Attached files
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| 8-K - CURRENT REPORT - ChromaDex Corp. | cdxc8k_sept52017.htm |
Exhibit 99.1
Sale of Operating Assets
On
September 5, 2017, ChromaDex Corporation (“ChromaDex”),
ChromaDex, Inc., a wholly-owned subsidiary of ChromaDex, and
ChromaDex Analytics, Inc., a wholly-owned subsidiary of ChromaDex,
Inc. (collectively, the “Company”), sold operating
assets that are used or held for use in connection with the
Company’s quality verification program testing or seals and
analytical chemistry and microbiology testing business for food and
food related products (the “Lab Business”) to Covance
Laboratories Inc. (“Covance”) pursuant to an asset
purchase agreement. Pursuant to the terms of the asset purchase
agreement, the Company will receive total consideration equal to
$7.5 million, subject to certain escrow provisions. In addition,
the Company is eligible to receive an additional earnout payment
from Covance up to $1.0 million, subject to certain escrow
provisions.
Pro Forma Information
The
accompanying unaudited pro forma condensed consolidated statements
of operations of the Company for the years ended December 31, 2016,
January 2, 2016 and January 3, 2015 and the six months ended July
1, 2017 are presented as if the Lab Business sale had occurred on
December 29, 2013, the beginning of the earliest period presented.
The accompanying unaudited pro forma condensed consolidated balance
sheet of the Company as of July 1, 2017 is presented as if the Lab
Business sale had occurred on July 1, 2017. The pro forma
adjustments related to the Lab Business sale do not reflect the
final purchase price or final asset and liability balances of the
Lab Business. Accordingly, the pro forma adjustments are
preliminary and have been made solely for the purpose of providing
unaudited pro forma condensed consolidated financial information.
The unaudited pro forma financial information is not necessarily
indicative of the results of operations or financial position that
might have been achieved for the dates or periods indicated, nor is
it necessarily indicative of the results of operations or financial
position that may occur in the future.
The
historical consolidated financial information has been adjusted in
the unaudited pro forma financial information to give effect to pro
forma events that are (1) directly attributable to the disposal,
(2) factually supportable, and (3) with respect to the statements
of operations, expected to have a continuing impact on the combined
results.
The
following is a brief description of the amounts recorded under each
of the column headings in the unaudited pro forma consolidated
statements of operations and balance sheet:
Historical
This
column reflects the Company’s historical audited operating
results for the years ended December 31, 2016, January 2, 2016 and
January 3, 2015 and the historical and unaudited operating results
of continuing operations and financial condition as of and for the
six months ended July 1, 2017 prior to any adjustment for the Lab
Business sale described above.
Disposal
This
column reflects the elimination of the historical operating results
of the Lab Business for the years ended December 31, 2016, January
2, 2016 and January 3, 2015 and the six months ended July 1, 2017
at the amounts that have been reflected in the Company’s
condensed consolidated statements of operations for those periods.
These amounts are based on the best available information and
certain assumptions that the Company's management believe are
reasonable. These amounts do not include allocations of corporate
overhead expenses included in general and administrative expenses.
The disposal column on the unaudited pro forma condensed
consolidated balance sheet as of July 1, 2017 reflects the value of
operating assets and liabilities included in the sale of the Lab
Business as of that date. Net operating obligations of
approximately $0.5 million as of July 1, 2017 were not assumed by
Covance in its purchase of the Lab Business and these obligations
are expected to be paid or collected by the Company within a
year.
Pro Forma Adjustments
This
column on the unaudited pro forma condensed consolidated balance
sheet reflects the pro forma effect of the receipt and use of the
cash consideration from the Lab Business sale.
