Ladies and gentlemen, thank you for standing by, and welcome to ChromaDex Corporation's First Quarter 2018 Earnings Conference Call. My name is Daniel, and I will be the conference operator today. At this time, all participants are in a listen-only mode. And as a reminder, this conference call is being recorded. This afternoon, ChromaDex issued a news release announcing the company's financial results for the first quarter 2018. If you have not reviewed this information, both are available within the Investor Relations section of ChromaDex's website at www.chromadex.com. I would now like turn the conference over to Andrew Johnson, Director of Investor Relations. Please go ahead, sir.

Thank you, Daniel. Good afternoon, and welcome to ChromaDex Corporations' first quarter 2018 results investor call. With us today are ChromaDex's Founder and Chief Executive Officer, Frank Jaksch; President and Chief Operating Officer, Rob Fried; and Chief Financial Officer, Kevin Farr. Today's conference call may include forward-looking statements, including statements related to ChromaDex's research and development and clinical trial plans, and the timing and results of such clinical trials, the timing of future regulatory filings, the expansion of the sale of TRU NIAGEN in new markets, plans to add to the management team, future financial results, business development opportunities, future cash needs, ChromaDex's operating performance in the future, future investor interest, and clinical trial studies that are subject to risks and uncertainties relating to ChromaDex's future business prospects and opportunities, as well as anticipated results of operations. Forward-looking statements represent only the company's estimates on the date of this conference call and are not intended to give any assurances as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties, many factors could cause ChromaDex's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These risk factors include those contained in ChromaDex's Annual Report on Form 10-K and Form 10-Q, most recently filed with the SEC. Please note, that the company assumes no obligation to update any forward-looking statements after the date of this conference call to confirm with the forward-looking statements, actual results or changes in its expectations. In addition, certain of the financial information presented in this call references non-GAAP financial measures. The company's earnings release, which was issued this afternoon is available on the company's website, presents reconciliations to the appropriate GAAP measures, and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Finally, this conference call is being recorded via webcast. The webcast will be available at the Investor Relations section of our website at www.chromadex.com. With that, it is now my pleasure to turn over the call to Frank Jaksch.

Thank you, Andrew. Good afternoon, everyone, and thank you for joining our first quarter 2018 investor call. We are pleased to report today that the science surrounding NIAGEN and the importance of NAD to ageing and human health continues to expand and our sales of NIAGEN related products continues to surge. Rob and Kevin will take you through the details of the strong growth, but first I’ll provide an update on the continued broadening of scientific research into the benefits of NIAGEN. This year, the number of human studies on NIAGEN posted on a clinical trials.gov has grown from 14 to 18. The additional four human studies are investigating NIAGEN’s role in some very exciting new areas of human health. The University of Cambridge is looking at mitochondria and mitochondrial biogenesis. Researchers at the University of Washington are looking at NR for specific areas of heart health. Iowa State University researchers are evaluating the effective NR on metabolism and vascular function. And Dr. Martens, the author of the recent University of Colorado Boulder Blood Pressure Vascular Stiffness Nature publication is continuing his work on NIAGEN at the university of Delaware where his team is looking at NR for decreasing mild cognitive impairment and age-related memory loss. With these four new clinical studies, there are currently 11 clinical trials underway that are looking at specific efficacy end points. To date, the total number of signed research collaborations has grown from 140 to over 150. We estimate that these studies represent more than 50 million of independent research on NIAGEN that is fully funded by unrelated parties. We look forward to learning more from these valuable independent collaborative studies as they progress. As the foundation of science continues, the pipeline of peer reviewed publications will provide the significant source for ongoing media…

Thank you, Frank. As Frank said, he and I will be transitioning to new roles in a few weeks, but we will continue to work together to execute the strategy that we’ve laid out over the past year. Frank will continue to drive our scientific efforts and product development and will represent the company in the industry as he leads the Board as Executive Chairman. I have spent many years researching the science behind nicotinamide riboside, as well as the company that developed it, ChromaDex. We have invested many years and millions of dollars in toxicology, regulatory approvals, clinical studies, and patent protection. I believe that the science behind this ingredient is very real. And I believe the science at this company is very strong. From that foundation, we are building a company designed for sustained long-term growth. We expect to show significant short-term growth, but this is a global opportunity and we're making choices to best to realize that potential long term. Along the way, we expect to show steady consistent and transparent progress. Our mission is to be the most science-based trusted nutraceutical company in the world with a focus on the science of NAD and cellular energy. Our strategy is to build a TRU NIAGEN into a global brand. Over the last three years, ChromaDex generated around $20 million per year in revenue. Until 2017 that revenue consisted of an ingredient ingredients business, a core standards business, and our contract services business. There was no TRU NIAGEN business until March 2017. The ingredient core standards and contract services businesses are important parts of this enterprise, but the growth is mostly from sales of TRU NIAGEN and NIAGEN ingredient. TRU NIAGEN sales in the first quarter of 2018 were $3 million, as compared to $14,000 in the prior…

