Business Context and Reporting Period
Company: ChromaDex Corp. (Note: Request metadata listed "Niagen Bioscience, Inc.", but the filing identifies the registrant as ChromaDex Corp.)
Filing Type: Form 8-K (Current Report)
Date of Report: March 28, 2013
Event: Entry into a Material Definitive Agreement involving the sale of the BluScience consumer product line to NeutriSci International Inc.
Key Financial Metrics and Transaction Details
This filing reports a specific asset sale transaction rather than periodic financial statements. Key financial terms include:
- Total Purchase Price: $6,200,000 aggregate value.
- Cash Consideration: $1,000,000 total ($250,000 deposit paid in Feb 2013; $250,000 at closing; $500,000 within 60 days of closing).
- Debt Instrument: $2,500,000 senior secured convertible note payable in six quarterly installments of $416,667 starting August 15, 2013.
- Equity Consideration: 669,708 Series I Preferred Shares of NeutriSci (convertible to 2,678,832 Class "A" common shares), representing 19% of NeutriSci's common stock at a deemed price of $1.00/share.
- Recurring Revenue: 6% royalty on net sales of the Product Line.
Material Changes and Transaction Scope
ChromaDex consummated the sale of the "BluScience" product line, which includes products containing pterostilbene marketed under names such as HeartBlu, MemoryBlu, EternalBlu, TrimBlu, and Blu2Go. The sale explicitly excludes the pTeroPure brand and its associated intellectual property. Concurrently, ChromaDex entered into a Supply Agreement requiring NeutriSci to purchase pTeroPure exclusively from ChromaDex.
Outlook, Risks, and Contingencies
- Security Interest: The $2.5 million note is secured by a security interest in substantially all of NeutriSci's assets, with a subsidiary guarantee from Britlor Health and Wellness, Inc.
- Ownership Caps: Transaction documents include equity blockers preventing ChromaDex from owning more than 9.99% or 19% of NeutriSci without a waiver.
- Future Cash Flow: ChromaDex expects future cash inflows from the 6% royalty on net sales and quarterly note payments.
- Exclusivity: ChromaDex is obligated to sell pTeroPure exclusively to NeutriSci under the new Supply Agreement.
Investor Verification Checklist
- Verify the financial health and ability of NeutriSci International Inc. to meet the $2.5 million note obligations and royalty payments.
- Confirm the valuation of the 19% equity stake in NeutriSci and the liquidity of the Series I Preferred Shares.
- Review the specific terms of the "equity blockers" to understand limitations on future ownership increases.
- Assess the impact of the exclusive supply agreement on ChromaDex's ability to sell pTeroPure to other potential customers.
- Examine the definition of "net sales" in the Royalty Agreement to understand the revenue base for the 6% royalty.