Edgar Filing: ChromaDex Corp.

cdxc10qa_june292013.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q /A

(Amendment No. 1)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2013

Commission File Number: 000-53290

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.)

10005 Muirlands Blvd. Suite G, Irvine, California		92618
(Address of Principal Executive Offices)		(Zip Code)

Registrant's telephone number, including area code: (949) 419-0288

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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No [ ]

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

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [X]

(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Number of shares of common stock of the registrant: 101,307,164 outstanding as of August 12, 2013.

CHROMADEX CORPORATION

2013 QUARTERLY REPORT ON FORM 10- Q/A

TABLE OF CONTENTS

PART I –	FINANCIAL INFORMATION (UNAUDITED)	Page
	ITEM 1. FINANCIAL STATEMENTS:	1
	CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 29, 2013 AND DECEMBER 29, 2012 (UNAUDITED)	1
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 29, 2013 AND JUNE 30, 2012 (UNAUDITED)	2
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 29, 2013 AND JUNE 30, 2012 (UNAUDITED)	3
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY FOR THE SIX MONTHS ENDED JUNE 29, 2013 (UNAUDITED)	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 29, 2013 AND JUNE 30, 2012 (UNAUDITED)	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	6
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
	ITEM 4. CONTROLS AND PROCEDURES	28

PART II –	OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS	29
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES	29
	ITEM 4. MINE SAFETY DISCLOSURES	29
	ITEM 5. OTHER INFORMATION	29
	ITEM 6. EXHIBITS	30
	SIGNATURES

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Explanatory Note

This Quarterly Report on Form 10-Q/A of ChromaDex Corporation (the “Company”) for the quarterly period ended June 29, 2013 includes restated condensed consolidated balance sheet as of June 29, 2013, condensed consolidated statements of operations for the three and six months ended June 29, 2013, condensed consolidated statement of cash flows for the six months ended June 29, 2013 and restated notes to such condensed consolidated financial statements. This restatement is to reflect a correction in the manner in which the Company has accounted for the sale of the BluScience assets to NeutriSci International, Inc. (“NeutriSci”). The value of the equity and the senior secured convertible note that the Company received from NeutriSci as part of the purchase price were originally accounted for at their stated values which resulted in the Company recognizing a gain on the sale of the BluScience assets. Due to the inability to make a reliably determinable estimate of the fair value of the NeutriSci equity securities and the ultimate collectability of the note received as consideration, management has determined that the proper accounting for the sale transaction is the cost recovery method. Under the cost recovery method, no gain on the sale will be recognized until the Company’s cost basis in the net assets sold has been recovered. In addition, the Company originally accounted for its investment in NeutriSci under the cost method and the Company has now determined that the equity method should have been used. The restatement of the Company’s previously issued condensed consolidated financial statements to reflect its correction in accounting for the sale of BluScience assets to NeutriSci is referred to herein as the “Restatement.”

For further information regarding the Restatement, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 21, 2013 (the “Restatement 8-K”), and for detailed financial information with respect to the Restatement, see Note 2 of the notes to condensed consolidated financial statements included in this Quarterly Report on Form 10-Q/A.

The following items of the Form 10-Q have been modified or revised in this Form 10-Q/A to reflect the Restatement:

Part I, Item 1. Financial Statements;

Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations;

Part I, Item 4. Controls and Procedures; and

Part II, Item 6. Exhibits

The Company’s Chief Executive Officer and Chief Financial Officer have provided currently dated certifications pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002 in connection with this Amendment on Form 10-Q/A; the certifications are filed as Exhibits 31.1, 31.2 and 31.3.

This amended Quarterly Report on Form 10-Q/A sets forth the original Quarterly Report on Form 10-Q in its entirety, except as required to reflect the effects of the Restatement. Except for disclosures affected by the Restatement, this amended Quarterly Report on Form 10-Q/A speaks as of the original filing date of May 10, 2013 and does not modify or update disclosures in the Form 10-Q, including the nature and character of such disclosures, to reflect events occurring or items discovered after the original filing date of the Form 10-Q.

This amended Quarterly Report on Form 10-Q/A should be read in conjunction with the Company’s other filings, as amended, made with the Securities and Exchange Commission subsequent to December 29, 2012, including the Restatement 8-K, the Company’s Annual Report on Form 10-K for the year ended December 29, 2012, as filed with the SEC on March 29, 2013 and the Company’s amended Quarterly Report on Form 10-Q/A for the three month period ended March 30, 2013, as filed with the SEC concurrently with this amended Quarterly Report on Form 10-Q/A.

