Business Segmentation and Geographical Distribution

12 Months Ended

Dec. 30, 2017

Intangible Assets Details

Business Segmentation and Geographical Distribution

Since the year ended December 31, 2016, the Company has made operational changes to merge its scientific and regulatory consulting segment into core standards and contract services segment. Additionally, with the acquisition of Healthspan in March 2017, the Company began selling consumer products that contain the Company's branded NIAGEN® ingredient. The Company made operational changes and began segregating its financial results for consumer products operations.

As a result, the Company has the following three reportable segments:

●  Ingredients segment develops and commercializes proprietary-based ingredient technologies and supplies these ingredients to consumers in finished products or as raw materials to the manufacturers of consumer products in various industries including the nutritional supplement, food and beverage and animal health industries.

●  Consumer products segment provides directly to consumers as well as to distributors finished dietary supplement products that contain the Company's proprietary ingredients.

●  Core standards and contract services segment includes (i) supply of phytochemical reference standards, (ii) scientific and regulatory consulting and (iii) other research and development services.

On September 5, 2017, the Company completed the sale of the Lab Business which was a part of the core standards and contract services segment. The discontinued operations related to the Lab Business are not included in following statement of operations for business segments.

The “Corporate and other” classification includes corporate items not allocated by the Company to each reportable segment. Further, there are no intersegment sales that require elimination. The Company evaluates performance and allocates resources based on reviewing gross margin by reportable segment.

Year ended
December 30, 2017	Ingredients		Consumer Products			Core Standards and Contract Services		Corporate
	segment		segment			segment		and other			Total
Net sales	$	11,153,371	$	5,464,843		$	4,583,268	$	-		$	21,201,482
Cost of sales		5,491,920		2,189,597			3,042,660		-			10,724,177
Gross profit		5,661,451		3,275,246			1,540,608		-			10,477,305
Operating expenses:
Sales and marketing		1,280,004		2,672,810			506,410		-			4,459,224
Research and development		2,903,249		1,104,132								4,007,381
General and administrative		-		-			-		17,641,889			17,641,889
Other		745,773		-			-		-			745,773
Operating expenses		4,929,026		3,776,942			506,410		17,641,889			26,854,267
Operating income (loss)	$	732,425	$	(501,696	)	$	1,034,198	$	(17,641,889	)	$	(16,376,962	)

Year ended
December 31, 2016	Ingredients		Consumer Products		Core Standards and Contract Services		Corporate
	segment		segment		segment		and other			Total
Net sales	$	16,774,641	$	-	$	4,890,007	$	-		$	21,664,648
Cost of sales		7,920,516		-		3,353,598		-			11,274,114
Gross profit		8,854,125		-		1,536,409		-			10,390,534
Operating expenses:
Sales and marketing		1,196,711		-		361,502		-			1,558,213
Research and development		2,487,978		-		34,790		-			2,522,768
General and administrative		-		-		-		9,214,763			9,214,763
Operating expenses		3,684,689		-		396,292		9,214,763			13,295,744
Operating income (loss)	$	5,169,436	$	-	$	1,140,117	$	(9,214,763	)	$	(2,905,210	)

Year ended
January 2, 2016	Ingredients		Consumer Products		Core Standards and Contract Services		Corporate
	segment		segment		segment		and other			Total
Net sales	$	12,542,314	$	-	$	5,342,572	$	-		$	17,884,886
Cost of sales		6,664,164		-		3,686,117		-			10,350,281
Gross profit		5,878,150		-		1,656,455		-			7,534,605
Operating expenses:
Sales and marketing		1,111,993		-		395,875		-			1,507,868
Research and development		891,601		-		-		-			891,601
General and administrative		-		-		-		7,201,231			7,201,231
Operating expenses		2,003,594		-		395,875		7,201,231			9,600,700
Operating income (loss)	$	3,874,556	$	-	$	1,260,580	$	(7,201,231	)	$	(2,066,095	)

At December 30, 2017	Ingredients		Consumer Products		Core Standards and Contract Services		Corporate
	segment		segment		segment		and other		Total
Total assets	$	9,742,400	$	3,398,800	$	2,558,801	$	47,023,599	$	62,723,600

At December 31, 2016	Ingredients		Consumer Products		Core Standards and Contract Services		Corporate
	segment		segment		segment		and other		Total
Total assets	$	13,257,289	$	-	$	2,547,427	$	3,947,352	$	19,752,068

Revenues from international sources for the ingredients segment approximated $0.4 million, $0.5 million and $0.3 million for the years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively. Revenues from international sources for the consumer products segment approximated $4.2 million for the year ended December 30, 2017. Revenues from international sources for the core standards and contract services segment from continuing operations approximated $1.0 million, $1.6 million and $1.8 million for the years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively. International sources which the Company generates revenue from include Europe, North America, South America, Asia, and Oceania.

The Company’s long-lived assets are located within the United States.

Disclosure of major customers

Major customers who accounted for more than 10% of the Company’s total sales from continuing operations were as follows:

	Years Ended
Major Customers		2017			2016			2015
Customer G - Related Party			19.4	%		*			*
Customer D			10.2	%		11.0	%		*
Customer C (1)			*			23.9	%		*
Customer B			*			*			13.6	%
* Represents less than 10%.
(1) There is ongoing litigation with Customer C

Major customers who accounted for more than 10% of the Company’s total trade receivables were as follows:

	Percentage of the Company's Total Trade Receivables
Major Customers		At December 30, 2017			At December 31, 2016
Customer G - Related Party			18.1	%		*
Customer D			13.4	%		10.2	%
Customer C (1)			41.8	%		45.8	%
* Represents less than 10%.
(1) There is ongoing litigation with Customer C

Disclosure of major vendors

Major vendors who accounted for more than 10% of the Company's total accounts payable were as follows:

	Percentage of the Company's Total Accounts Payable
Major Vendors		At December 30, 2017			At December 31, 2016
Vendor A			*			39.5	%
Vendor B			*			20.8	%
Vendor C			14.5	%		*
Vendor D			10.4	%		*
Vendor E			10.3	%		*
* Represents less than 10%.