ChromaDex(CDXC) - 2019 Q4 - Annual Report

Financial Performance - ChromaDex's total revenues for the fiscal year ended December 31, 2019, were approximately $46.3 million, up from $31.6 million in 2018, representing a growth of 46.5%[30] - Net sales of TRU NIAGEN® increased by $17.6 million, from $18.5 million in 2018 to $36.1 million in 2019, offsetting a 28% decrease in the ingredients segment net sales[26] - ChromaDex's ingredients segment net sales decreased from $8.6 million in 2018 to $6.2 million in 2019, reflecting a strategic reduction in NIAGEN® resellers[26] - The company incurred net losses of approximately $32.1 million and $33.3 million for the years ended December 31, 2019, and December 31, 2018, respectively, with an accumulated deficit of approximately $121.9 million as of December 31, 2019[93] - Cash and cash equivalents totaled approximately $18.8 million as of December 31, 2019, with expectations that current cash and operations will suffice for projected plans through at least the next twelve months[94] - Working capital at the end of years 2019 and 2018 was approximately $4.1 million and $3.1 million, respectively[82] Market Expansion and Strategy - The global dietary supplements market size was estimated at $123 billion in 2019 and is expected to grow at a CAGR of 8.2% to about $232 billion by 2027, indicating a favorable market environment for ChromaDex[36] - ChromaDex received a positive opinion from the European Food Safety Authority on nicotinamide riboside (NR) as a novel food ingredient in 2019, facilitating international market expansion[27] - The company plans to expand its TRU NIAGEN® products into new international markets, focusing on obtaining additional regulatory approvals[38] - The company has successfully launched TRU NIAGEN® in Hong Kong, Macau, Singapore, New Zealand, and Canada, and is currently selling in China, the UK, Canada, and Japan[50] Research and Development - The company has approximately 190 partnerships with leading universities and research institutions globally, enhancing its research capabilities in the NAD space[22] - The company is conducting additional clinical trials to validate the health benefits associated with NIAGEN® and TRU NIAGEN®[42] - Research and development costs for the fiscal years ended December 31, 2019, and December 31, 2018, were approximately $4.4 million and $5.5 million, respectively[79] - The company completed a second human clinical trial on its proprietary ingredient NIAGEN®, demonstrating that NAD+ levels rose in response to the dose of NIAGEN®[78] Sales and Marketing - The company employs various sales and marketing strategies for TRU NIAGEN®, including social media, internet advertising, and partnerships with influencers[45] - Major customers accounted for more than 10% of total sales, with A.S. Watson Group contributing 15.8% in 2019[62] Competition and Market Risks - The company faces competition from Elysium Health in the consumer products segment and various ingredient suppliers in the ingredients segment[64] - The company faces significant competition, with many competitors having greater financial and operational resources, which could lead to the development of superior technologies that may harm the company's market position[132] - The markets for the company's products are highly price competitive, and failure to respond to price competition could lead to reduced sales revenues and increased losses[133] Intellectual Property and Regulatory Risks - The company protects its intellectual property through patents, trademarks, and copyrights, aiming for long-term royalty payments from proprietary ingredients[68] - The ability to protect intellectual property rights is uncertain, and failure to do so could have a material adverse effect on the company's business[145] - Regulatory approval may be required in the future for the company's goods, which could delay revenue generation until such approval is obtained[190] - The company cannot ensure that any developed goods will meet all regulatory requirements necessary for marketing clearance, which could hinder commercialization efforts[192] Financial and Operational Challenges - The company may seek to raise additional capital within the next twelve months to meet projected operating plans and fund long-term strategic objectives, which could lead to dilution for existing stockholders[97] - The company has no commitments for additional financing and may not be able to obtain it on favorable terms, which could adversely affect future performance[94] - The company may face significant costs and reputational damage from product liability claims, which could adversely affect its business and financial condition[119] - The company bears financial risk if contracts are under-priced or if cost estimates are exceeded, which could adversely affect business operations and cash flows[164] Future Outlook - Future revenue is expected to significantly depend on the market acceptance of the TRU NIAGEN® product, which is critical for the company's continued success[105] - The company anticipates that operating expenses will continue to increase due to the expansion of product launches and hiring of additional personnel[107] - The company's future revenue and operating results are difficult to forecast due to various uncontrollable factors, including competition and economic conditions[131] Legal and Compliance Issues - The company is currently engaged in litigation with Elysium Health, which represented 19% of net sales for the year ended December 31, 2016, and has not made purchases since August 9, 2016[99] - The company has written off approximately $2.7 million as uncollectible expense due to Elysium's failure to pay for previous purchase orders[100] - The company may become involved in securities class action litigation due to extreme fluctuations in stock price, diverting management's attention[208]