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PART I – FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

ChromaDex Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

June 29, 2013 and December 29, 2012

	June 29, 2013 (Restated, Note 2)			December 29, 2012
Assets

Current Assets
Cash	$	826,631		$	520,000
Trade receivables, less allowance for doubtful accounts and returns June 29, 2013 $17,000; December 29, 2012 $450,000		1,186,529			1,940,539
Non-trade receivable		250,000			-
Inventories		1,944,597			5,205,304
Prepaid expenses and other assets		436,455			261,297
Total current assets		4,644,212			7,927,140

Leasehold Improvements and Equipment, net		1,012,963			936,426

Other Noncurrent Assets
Deposits		41,192			34,773
Long-term investment in affiliate (Note 4)		2,157,804			-
Intangible assets, net		165,561			136,182
Total other noncurrent assets		2,364,557			170,955

Total assets	$	8,021,732		$	9,034,521

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable	$	2,152,023		$	3,428,233
Accrued expenses		711,503			876,158
Current maturities of capital lease obligations		110,382			77,259
Customer deposits and other		336,824			310,267
Deferred rent, current		51,743			71,042
Total current liabilities		3,362,475			4,762,959

Capital lease obligations, less current maturities		238,287			148,374

Deferred rent, less current		152,456			129,859

Stockholders' Equity
Common stock, $.001 par value; authorized 150,000,000 shares; issued and outstanding June 29, 2013 100,807,164 and December 29, 2012 92,140,062 shares		100,807			92,140
Additional paid-in capital		36,329,257			33,617,801
Accumulated deficit		(32,161,550	)		(29,716,612	)
Total stockholders' equity		4,268,514			3,993,329

Total liabilities and stockholders' equity	$	8,021,732		$	9,034,521

See Notes to Condensed Consolidated Financial Statements.

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

For the Three Month Periods Ended June 29, 2013 and June 30, 2012

	June 29, 2013 (Restated, Note 2)			June 30, 2012

Sales	$	2,706,896		$	2,670,611
Cost of sales		1,746,158			1,905,916

Gross profit		960,738			764,695

Operating expenses:
Sales and marketing		631,559			1,868,418
General and administrative		1,342,280			2,883,728
Operating expenses		1,973,839			4,752,146

Operating loss		(1,013,101	)		(3,987,451	)

Nonoperating income (expense):
Interest income		296			1,056
Interest expense		(8,061	)		(7,562	)
Nonoperating expenses		(7,765	)		(6,506	)

Net loss	$	(1,020,866	)	$	(3,993,957	)

Basic and Diluted net loss per common share	$	(0.01	)	$	(0.04	)

Basic and Diluted weighted average common shares outstanding		99,833,963			91,362,664

See Notes to Condensed Consolidated Financial Statements.

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

For the Six Month Periods Ended June 29, 2013 and June 30, 2012

	June 29, 2013 (Restated, Note 2)			June 30, 2012

Sales	$	5,041,462		$	4,455,617
Cost of sales		3,407,884			4,295,136

Gross profit		1,633,578			160,481

Operating expenses:
Sales and marketing		1,360,983			3,727,080
General and administrative		2,702,181			4,845,639
Operating expenses		4,063,164			8,572,719

Operating loss		(2,429,586	)		(8,412,238	)

Nonoperating income (expense):
Interest income		500			2,255
Interest expense		(15,852	)		(15,827	)
Nonoperating expenses		(15,352	)		(13,572	)

Net loss	$	(2,444,938	)	$	(8,425,810	)

Basic and Diluted net loss per common share	$	(0.03	)	$	(0.10	)

Basic and Diluted weighted average common shares outstanding		97,230,043			88,034,429

See Notes to Condensed Consolidated Financial Statements.

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity (Unaudited)

Six Months Ended June 29, 2013

										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-in Capital		Deficit			Equity
Balance, December 29, 2012		92,140,062	$	92,140	$	33,617,801	$	(29,716,612	)	$	3,993,329

Exercise of stock options		13,538		14		6,755		-			6,769

Exercise of warrants		3,414,283		3,414		713,585		-			716,999

Share-based compensation		440,000		440		548,212		-			548,652

Net loss, as restated (Note 2)		-		-		-		(1,424,072	)		(1,424,072	)

Balance, March 30, 2013, as restated (Note 2)		96,007,883	$	96,008	$	34,886,353	$	(31,140,684	)	$	3,841,677

Exercise of stock options		250,000		250		124,750		-			125,000

Exercise of warrants		4,389,281		4,389		917,360		-			921,749

Share-based compensation		160,000		160		400,794		-			400,954

Net loss, as restated (Note 2)		-		-		-		(1,020,866	)		(1,020,866	)

Balance, June 29, 2013, as restated (Note 2)		100,807,164	$	100,807	$	36,329,257	$	(32,161,550	)	$	4,268,514

See Notes to Condensed Consolidated Financial Statements.

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Six Month Periods Ended June 29, 2013 and June 30, 2012

	June 29, 2013 (Restated, Note 2)			June 30, 2012

Cash Flows From Operating Activities
Net loss	$	(2,444,938	)	$	(8,425,810	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of leasehold improvements and equipment		134,325			166,748
Amortization of intangibles		10,621			6,799
Share-based compensation expense		728,349			1,264,524
Loss from disposal of equipment		-			1,879
Changes in operating assets and liabilities:
Trade receivables		770,994			(264,536	)
Inventories		(206,824	)		(2,348,197	)
Prepaid expenses and other assets		(51,010	)		369,527
Accounts payable		(907,337	)		1,151,141
Accrued expenses		(150,095	)		(213,521	)
Customer deposits and other		26,557			(30,081	)
Deferred rent		3,298			(30,034	)
Net cash used in operating activities		(2,086,060	)		(8,351,561	)

Cash Flows From Investing Activities
Purchases of leasehold improvements and equipment		(39,011	)		(12,214	)
Purchase of intangible assets		(40,000	)		(2,000	)
Proceeds from sale of assets		750,000			-
Net cash provided by (used in) investing activities		670,989			(14,214	)