Thank you, Rob. Let’s look at our financial results for the first quarter of 2018. For the three months ended March 31, 2018, ChromaDex reported net sales of $6.6 million, up 95% compared to $3.4 million from continuing operations of the first quarter of 2017. The increase in sales in the first quarter was driven by growth in the sales of TRU NIAGEN. For the first quarter, NIAGEN related revenues were $3 million, which represented 65% first-quarter sales and TRU NIAGEN sales were 71% of NIAGEN related revenues. Gross margins remained flat at 48% for both periods, which includes certain charges. Excluding a write-off related to the purchase of private label consumer products inventory from certain NIAGEN resellers, which are no longer distributors of our product, adjusted growth profit a non-GAAP measure as a percentage of net sales was 52.5% for the first quarter of 2018 as compared to 48% for the same period in 2017. We experienced better margins due to the positive impact of TRU NIAGEN consumer product sales, which we anticipate will continue. Our operating expenses for the first quarter were up by $8.1 million to $11.5 million as compared to the first quarter of 2017 of $3.4 million from continuing operations as we made incremental investments in sales and marketing expenditures, research and development, and general and administrative expenses to support growth in our business. The company invested $2.6 million in advertising and marketing to build out the new TRU NIAGEN brand higher R&D expenses of $0.8 million, as well as incremental legal cost of $2.4 million in stock-based compensation expense of $0.8 million. Excluding incremental legal expenses and equity-based compensation expense, general and administrative expenses were $3.6 million, which were up by $1.3 million as compared to the prior year. The net loss attributable to…

Thank you. [Operator Instructions] And our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Your line is now open.

Hi Frank, Rob, Kevin and Andrew, how are you?

Good, thank you.

So, a few questions, Frank, firstly as far as the game strategy, so when you finish up this IND, when should I expect you to complete the IND, and do you expect that the NIH will carry that forward, as far as the enrolment and the centers?

Well, right now we’re going to basically, I would say we are going to pivot the activity a 100% to working on it as a collaboration with NIH, meaning that the IND process is going to be moved over to NIH to essentially file the IND versus ChromaDex filing the IND. It’s much more efficient process to do it through an investigator IND versus ChromaDex doing it as an IND on our own.

Okay., So, it will kind of take the range on the proposed study going forward?

Yes. I mean it started as a collaboration like I had said on the call, going back to 2013, and I think that reflecting the current position of where we are going as a company is a dietary supplement or nutraceutical company focused on our TRU NIAGEN product. This type of development activity is much better handled as a collaborative study and that’s where it’s going.

Got it. Okay, that it's helpful. Any particular geographies to call out as far as growth in any particular areas of note for the quarter?

Jeff, I think as we look at our operations for the first quarter, the results really were driven by our U.S. e-commerce business where it grew from 800,000 in the first quarter from year-end to this year at 1.8 million as Rob said. Comparing it back to the first quarter of 2017, it was about 14,000, as Rob said. So that’s the big driver. We did see growth or some sales in Watsons in the first quarter of about 800,000 and about 400,000 in other international markets.

Okay. I got that, and about the comment about the DTC growing 25% per month compounded, so the 1.8 out of 3, as far as the TRU NIAGEN is 71% of the online percent, what percent of that was directed through company’s website? And what percent of that was not? Or was it all through the company's website?

You know, we’re not going to get into that level of detail, but both of them grew substantially during the period, but we're not going to really give the detail between what’s the split between Amazon and truniagen.com.

Okay, got it. And can you give us any flavor for other geographies, as far as pursuing the Watsons relationship beyond Taiwan, would you say it’s Southeast Asia, any particular geographies you are going to call out or no?

Watsons has expressed interest in entering all of their territories and you know they are prolific throughout Asia and Europe, but this is largely dependent on regulatory approvals and we also do not yet have a deal in place with Watsons beyond the initial four territories. So, we don’t know yet beyond those four, where the next one to be released will be.

Got it. Okay thanks Rob and one more if I may, your commentary towards the end you said, you anticipate positive cash flow in the beginning of 2019, Q1 2019, what was it specific that you called out that was going positive by the end of Q4 2018, was that EBITDA?

