Companys closing stock price of $0.82 on the last day of business for the period ended October 1, 2011.
As of October 1, 2011, there was $29,294 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted to non-employees. That cost is expected to be recognized over a weighted average period of 0.71 year as of October 1, 2011. The fair value of the options that vested during the nine months ended October 1, 2011 was $38,843.
Restricted Stock
Restricted stock awards granted by the Company to non-employees generally have a time vesting condition tied to respective service agreements. In addition, there may be other vesting conditions such as achievement of certain performance goals on certain awards.
On June 23, 2011, the Company awarded 630,000 shares of restricted stock at a purchase price of $0.14 per share to certain consultants as compensation for services to the Company. These restricted shares will fully vest on April 19, 2012, provided that no termination events defined in the related consulting agreements have occurred on or prior to such dates. On July 13, 2011 the Company awarded 40,000 shares of restricted stock at a purchase price of $0.14 per share to a certain consultant as compensation for services to the Company. These restricted shares will fully vest on July 13, 2012, provided that no termination events defined in the related consulting agreements have occurred on or prior to such dates and certain performance conditions have been met.
The fair value of the Companys restricted stock awards was $986,200 which represents the market value of the Companys common stock on the date of award less the purchase price.
The following table summarizes activity of restricted stock awards to non-employees at October 1, 2011 and changes during the nine months then ended:
As of October 1, 2011, there was $666,105 of total unrecognized compensation expense related to restricted stock awards to non-employees. That cost is expected to be recognized over a period of 0.57 year as of October 1, 2011.
For non-employee share-based compensation, the Company recognized share-based compensation expense of $444,263 in general and administrative expenses in the statement of operations for the nine months ended October 1, 2011. The Company recognized $46,523 in share-based compensation expense for the comparable period in 2010.
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Interim Financial Statements | 9 Months Ended |
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Oct. 01, 2011 | |
Notes to Financial Statements | |
Note 1.Interim Financial Statements | The accompanying financial statements of ChromaDex Corporation and its wholly owned subsidiaries, ChromaDex, Inc. and ChromaDex Analytics, Inc. (collectively, the Company) include all adjustments, consisting of normal recurring adjustments and accruals, that, in the opinion of the management of the Company, are necessary for a fair presentation of our financial position as of October 1, 2011 and results of operations and cash flows for the three and nine months ended October 1, 2011 and October 2, 2010. These unaudited interim financial statements should be read in conjunction with the Companys audited financial statements and the notes thereto for the year ended January 1, 2011 appearing in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission (the Commission) on March 16, 2011. Operating results for the nine months ended October 1, 2011 are not necessarily indicative of the results to be achieved for the full year ending on December 31, 2011. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
The balance sheet at January 1, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
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