Cash Flows From Financing Activities
Proceeds from issuance of common stock, net of issuance costs		-			10,158,438
Proceeds from exercise of stock options		131,769			-
Proceeds from exercise of warrants		1,638,748			45,000
Principal payments on capital leases		(48,815	)		(44,806	)
Net cash provided by financing activities		1,721,702			10,158,632

Net increase in cash		306,631			1,792,857

Cash Beginning of Period		520,000			420,152

Cash Ending of Period	$	826,631		$	2,213,009

Supplemental Disclosures of Cash Flow Information
Cash payments for interest	$	15,852		$	15,827

Supplemental Schedule of Noncash Investing Activity
Capital lease obligation incurred for the purchase of equipment	$	171,851		$	50,786

Supplemental Schedule of Noncash Share-based Compensation
Stock awards issued for services prior to the period	$	14,560		$	-
Changes in stock and warrant awards issued for future services	$	206,697		$	-

Supplemental Schedule of Noncash Activities Related to
Sale of BluScience Consumer Product Line
Assets transferred	$	3,526,677		$	-
Liabilities transferred	$	368,873		$	-
Carrying value of long-term investment in affiliate, net of $750,000 cash proceeds and $250,000 non-trade receivable	$	2,157,804		$	-

See Notes to Condensed Consolidated Financial Statements.

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Note 1. Interim Financial Statements

The accompanying financial statements of ChromaDex Corporation (the “Company”) and its wholly owned subsidiaries, ChromaDex, Inc., ChromaDex Analytics, Inc. and Spherix Consulting, Inc. 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 the Company's financial position as of June 29, 2013 and results of operations and cash flows for the three and six months ended June 29, 2013 and June 30, 2012. These unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 29, 2012 appearing in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) on March 29, 2013. Operating results for the six months ended June 29, 2013 are not necessarily indicative of the results to be achieved for the full year ending on December 28, 2013. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") 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 December 29, 2012 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

Note 2. Restatement of Previously Issued Financial Statements

On November 18, 2013, during the review of the interim financial statements, the Company determined that the previously issued financial statements for the three month period and the six month period ending March 30, 2013 and June 29, 2013, respectively, contained in the Company’s Quarterly Reports on Form 10-Q (“ Quarterly Reports”) for the period ended March 30, 2013 (as filed with the Securities and Exchange Commission on May 10, 2013) and June 29, 2013 (as filed with the Securities and Exchange Commission on August 13, 2013), respectively, should no longer be relied upon certain non-cash errors in the Quarterly Reports and that those financial statements (the “Financial Statements”) would be restated to make the necessary accounting adjustments .

The financial statements filed for the three month period ended March 30, 2013 and the six month period ended June 29, 2013 contained a misstatement pertaining to the accounting treatment of the sale of the BluScience assets to NeutriSci International, Inc. (“NeutriSci”) (See Note 4). The value of the equity and the senior secured convertible note that the Company received from NeutriSci as part of the purchase price were originally accounted for at their stated values which resulted in the Company recognizing a gain on the sale of the BluScience assets. Due to the inability to make a reliably determinable estimate of the fair value of the NeutriSci equity securities and the ultimate collectability of the note received as consideration, management has determined that the proper accounting for the sale transaction is the cost recovery method. Under the cost recovery method, no gain on the sale will be recognized until the Company’s cost basis in the net assets sold has been recovered. In addition, the Company originally accounted for its investment in NeutriSci under the cost method where it has now been determined that the equity method should have been used. The Company expects all amendments and restatements to the Financial Statements affected to be non-cash in nature.

The Company has determined that the restatements of its Financial Statements resulted from a material weakness in its internal control over financial reporting, specifically related to its process and procedures related to the accounting for sale of assets in exchange for non-cash consideration. More information regarding the Company’s controls and procedures is set forth in Part I, Item 4 of this Form 10-Q/A.

The restatement adjustments to the previously issued financial statements for the six month period ended June 29, 2013 are as follows:

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Balance Sheet (Unaudited)

June 29, 2013

	Previously Reported			Restatement Adjustments			As Restated
Assets

Current Assets
Cash	$	826,631		$	-		$	826,631
Trade receivables		1,186,529			-			1,186,529
Non-trade receivable		250,000			-			250,000
Note receivable, current		1,623,508			(1,623,508	)		-
Inventories		1,944,597			-			1,944,597
Prepaid expenses and other assets		436,455			-			436,455
Total current assets		6,267,720			(1,623,508	)		4,644,212

Leasehold Improvements and Equipment, net		1,012,963			-			1,012,963

Other Noncurrent Assets
Deposits		41,192			-			41,192
Note receivable, less current		779,205			(779,205	)		-
Long-term equity investment		2,678,832			(2,678,832	)		-
Long-term investment in affiliate		-			2,157,804			2,157,804
Intangible assets, net		165,561			-			165,561
Total other noncurrent assets		3,664,790			(1,300,233	)		2,364,557

Total assets	$	10,945,473		$	(2,923,741	)	$	8,021,732

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable	$	2,152,023		$	-		$	2,152,023
Accrued expenses		711,503			-			711,503
Current maturities of capital lease obligations		110,382			-			110,382
Customer deposits and other		336,824			-			336,824
Deferred rent, current		51,743			-			51,743
Total current liabilities		3,362,475			-			3,362,475

