Ladies and gentlemen, thank you for standing by and welcome to ChromaDex Corporation’s Third Quarter 2018 Earnings Conference Call. My name is Shannon, and I’ll be the conference operator today. [Operator Instructions] 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 third quarter 2018. If you have not reviewed this information, both are available within the Investor Relations section of ChromaDex’ website at www.chromadex.com. I would now like to turn the conference call over to Brianna Gerber, Senior Director of FP&A and Investor Relations. Please go ahead, Mrs. Gerber.

Thank you, Shannon. Good afternoon, and welcome to ChromaDex Corporation’s third quarter 2018 results investor call. With us today are ChromaDex’ Chief Executive Officer, Rob Fried; Founder and Executive Chairman, Frank Jaksch; and Chief Financial Officer, Kevin Farr. Today’s conference call may include forward-looking statements, including statements related to ChromaDex’ research and development and clinical trial plans and the timing and results of such trials, the timing of future regulatory filings, the expansion of the sales of TRU NIAGEN in new markets, plans to add to the management team, future financial results, business development opportunities, future cash needs, ChromaDex’ operating performance in the future, future investor interest and clinical trial studies that are subject to risk and uncertainties relating to ChromaDex’ 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 assurance 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’ actually activities or results to differ materially from the activities and results anticipated in the forward-looking statements. These risk factors included those contained in ChromaDex’ 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 conform with the forward-looking statements’ actual results or to changes 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 and 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’s now my pleasure to turn the call over to our Chief Executive Officer, Rob Fried.

Thank you, Brianna. Good afternoon, everyone and thank you for joining our third quarter 2018 investor call. Our mission is to help solve the problem of metabolic aging by being the world’s most trusted and science-based dietary supplement company. Research shows that metabolic aging is associated with the reduced cellular energy and accumulation of cell damage, resulting from a reduction in NAD levels. Our approach to solving this problem, we’re the only product on the market today that scientific study suggest most safely and effectively addresses this problem NIAGEN. Our consumer brand is TRU NIAGEN and our strategy is to make TRU NIAGEN an important global brand. NIAGEN is protected by a strong portfolio of patents and has twice been successfully reviewed under FDA’s new dietary ingredient, NDI notification program. And has also been successfully notified to the FDA as generally recognized as safe. ChromaDex has invested many years and millions of dollars in toxicology studies, regulatory approvals, clinical studies and patent protections. Research on NIAGEN is presently being conducted by over 160 researchers and institutions worldwide, examining a wide range of health conditions. And this research increasingly shows the importance of NAD in human health. And that NIAGEN is safe and effective in raising levels of NAD. Before discussing strategy and third quarter results, I will turn the call over to our Executive Chairman, Frank Jaksch for an update on recent developments in scientific research. Frank?

Thank you, Rob. Since our last update, the science surrounding NIAGEN and the importance of NAD on human health continues to expand. The number of human studies on NIAGEN post on clinical trials.gov has grown by two to a total of 26. And we finished the quarter with over 160 signed research collaborations approximately 10 more than last quarter. The additional human studies we’re focused on diabetes and cardiovascular health. And while these collaborative studies cover a wide range of research areas, the most prevalent today include neuroprotection and cognition, cardiovascular health, obesity, and aging. Collectively, these areas represent over half of the total signed research collaborations. Not only does this research validate the efficacy of NR, it provides valuable insights that may translate into potential new benefit areas for NR with additional research. We also view this as a pipeline for future peer-review publications which could yield increasing scientific consensus on the benefits of NR, media attention and greater consumer awareness of NR. Here are a few important highlights related to clinical studies since we last spoke. In August 2018, The NHLBI, a subgroup of NIH completed a two year human clinical trial to determine if NR will have the same healthy effects on the immune system is fasting and if those effects last even after eating again. The teams are actively analyzing the data. In September 2018, Dr. James Russell from the University of Maryland registered a new clinical trial that will investigate the use of NR as a potential treatment for diabetic neuropathy or nerve damage. In subjects with Type 2 diabetes or impaired glucose tolerance. Currently, there are no effective disease modifying therapy for diabetic neuropathy. The study will measure the impact of NR on this progressive disease and also provide insight into treating neuropathic pain…

Thank you, Frank. In the third quarter total net sales were up 33% year-over-year with NIAGEN-related revenue accounting for 77% of our total net revenues and TRU NIAGEN accounting for 84% of NIAGEN-related net revenue. TRU NIAGEN net sales were up 97% compared to the third quarter of 2017 and accounted for 64% of our total net revenues for the third quarter of 2018. Through the first nine months of 2018, total net sales were up 65%, with NIAGEN-related revenue accounting for 72% and TRU NIAGEN sales accounting for 74% of NIAGEN-related net revenues. TRU NIAGEN net sales more than quadrupled compared to the first nine months of 2017 and accounted for 53% of our total net revenues for the year-to-date nine month results. From the second quarter to the third quarter e-commerce revenue grew 28% and TRU NIAGEN sales overall increased by 40%. Our new Chief Marketing Officer, Lisa Bratkovich, started in June and has been assembling an excellent team of professionals who have been updating our systems and platforms and preparation for significant growth. They are developing exciting new campaigns that should launch in the coming months. TRU NIAGEN sales to Watsons grew 166% sequentially in the third quarter as part of the extended and renegotiated agreement between the between the two companies. I will further comment on Watsons and our global progress in general, shortly. We were very busy in the third quarter and achieved quite a few important accomplishments. We launched TRU NIAGEN PRO bottles of which feature 300 milligram capsules, the highest dose of NR available in a single capsule. TRU NIAGEN PRO is available exclusively for sale through healthcare providers, including a partnership with natural partners Fullscript’s, which has an established network of over 40,000 HCPs, healthcare practitioners in the United States. We see…