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ChromaDex
Corporation and Subsidiaries
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| Unaudited Pro Forma Condensed Consolidated Balance Sheet |
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(in
thousands)
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As of July 1, 2017
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Historical
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Disposal
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Pro
Forma
Adjustments
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Notes
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Pro
Forma
|
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Assets
|
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Current
Assets
|
|
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|
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Cash
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$14,139
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$6,550
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(A)
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$20,689
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Trade
receivables, net of allowances
|
4,579
|
|
|
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4,579
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Inventories
|
7,794
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7,794
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Prepaid
expenses and other assets
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865
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(19)
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|
846
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Total current assets
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27,377
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(19)
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6,550
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33,908
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Leasehold
Improvements and Equipment, net
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3,373
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(1,473)
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(B)
|
1,900
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Deposits
|
402
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(20)
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|
382
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Intangible
assets, net
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1,768
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1,768
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Other
receivables
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-
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950
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(A)
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950
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Total assets
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$32,920
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$(1,512)
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$7,500
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$38,908
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Liabilities and Stockholders' Equity
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|
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Current
Liabilities
|
|
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Accounts
payable
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$3,132
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$700
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(C)
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$3,832
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Accrued
expenses
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2,111
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2,111
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Current
maturities of capital lease obligations
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299
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299
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Customer
deposits and other
|
504
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504
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Deferred
rent, current
|
114
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(33)
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81
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Due
to officer
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100
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100
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Total current liabilities
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6,260
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(33)
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700
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6,927
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Capital
lease obligations, less current maturities
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393
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393
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Deferred
rent, less current
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548
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(184)
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364
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Total liabilities
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7,201
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(217)
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700
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7,684
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Commitments
and contingencies
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|
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Stockholders'
Equity
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Common
stock, $.001 par value
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45
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45
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Additional
paid-in capital
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75,590
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75,590
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Accumulated
deficit
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(49,916)
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5,505
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(C)
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(44,411)
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Total stockholders' equity
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25,719
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-
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5,505
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31,224
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Total liabilities and stockholders' equity
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$32,920
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$(217)
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$6,205
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$38,908
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See
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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ChromaDex Corporation and Subsidiaries
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Unaudited Pro Forma Condensed Consolidated Statements of
Operations
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(in
thousands, except for per share amounts)
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For the Six Month Period Ended July 1, 2017
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Historical
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Disposal
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Pro
Forma Adjustments
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Pro
Forma
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Sales,
net
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$9,756
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$(2,170)
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$7,586
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Cost
of sales
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5,741
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(1,882)
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3,859
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Gross profit
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4,015
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(288)
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-
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3,727
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Operating
expenses:
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Sales
and marketing
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1,324
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(369)
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|
955
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Research
and development
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1,514
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-
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1,514
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General
and administrative
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5,041
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(106)
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4,935
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Other
|
746
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-
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746
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Operating expenses
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8,625
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(475)
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-
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8,150
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Operating loss
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(4,610)
|
187
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-
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(4,423)
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Nonoperating
expense:
|
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Interest
expense, net
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(83)
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19
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(64)
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Nonoperating expenses
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(83)
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19