Capital lease obligations, less current maturities		238,287			-			238,287

Deferred rent, less current		152,456			-			152,456

Stockholders' Equity
Common stock		100,807			-			100,807
Additional paid-in capital		36,329,257			-			36,329,257
Accumulated deficit		(29,237,809	)		(2,923,741	)		(32,161,550	)
Total stockholders' equity		7,192,255			(2,923,741	)		4,268,514

Total liabilities and stockholders' equity	$	10,945,473		$	(2,923,741	)	$	8,021,732

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

For the Three Month Periods Ended June 29, 2013

	Previously Reported			Restatement Adjustments			As Restated

Sales	$	2,706,896		$	-		$	2,706,896
Cost of sales		1,746,158			-			1,746,158

Gross profit		960,738			-			960,738

Operating expenses:
Sales and marketing		631,559			-			631,559
General and administrative		1,342,280			-			1,342,280
Operating expenses		1,973,839			-			1,973,839

Operating loss		(1,013,101	)		-			(1,013,101	)

Nonoperating income (expense):
Interest income		31,440			(31,144	)		296
Interest expense		(8,061	)		-			(8,061	)
Nonoperating income (expenses)		23,379			(31,144	)		(7,765	)

Net loss	$	(989,722	)	$	(31,144	)	$	(1,020,866	)

Basic and Diluted net loss per common share	$	(0.01	)	$	(0.00	)	$	(0.01	)

Basic and Diluted weighted average common shares outstanding		99,833,963			-			99,833,963

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

For the Six Month Period Ended June 29, 2013

	Previously Reported			Restatement Adjustments			As Restated

Sales	$	5,041,462		$	-		$	5,041,462
Cost of sales		3,407,884			-			3,407,884

Gross profit		1,633,578			-			1,633,578

Operating expenses:
Sales and marketing		1,360,983			-			1,360,983
General and administrative		2,702,181			-			2,702,181
Gain on sale of assets		(2,891,917	)		2,891,917			-
Operating expenses		1,171,247			2,891,917			4,063,164

Operating income (loss)		462,331			(2,891,917	)		(2,429,586	)

Nonoperating income (expense):
Interest income		32,324			(31,824	)		500
Interest expense		(15,852	)		-			(15,852	)
Nonoperating income (expenses)		16,472			(31,824	)		(15,352	)

Net income (loss)	$	478,803		$	(2,923,741	)	$	(2,444,938	)

Basic net income (loss) per common share	$	0.00		$	(0.03	)	$	(0.03	)

Diluted net income (loss) per common share	$	0.00		$	(0.03	)	$	(0.03	)

Basic weighted average common shares outstanding		97,230,043			-			97,230,043

Diluted weighted average common shares outstanding		97,486,066			(256,023	)		97,230,043

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ChromaDex Corporation and Subsidiaries

Condensed Consolidated Statement of Cash Flows (Unaudited)

For the Six Month Period Ended June 29, 2013

	Previously Reported			Restatement Adjustments			As Restated

Cash Flows From Operating Activities
Net income (loss)	$	478,803		$	(2,923,741	)	$	(2,444,938	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of leasehold improvements and equipment		134,325			-			134,325
Amortization of intangibles		10,621			-			10,621
Share-based compensation expense		728,349			-			728,349
Gain on sale of assets		(2,891,917	)		2,891,917			-
Interest added to note receivable		(31,824	)		31,824			-
Changes in operating assets and liabilities:					-
Trade receivables		770,994			-			770,994
Inventories		(206,824	)		-			(206,824	)
Prepaid expenses and other assets		(51,010	)		-			(51,010	)
Accounts payable		(907,337	)		-			(907,337	)
Accrued expenses		(150,095	)		-			(150,095	)
Customer deposits and other		26,557			-			26,557
Deferred rent		3,298			-			3,298
Net cash used in operating activities		(2,086,060	)		-			(2,086,060	)

Cash Flows From Investing Activities
Purchases of leasehold improvements and equipment		(39,011	)		-			(39,011	)
Purchase of intangible assets		(40,000	)		-			(40,000	)
Proceeds from sale of assets		750,000			-			750,000
Net cash provided by investing activities		670,989			-			670,989

Cash Flows From Financing Activities
Proceeds from exercise of stock options		131,769			-			131,769
Proceeds from exercise of warrants		1,638,748			-			1,638,748
Principal payments on capital leases		(48,815	)		-			(48,815	)
Net cash provided by financing activities		1,721,702			-			1,721,702

Net increase in cash		306,631			-			306,631

Cash Beginning of Period		520,000			-			520,000

Cash Ending of Period	$	826,631		$	-		$	826,631

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Note 3. Nature of Business and Significant Accounting Policies

Nature of business: The Company is a natural products company that discovers, acquires, develops and commercializes proprietary ingredient technologies through its business model that utilizes its wholly owned business units, including ingredient technologies, natural product fine chemicals, chemistry and analytical testing services, and product regulatory and safety consulting. The Company provides science-based solutions to the nutritional supplement, food and beverage, animal health, cosmetic and pharmaceutical industries at various terms.