I think what we said about 2018 fourth quarter is that we expect TRU NIAGEN to make a contribution against other overhead in the fourth quarter of 2018. With respect to the comment ongoing cash flow breakeven on a run rate or better, we're working on that now as Rob's transition to CEO despite having significant cash and enough cash to operate in 2018 and 2019, Rob has set a mandate to try to become cash flow breakeven or better in the fourth quarter 2019, and we're working on that diligently and we’ll give you update on that as we exit the second quarter.

Okay, that it's helpful. Thanks Kevin. I think that does it for me for the moment. Thanks a lot.

Thank you.

Thanks Jeff.

Thanks Jeff.

Thank you. [Operator Instructions] Our next question comes from Bill Dezellem with Tieton Capital Management. Your line is now open.

Thank you. That’s Tieton Capital Management. Couple of questions, first of all, to start with a private label inventory that you purchased, would you talk a bit to that and to what degree are you anticipating additional purchases or repurchases like that in future quarters?

Yes, I’ll just talk about as we wind down selling to a few of the resellers that are no longer distributing the consumer product. We brought back their inventory. It was 300,000 and it is private label inventory. So, we're really not in place to really resell that. So, we did write it off and as we are down to about three resellers at this point-in-time and as we work with them we could buy their private label, but we’re mostly working with them to have them sell it through and then we would basically after that sellout period no longer continue to sell NIAGEN to them.

Would it be fair to say, this is really a good face gesture on ChromaDex's part, recognizing that you’re no longer selling to them and so that has an impact on their business model and repurchasing product, so that’s may be not as easy for them to sell now?

Yes, part of the consideration is the relationship that we have with these companies. Some of these companies we’ve been in business with for years, some of them also purchase other ingredients from us, and these are companies that we might do business with on in other ways in the future. I also want to point out that we have not made, we're down two companies to whom we’re supplying NIAGEN. We haven't made a final decision as to the relationship with those two particular companies. We may continue to sell to them for a while. We are in conversations with them presently and we haven't made our final decision.

That is helpful. And so, are there any companies that you are not selling to that you are in negotiations with to repurchase inventory?

Yes. There is one.

That’s helpful. And if I may segue to the Elysium relationship, would you please give us an update on the litigation and may be tie into that the amount of money that you are spending on legal expenses and would it just make sense to repurchase some of their inventory back and, unless they’ve already sold it, and just, talk around those issues if you would please?

With regard to the litigation, as you know, it’s an ongoing litigation and we can’t provide any details beyond what’s in the most recent 10-Q, specifically about the litigation. Do you want to answer that?

Yes, with regard to Elysium and buying back their ingredient, our, probably intelligence indicates that they’ve sold through the ingredient that we sold to them. However, they have not paid us for that ingredient. So, that’s still part of the litigation.

Yes, we don't believe there is any inventory to buy back from Elysium. And we are testing shows that what they are selling out on the market is some other source of nicotinamide riboside.

That is helpful. Thank you. And then I would like to switch to the sell-in into retail, in the first quarter what was the level of sell-in and how much was that level of sell-in in the fourth quarter, just trying to get a comparison there if we could please?

In the first quarter, we shipped them about $800,000 worth of bottles and with regard to the fourth quarter last year, we sold them 1.8, part of that 1.8 was to sell into Singapore for them to launch the brand. And as we look at Hong Kong, it’s been very strong sales, and I think what we shipped in is what’s selling through and helping them to maintain their retail inventory levels at the level that they’ve been targeting. And as we look forward, we think again with regard to before we enter new markets that we will be basically shipping in what they need to sell through and maintain their inventory levels and we are seeing good sell-through, very strong sell-through in Hong Kong as we look at the results year-to-date and expectations of what they’re going to do in the balance of the year as they do more sales in promoting in the balance of the year.

That is quite helpful. Relative to Singapore, what would be your guess as to how much was the sell-in in the fourth quarter and was there any cell in to fill initial stock of any shelves into Q1?

You know, the marketing in Singapore is a bit more complex than Hong Kong. There is different levels of approvals required and so they, we have not yet begun to aggressively do a marketing push in Singapore. Although last few couple of weeks it has slowly, gradually begun to materialize. So, we're not yet sure how Singapore is doing or how they’re selling through.

But I’d say the 800,000 that we shipped in in the first quarter relates to Hong Kong, not to Singapore.

And then, your guess as to how much were sell-in of the 1.8 million in Q4?

I think it was probably about a quarter of that, went to Singapore. So, about 400,000.

Great. Thank you, both.

Sure.

Thank you. And ladies and gentlemen that concludes our question-and-answer session for today's call. I would now like to turn the call back or to the ChromaDex management team for any further remarks.

No. I think that’s it. Thank you.