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-
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(64)
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Net loss
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$(4,693)
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$206
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$-
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$(4,487)
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Basic
and diluted loss per common share
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$(0.12)
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$0.01
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$-
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$(0.11)
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Basic
weighted average common shares outstanding
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40,076
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40,076
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40,076
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40,076
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See
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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ChromaDex Corporation and Subsidiaries
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Unaudited Pro Forma Condensed Consolidated Statements of
Operations
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(in
thousands, except for per share amounts)
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For the Year Ended December 31, 2016
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Historical
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Disposal
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Pro
Forma Adjustments
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Pro
Forma
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Sales,
net
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$26,811
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$(5,146)
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$21,665
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Cost
of sales
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14,890
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(3,616)
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11,274
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Gross profit
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11,921
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(1,530)
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-
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10,391
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Operating
expenses:
|
|
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Sales
and marketing
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2,250
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(692)
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|
1,558
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Research
and development
|
2,523
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-
|
|
2,523
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General
and administrative
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9,393
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(179)
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|
9,214
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Operating expenses
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14,166
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(871)
|
-
|
13,295
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|
|
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Operating income (loss)
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(2,245)
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(659)
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-
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(2,904)
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|
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Nonoperating
expense:
|
|
|
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Interest
expense, net
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(370)
|
36
|
|
(334)
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Loss
on debt extinguishment
|
(313)
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-
|
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(313)
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Nonoperating expenses
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(683)
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36
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-
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(647)
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Net income (loss)
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$(2,928)
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$(623)
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$-
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$(3,551)
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Basic
and diluted loss per common share
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$(0.08)
|
$(0.02)
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$-
|
$(0.10)
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Basic
weighted average common shares outstanding
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37,294
|
37,294
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37,294
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37,294
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See
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
|
ChromaDex Corporation and Subsidiaries
|
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Unaudited Pro Forma Condensed Consolidated Statements of
Operations
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(in
thousands, except for per share amounts)
|
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For the Year Ended January 2, 2016
|
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Historical
|
Disposal
|
Pro
Forma Adjustments
|
Pro
Forma
|
|
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Sales,
net
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$22,014
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$(4,129)
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|
$17,885
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Cost
of sales
|
13,533
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(3,183)
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|
10,350
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|
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Gross profit
|
8,481
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(946)
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-
|
7,535
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|
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|
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Operating
expenses:
|
|
|
|
|
|
Sales
and marketing
|
2,327
|
(819)
|
|
1,508
|
|
Research
and development
|
892
|
-
|
|
892
|
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General
and administrative
|
7,416
|
(215)
|
|
7,201
|
|
Operating expenses
|
10,635
|
(1,034)
|
-
|
9,601
|
|
|
|
|
|
|
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Operating loss
|
(2,154)
|
88
|
-
|
(2,066)
|
|
|
|
|
|
|
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Nonoperating
expense:
|
|
|
|
|
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Interest
expense, net
|
(613)
|
46
|
|
(567)
|
|
Nonoperating expenses
|
(613)
|
46
|
-
|
(567)
|
|
|
|
|
|
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Loss
before income taxes
|
(2,767)
|
134
|
-
|
(2,633)
|
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Provision
for income taxes
|
(4)
|
-
|
-
|
(4)
|
|
|
|
|
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Net loss
|
$(2,771)
|
$134
|
$-
|
$(2,637)
|
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Basic
and diluted loss per common share
|
$(0.08)
|
$0.00
|
$-
|
$(0.07)
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
35,877
|
35,877
|
35,877
|
35,877
|
See
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
|
ChromaDex Corporation and Subsidiaries
|
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|
Unaudited Pro Forma Condensed Consolidated Statements of
Operations
|
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||
|
(in
thousands, except for per share amounts)
|
|
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|
|
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For the Year Ended January 3, 2015
|
|
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|
|
|
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Historical
|
Disposal
|
Pro
Forma Adjustments
|
Pro
Forma
|
|
|
|
|
|
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Sales,
net
|
$15,313
|
$(3,452)
|
|
$11,861
|
|
Cost
of sales
|
9,987
|
(3,132)
|
|
6,855
|
|
|
|
|
|
|
|
Gross profit
|
5,326
|
(320)
|
-
|
5,006
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Sales
and marketing
|
2,136
|
(654)
|
|
1,482
|
|
Research
and development
|
514
|
-
|
|
514
|
|
General
and administrative
|
7,861
|
(212)
|
|
7,649
|
|
Loss
from investment in affiliate
|
46
|
-
|
|
46
|
|
Operating expenses
|
10,557
|
(866)
|
-
|
9,691
|
|
|
|
|
|
|
|
Operating loss
|
(5,231)
|
546
|
-
|
(4,685)
|
|
|
|
|
|
|
|
Nonoperating
expense:
|
|
|
|
|
|
Interest
expense, net
|
(157)
|
33
|
|
(124)
|
|
Nonoperating expenses
|
(157)
|
33
|
-
|
(124)
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|
|
|
|
|
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|
Net loss
|
$(5,388)
|
$579
|
$-
|
$(4,809)
|
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Basic
and diluted loss per common share
|
$(0.15)
|
$0.02
|
$-
|
$(0.14)
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
35,486
|
35,486
|
35,486
|
35,486
|
See Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
ChromaDex Corporation and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Financial
Information
(A)
Total consideration for the Lab Business sale is as follows (in
thousands):
|
Cash payment upon
closing of sale
|
$6,550
|
|
Other cash payment
to be held in escrow to satisfy any indemnification
claims
|
950
|
|
Additional earnout
payment up to $1.0 million *
|
-
|
|
Total
consideration
|
$7,500
|
*
Additional earnout payment is considered as gain contingency and is
not recognized until received.
(B)
Leasehold improvements and equipment included in the sale of the
Lab Business consisted of following:
|
Leasehold
improvements and equipment
|
$3,477
|
|
Less accumulated
depreciation
|
(2,004)
|
|
Leasehold
improvements and equipment, net
|
$1,473
|
(C) The
gain from disposal of the Lab Business is as follows (in
thousands):
|
Total
consideration
|
$7,500
|
|
Net assets
sold
|
(1,295)
|
|
Estimated
transaction costs, legal and other
|
(700)
|
|
Gain from
disposal
|
$5,505
|