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 Company’s 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 Company’s floating year-end date. The fiscal year 2014 will include 53 weeks instead of the normal 52 weeks.

Trade accounts receivable: Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on monthly and quarterly reviews of all outstanding amounts. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. The allowances for doubtful accounts for the periods ended June 29, 2013 and December 29, 2012 were $17,000 and $450,000, respectively. Of the allowance amount of $450,000 for the period ended December 29, 2012, $433,000 represents a hold on the receivables placed by a retailer that carried the Company's BluScience retail consumer line. The hold was placed by the retailer as an offset in the event of future returns of the Company's products and the hold was treated as a reduction of revenue. On March 28, 2013, the Company sold the BluScience retail consumer line to NeutriSci and the related trade accounts receivable including the allowance have been transferred to NeutriSci. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded when received.

Inventories: Inventories are comprised of raw materials, work-in-process and finished goods. They are stated at the lower of cost, determined by the first-in, first-out method (FIFO) method, or market. The inventory on the balance sheet is recorded net of valuation allowances of $225,000 and $366,000 for the periods ended June 29, 2013 and December 29, 2012, respectively. Labor and overhead has been added to inventory that was manufactured or characterized by the Company. On March 28, 2013, the Company sold the BluScience retail consumer line to NeutriSci and related dietary supplements inventory have been transferred to NeutriSci. The amounts of major classes of inventory as of June 29, 2013 and December 29, 2012 are as follows:

	June 29, 2013		December 29, 2012
Natural product fine chemicals	$	1,656,702	$	1,614,755
Bulk ingredients		512,895		432,230
Dietary supplements – raw materials		-		401,809
Dietary supplements – work in process		-		465,253
Dietary supplements – finished goods		-		2,657,257
		2,169,597		5,571,304
Less valuation allowance		225,000		366,000
	$	1,944,597	$	5,205,304

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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 the three- and six-month periods ended June 29, 2013 and June 30, 2012 , the basic and diluted shares reported are equal because the common share equivalents are anti-dilutive due to the net loss. Below is a tabulation of the potentially dilutive securities that were “in the money” for the three- and six-month periods ended June 29, 2013 and June 30, 2012.

	Three Months Ended				Six Months Ended
		June 29, 2013	June 30, 2012			June 29, 2013	June 30, 2012
Basic weighted average common shares outstanding		99,833,963		91,362,664		97,230,043		88,034,429
Warrants and options in the money, net		319,587		5,693,386		256,023		6,101,236
Weighted average common shares outstanding assuming dilution		100,153,550		97,056,050		97,486,066		94,135,665

Total warrants and options that were not “in the money” at June 29, 2013 and June 30, 2012 were 11,595,211 and 15,071,066, respectively.

Long-term investment in affiliate: The Company accounts for its investment in affiliate under the equity method. The Company records equity method adjustments in gains (losses) on equity method investments, net, and may do so with up to a three-month lag, pending on the timely availability of financial information of the investee. Equity method adjustments include: our proportionate share of investee income or loss, gains or losses resulting from investee capital transactions, and other adjustments required by the equity method. The long-term investment in affiliate is subject to a periodic impairment review and is considered to be impaired when a decline in carrying value is judged to be other-than-temporary. Evidence of a loss in value might include (i) absence of an ability recover the carrying amount of the investment or (ii) inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.

Note 4. Sale of Product Line and Investment in Affiliate

On March 28, 2013, the Company entered into an asset purchase and sale agreement with NeutriSci and consummated the sale of BluScience consumer product line to NeutriSci. The Company is using the cost recovery method to account for the sale transaction, which is estimated at approximately $ 3,157,804. The consideration received consists of following: (a) a $250,000 cash payment, which NeutriSci paid as a deposit in February 2013; (b) an additional $250,000 cash payment, which was paid at the closing of the sale; (c) an additional cash payment of $500,000 due no later than 60 days after the closing of the sale, which $250,000 was paid as of June 29, 2013 and an additional $200,000 was paid on July 12, 2013; (d) a $2,500,000 senior convertible secured note (convertible into 625,000 shares Series I Preferred Stock as described below) payable in quarterly installments of $416,667 beginning August 15, 2013; and (e) 669,708 shares of Series I Preferred Shares that are convertible into 2,678,832 Class “A” common shares of NeutriSci, representing an aggregate of 19% of the NeutriSci shares at a deemed price for each Class A common share of $1.00 per share. The transaction documents contain certain equity blockers that preclude the Company's ownership in NeutriSci in excess of 9.99% and 19% without obtaining a waiver from NeutriSci. The Company will continue to generate revenue through a royalty on 6% of future net sales of BluScience products as well as a supply agreement with NeutriSci for the Company's patented pTeroPure pterostilbene. As of June 29, 2013, the Company did not have any sales to NeutriSci under this supply agreement for pTeroPure pterostilbene.

