$5 million in additional funding will help ChromaDex bridge through to profitability, CEO says

02-Oct-2014 - Last updated on 03-Oct-2014 at 15:56 GMT

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ChromaDex Corp. has announced an additional $5 million in funding from Hercules Technology Growth Capital. The cash infusion will fund operations for a number of months as the company moves toward profitability, said CEO Frank Jaksch.

ChromaDex has developed or acquired several ingredient lines, including Niagen, a patented and branded form nicotinamide riboside, a form of vitamin B3, pTeroPure, the brand name for the company’s synthetic pterostilbene ingredient, and PurEnergy, which is a combination of pTeroPure and caffeine. In addition to the ingredients side of the business, ChromaDex also provides testing services and sells testing materials and the company also in 2012 acquired scientific and regulatory consulting capabilities in the form of Spherix Consulting.

The funding will help ChromaDex stay the course as it develops its ingredients portfolio, said Jaksch.

"This financing should provide ChromaDex with sufficient capital to fund our operations at least until late 2015, as our business transitions to cash flow positive and profitable. The Hercules funding will provide ample working capital to continue to grow the emerging ingredient segment of our business, allow us to accelerate the R&D efforts on our existing ingredient portfolio, and continue to develop our new ingredient pipeline,” he said.

"We have been following ChromaDex for more than three years and have been impressed with the company's progress in executing its business plan and its emphasis on new product offerings, such as its new ingredients business line,” said Chad Norman, managing director at Hercules.

Capital intensive strategy

ChromaDex’s strategy has been capital intenstive. ChromaDex has posted consistent losses in recent quarters. In the most recent quarter ended June 28, the company lost $1.65 million, and the quarter before that it lost $1.85 million. In March the company reported having $1.92 million in cash and equivalents on hand; that declined to $1.28 million by the end of June.

But ChromaDex has also been able to demonstrate significant progress on its strategy. The company has posted steep rises in the sales of its branded ingredients in recent quarters. In second quarter sales rose 155% year-over-year and 53% sequentially. And the company just announced the launch of a new product containing Niagen, this one by Florida-based Life Extension.

Other investors besides Hercules seem to believe that ChromaDex can pull its strategy off. After a major pothole in the road in 2012 that saw a management shakeup, the company received an investment in late 2013 from DSM Venturing, the details of which were not disclosed.

The initial funding from Hercules of $2.5 million, which closed on September 29, 2014, is in the form of a secured loan and includes an interest only feature of up to 12 months, followed by equal amortizing of principal and interest over the remaining term of the loan, or approximately 30 equal monthly installments. ChromaDex has to the option to drap on a second $2.5 million round through July 31, 2015 and the deal includes warrants issued to Hercules and provisions to convert principal payments into common stock.