The Company has applied the equity method of accounting for the 669,708 shares of Series I Preferred Shares that are convertible into 2,678,832 Class “A” common shares of NeutriSci and the carrying value, which includes the senior convertible secured note, is reflected as long-term investment in affiliate in the Company’s consolidated balance sheet as of June 29, 2013. The initial carrying value of this investment recognized, as restated, as of March 28, 2013 was $2,157,804, which is the Company’s unrecovered cost or the difference between the net assets transferred to NeutriSci and the initial monetary consideration received. Although, (i) other contemporaneous third party investments in NeutriSci’s Class “A” common shares were $1.00 per share and (ii) the face value of the senior convertible secured note was $2,500,000, management believed that $2,157,804 was the appropriate aggregate carrying value for the investment in affiliate, considering the fact that NeutriSci is a start-up company and has historically recorded significant operating losses. The Company is unable to determine NeutriSci’s likelihood of repaying the note, and because of this significant uncertainty, the amount of collectability of the senior convertible secured note is not ascertainable. There is a significant uncertainty in the realization of value of the Series I Preferred Shares as well. Consequently, management deemed it appropriate to consider that both the 669,708 shares of Series I Preferred Shares and the senior convertible secured note as one long term investment in affiliate. Under the cost recovery method, no gain on the sale will be recognized until the Company’s cost basis in the net assets transferred has been recovered. Prospective collection of payments under the note will be charged against the carrying value of the long-term investment in affiliate. The below table illustrates how the carrying value was determined.

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	At March 28, 2013
Assets transferred
Trade receivables, less allowance for returns	$	(16,984	)
Inventories		3,467,530
Prepaid expenses and other assets		76,131
Total assets transferred		3,526,677

Liabilities transferred
Accounts payable		368,873
Total liabilities transferred		368,873

Total net assets transferred	$	3,157,804

Initial monetary consideration received
Cash	$	500,000
Non-trade receivable		500,000

Total initial monetary consideration received	$	1,000,000

Carrying Value of Long Term Investment in Affiliate	$	2,157,804

The Company has elected to record equity method adjustments in gains (losses) on the investment in NeutriSci, with a three-month lag, as the financial information of NeutriSci was not available in a timely manner. At such, for the Company’s three- and six-month periods ended June 29, 2013, the Company did not record equity method adjustments corresponding to the three-month lag after closing the investment on March 28, 2013. When the financial information is available at a later time, the Company will use NeutriSci’s financial statements for the period beginning on April 1, 2013. This will not cover the three-day period from March 28, 2013 to March 30, 2013, which is also a portion of the Company’s investment period since the Company’s investment started from March 28, 2013. However, the Company has determined that the amount of any impact to the Company for the three day period not covered was immaterial as NeutriSci did not have any significant transactions.

As of June 29, 2013, $250,000 cash payment remained unpaid and this amount is reflected as non-trade receivable in the Company's consolidated balance sheet as of June 29, 2013. Of this unpaid amount, a partial payment of $200,000 was received on July 12, 2013.

The senior secured convertible note is secured by the Security Agreement, dated March 28, 2013 entered into between the Company and NeutriSci whereby NeutriSci granted the Company a security interest in substantially all of NeutriSci’s assets, including inventory, to secure its obligations pursuant to the note. In the event of default, the note can also be convertible into Series I Preferred Shares of NeutriSci at the option of ChromaDex. Each Series I Preferred Share can be convertible into 4 Class A common shares of NeutriSci. The conversion price will be (a) $4.00 per Series I Preferred Share prior to a Public Offering (as defined in the note); or (b) the closing price of Series I Preferred Share or four times the closing price of Class A common share on a stock exchange immediately prior to the conversion date.

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Under the asset purchase and sale agreement entered into as of March 28, 2013 with the Company, NeutriSci is obligated to file an initial public offering prospectus with a securities commission in Canada no later than September 24, 2013 (or 180 days from the closing date of March 28, 2013) and to concurrently seek approval of the listing of its common shares on the TSX Venture Exchange or similar stock exchange in Canada.

As of June 29, 2013, the Company has determined that there is no other-than-temporary impairment, as the Company is not aware of any other-than-temporary impairment triggering events or indicators. The Company will continue to monitor NeutriSci’s performance and evaluate if there are any such events or indicators to consider.

Note 5. Leasehold Improvements and Equipment

Leasehold improvements and equipment consisted of the following:

	June 29, 2013		December 29, 2012
Laboratory equipment	$	2,563,238	$	2,439,688
Leasehold improvements		403,971		403,971
Computer equipment		370,692		363,739
Furniture and fixtures		18,313		18,313
Office equipment		7,877		7,877
Construction in progress		186,439		106,080
		3,550,530		3,339,668
Less accumulated depreciation		2,537,567		2,403,242
	$	1,012,963	$	936,426

Note 6. Employee Share-Based Compensation

Stock Option Plans

At the discretion of the Company’s compensation committee (the “Compensation Committee”), and with the approval of the Company’s board of directors (the “Board of Directors”), the Company may grant options to purchase the Company’s common stock to certain individuals from time to time. Management and the Compensation Committee 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 from their date of issuance. 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 Company’s 2000 Non-Qualified Incentive Stock Plan. The remaining amount available for issuance under the Second Amended and Restated 2007 Equity Incentive Plan totaled 6,164,537 at June 29, 2013. 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 Compensation Committee, subject to approval by the Board of Directors.

The fair value of the Company’s 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 six months ended June 29, 2013

Six Months Ended June 29, 2013
Volatility		32.68	%
Expected dividends		0.00	%
Expected term	6.1 years
Risk-free rate		1.18	%

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The Company calculated expected volatility from the volatility of publicly held companies in similar industries, as the historical volatility of the Company’s common stock does not cover the period equal to the expected life of the options. The dividend yield assumption is based on the Company’s history and expectation of 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 service period based options.

1) Service Period Based Stock Options

The majority of options granted by the Company are comprised of service based options granted to employees. These options vest ratably over a defined period following grant date after a passage of a service period.

The following table summarizes service period based stock options activity at June 29, 2013 and changes during the six months then ended:

				Weighted Average
						Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 29, 2012		12,202,558		$	1.08

Options Granted		310,000			0.68
Options Exercised		(13,538	)		0.50
Options Expired		(75,000	)		0.50
Options Forfeited		(149,168	)		1.24
Outstanding at June 29, 2013		12,274,852		$	1.08		7.86	$	375,554

Exercisable at June 29, 2013		6,035,944		$	1.24		6.48	$	202,092

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The aggregate intrinsic values in the table above are before income taxes, based on the Company’s closing stock price of $0.78 on the last day of business for the period ended June 29, 2013. The weighted average fair value of options granted during the six months ended June 29, 2013 and June 30, 2012 was $0.24 and $0.30 respectively. The aggregate intrinsic value for options exercised during the six months ended June 29, 2013 was $2,437. There were no options exercised during the three months ended June 29, 2013 and the three and six months ended June 30, 2012.

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 from time to time by the Compensation Committee. If these 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 June 29, 2013 and changes during the six months then ended:

				Weighted Average
						Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 29, 2012		145,834		$	1.59

Options Granted		200,000			0.63
Options Exercised		-			-
Options Expired		-			-
Options Forfeited		(45,834	)		1.59
Outstanding at June 29, 2013		300,000		$	0.95		9.00	$	30,200

Exercisable at June 29, 2013		52,084		$	1.59		7.85	$	-

The aggregate intrinsic value in the table above are before income taxes, based on the Company’s closing stock price of $0.78 on the last day of business for the period ended June 29, 2013. The weighted average fair value of options granted during the six months ended June 29, 2013 was $0.22. The Company did not grant any performance based stock options during the three months ended June 29, 2013 and the three and six months ended June 30, 2012.

As of June 29, 2013, there was $1,945,157 of total unrecognized compensation expense related to non-vested 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 2.44 years as of June 29, 2013. The realized tax benefit from stock options for the six months ended June 29, 2013, and June 30, 2012 was $0, based on the Company’s full valuation allowance against its deferred tax assets.

Restricted Stock

Restricted stock awards granted by the Company to employees have vesting conditions that are unique to each award.

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The following table summarizes activity of restricted stock awards granted to employees at June 29, 2013 and changes during the six months then ended:

			Weighted Average
			Award-Date
	Shares		Fair Value
Unvested shares at December 29, 2012		500,000	$	0.69

Granted		-		-
Vested		-		-
Forfeited		-		-
Unvested shares at June 29, 2013		500,000	$	0.69

Expected to Vest as of June 29, 2013		500,000	$	0.69

As of June 29, 2013, the Company did not have any unrecognized compensation expense related to restricted stock awards to employees.

For employee share-based compensation, the Company recognized share-based compensation expense of $286,417 and $572,951 in general and administrative expenses in the statement of operations for the three and six months ended June 29, 2013, respectively. The Company recognized $939,960 and $643,825 in share-based compensation expense for the three and six months ended June 30, 2012, respectively.

Note 7. Non-Employee Share-Based Compensation

Stock Option Plans

At the discretion of management, working with the Compensation Committee, and with approval of the Board of Directors, the Company may grant options to purchase the Company’s 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 re-measured over the vesting term until earned. The estimated fair value is expensed over the applicable service period.

The following table summarizes activity of stock options granted to non-employees at June 29, 2013 and changes during the six months then ended:

				Weighted Average
						Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 29, 2012		1,097,300		$	1.23

Options Granted		-			-
Options Exercised		(250,000	)		0.50
Options Forfeited		-			-
Outstanding at June 29, 2013		847,300		$	1.44		6.23	$	11,670

Exercisable at June 29, 2013		847,300		$	1.44		6.23	$	11,670

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The aggregate intrinsic values in the table above are before income taxes, based on the Company’s closing stock price of $0.78 on the last day of business for the period ended June 29, 2013. The aggregate intrinsic value for options exercised during the three and six months ended June 29, 2013 were $35,000 for both periods as there were no options exercised during the three months ended March 30, 2013. There were no options exercised during the three and six months ended June 30, 2012.

As of June 29, 2013, the Company did not have any unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans for non-employee stock options.

Stock Awards

From time to time, the Company awards shares of its common stock to non-employees for services provided or to be provided. If the fair value of services received is more reliably measurable than the fair value of the stock awarded, the fair value of the services received is used to measure the award. In contrast, if the fair value of the stock issued is more reliably measurable, than the fair value of services received, the award is measured based on the fair value of the stock awarded. Since these stock awards are fully vested and non-forfeitable, upon issuance the measurement date for the award is usually reached on the date of the award. The measured fair value of the award is amortized over the period the service is provided.

During the three and six months ended June 29, 2013, the Company awarded an aggregate of 160,000 and 600,000 shares of the Company’s common stock to non-employees, respectively. The fair values of the awards were based on the trading price of the Company’s stock on the date of issuance. The expense the Company recognized for stock awards was $88,071 and $150,249 for the three and six months ended June 29, 2013, respectively. As of June 29, 2013, there was $230,276 of total unrecognized compensation expense related to stock awarded to the non-employees. During the three and six months ended June 30, 2012, the Company awarded an aggregate of 265,000 and 454,557 shares, respectively, and recognized a total expense of $181,260 and $308,176, respectively.

Warrant Awards

During the three and six months ended June 29, 2013, the Company recognized an expense of $1,334 and $4,094, respectively, for the warrants that were previously awarded during the year ended December 29, 2012. The Company did not award any new warrants during the three and six months ended June 29, 2013. As of June 29, 2013, the Company did not have any unrecognized compensation expense related to warrants awarded to the non-employee.

For non-employee share-based compensation, the Company recognized share-based compensation expense of $90,342 and $155,398 in general and administrative expenses in the statement of operations for the three and six months ended June 29, 2013, respectively. The Company recognized $258,578 and $620,700 in share-based compensation expense for the three and six months ended June 30, 2012, respectively.

Note 8. Warrants

During the three and six months ended June 29, 2013, 4,389,281 and 7,803,564 warrants with an exercise price of $0.21 per share were exercised, respectively, and the Company received proceeds of $921,749 and $1,638,748 from exercise of these warrants, respectively. These warrants were issued during the year ended January 1, 2011 pursuant to a subscription agreement entered into by the holders of such warrants and the Company on April 22, 2010.

In addition, during the three and six months ended June 29, 2013, 533,067 and 1,314,303 warrants issued during the year 2008 with an exercise price of $3.00 per share expired, respectively.

At June 29, 2013, the following warrants were outstanding and exercisable:

Warrants granted in connection with :	Weighted Average Exercise Prices		Number Outstanding And Exercisable At June 29, 2013		Weighted Average Remaining Contractual Life
2008 Private placement equity offering	$	3.00		404,047	0.8 month
2012 Placement agent commission	$	0.85		285,000	13.1 months
2012 Non-employee award	$	0.75		250,000	13.3 months
	$	1.75		939,047	7.9 months

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Note 9. Business Segmentation

Since the year ended December 29, 2012, the Company began segregating its financial results for Spherix Consulting, Inc. (“Spherix”), which the Company acquired on December 3, 2012. Spherix provides scientific and regulatory consulting. The Company has following three reportable segments.

Core standards, contract services and ingredients segment includes supply of phytochemical reference standards, which are small quantities of plant-based compounds typically used to research an array of potential attributes, and reference materials, related contract services, and proprietary ingredients.

·	Scientific and regulatory consulting segment which consist of providing scientific and regulatory consulting to the clients in the food, supplement and pharmaceutical industries to manage potential health and regulatory risks.

Retail dietary supplement products segment which consist of the supply of the BluScience line of dietary supplement products containing the Company's proprietary ingredients to various retail distribution channels. On March 28, 2013, the Company entered into an asset purchase and sale agreement with NeutriSci and consummated the sale of BluScience consumer product line to NeutriSci.

The “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.

Three months ended	Core Standards,				Retail
June 29, 2013	Contract Services and		Scientific and Regulatory		Dietary Supplement
	Ingredients segment		Consulting segment		Products segment		Other			Total

Net sales	$	2,504,372	$	202,524	$	-	$	-		$	2,706,896
Cost of sales		1,614,413		131,745		-		-			1,746,158

Gross profit		889,959		70,779		-		-			960,738

Operating expenses:
Sales and marketing		630,447		1,112		-		-			631,559
General and administrative		-		-		-		1,342,280			1,342,280
Operating expenses		630,447		1,112		-		1,342,280			1,973,839

Operating income (loss)	$	259,512	$	69,667	$	-	$	(1,342,280	)	$	(1,013,101	)

Three months ended	Core Standards,				Retail
June 30, 2012	Contract Services and		Scientific and Regulatory		Dietary Supplement
	Ingredients segment		Consulting segment		Products segment			Other			Total

Net sales	$	2,150,585	$	-	$	520,026		$	-		$	2,670,611
Cost of sales		1,528,203		-		377,713			-			1,905,916

Gross profit		622,382		-		142,313			-			764,695

Operating expenses:
Sales and marketing		536,572		-		1,331,846			-			1,868,418
General and administrative		-		-		-			2,883,728			2,883,728
Operating expenses		536,572		-		1,331,846			2,883,728			4,752,146

Operating income (loss)	$	85,810	$	-	$	(1,189,533	)	$	(2,883,728	)	$	(3,987,451	)

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Six months ended June 29, 2013	Core Standards,				Retail Dietary Supplement
	Contract Services and		Scientific and Regulatory		Products segment					Total
	Ingredients segment		Consulting segment		(Restated, Note 2)			Other		(Restated, Note 2)

Net sales	$	4,655,885	$	445,862	$	(60,285	)	$	-	$	5,041,462
Cost of sales		3,128,396		278,533		955			-		3,407,884

Gross profit (loss)		1,527,489		167,329		(61,240	)		-		1,633,578

Operating expenses:
Sales and marketing		1,227,224		2,600		131,159			-		1,360,983
General and administrative		-