Thank you, Rob. Let's look at our financial results for the third quarter of 2018, which reflect continued progress against our key financial objectives. We continue to experience strong growth in sales, gross margin expansion, investments in marketing and discipline operating expenses, especially when you exclude legal costs. For the three months ended September 30, 2018, ChromaDex reported net sales of $8.1 million, up 33% compared to $6.1 million from continuing operations in the third quarter of 2017. Notably our TRU NIAGEN business roughly doubled in revenues year-over-year. Breaking this growth down further, for the third quarter, NIAGEN related to revenues were $6.2 million, up 40% compared to last year's third quarter and represented 77% of third quarter sales compared to 73% in the third quarter of 2017. TRU NIAGEN sales were 84% of NIAGEN related revenues in the third quarter of the year, compared to 60% a year earlier. Sequentially, net sales increased by 4% with troubled TRU NIAGEN sales up 40%, which was partially offset by expected declines and our ingredients in core businesses. We grew gross profits from continuing operations for the third quarter by 50% compared to last year. Gross margins increased by 580 basis points to 53.7% for the third quarter of 2018, compared to 47.9% for the third quarter of 2017. We experienced better gross margins due to the positive impact of TRU NIAGEN consumer product sales, which we anticipate will continue. Our operating expenses in the third quarter were up by $6.9 million to $13 million as compared to the third quarter of 2017 of $6.1 million from continuing operations. Consistent with our expectations, we made incremental investments in sales and marketing expenditures, research and development and general and administrative expenses to support growth in our business. Compared to the third quarter of…

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

Hi, guys. This is actually Destiny on for Jeff. How are you?

Great, thanks.

Great. Hi Destiny.

Good, good. So I just have a couple questions. Let me start with your current management team. I know that you added a couple of very important people this quarter, but I'm just curious, do you feel like your management team is fairly rounded out now? Or are you pursuing other additions and if so, what areas?

We feel the management team is fairly rounded out now.

Okay, got you. And then I know you also mentioned pursuing the FDA approval, do you have any idea of when you would submit a claim or submit anything or get regulatory approval, et cetera things like that or do you not providing that currently?

Are you referring to CFDA, China regulatory approval?

Yes, sorry. Hopefully, my connection is not too bad CFDA, yes.

No, we don't have any insights. There's quite a bit of transition going on in the China regulatory authorities right now. Obviously, the relationship is pretty strong with the Jiangxi Province, but in terms of the Central Government, we have no insights as to when that approval will be given, if at all.

Okay, got it. And then can you talk a little bit more about Turkey? I know, you said there was some additional turbulence this quarter and you were projecting for an approval by the end of the year. What are you looking at now early 2019 or mid-2019 later?

Well, because of the issues in the Turkey economy and even political issues with Turkey, Watsons’ feels that it's probably a good idea for us to hold off commercially on Turkey with Turkey for a few months. In terms of the regulatory approvals, as I said, we did receive regulatory approval for the ingredient nicotinamide riboside. We think that the product approval is short, will happen shortly. The claims approvals may take also a few months. It's not just receiving some claims approvals, it's claims approval is that we know would effectively market the product, so it sells well in Turkey.

Okay, that makes sense. Thank you for that. And you also mentioned expanding into some new territory. Can you provide a little more color on which one you are interested in now and you would pursue in the near term?

Well, we're certainly interested in Canada. We are pursuing regulatory acts regulatory approval in the EU. And that would encompass obviously quite a few countries. And throughout Asia, there are some other countries that we are pursuing. But each country has its own regulatory approval process. Some are quick. Most are not. Some are very slow. So it's a painstaking process that we take one country at a time, but we are employing a very aggressive strategy, where all major countries around the world.

All right, got it. And then thinking of Canada, what is the landscape like there now? Are you seeing similar interests as you would in the U.S.? And then additionally, I know you said you have a brick-and-mortar, but were you also employ an e-commerce strategy there as well?

Yes, we are already actually selling into Canada via Amazon. We will soon have a cross border Canada strategy with our website. And we are in discussions with numerous distributors and retailers in Canada, but a deal is not with any of them or is not an imminent. There is also the potential for a television strategy in Canada that we are examining.

Okay. And then, I believe, I just have one more related to your cost of goods sold. I know last quarter, you guys included shipping and handling and those costs. Did you do that again this quarter and will you continue to use that going forward?

Yes, that's part of our revenue recognition policy. And with regard to cost of goods sold, we made the election to include shipping and that will be consistently applied quarter-after-quarter, since it is in accounting election.

Okay. Just double checking. All right. I think that does it for me for now. Thank you for taking the question.

Our next question comes from Jeff Van Sinderen with B. Riley. Your line is open.

First, let me say congratulations on the growth in the quarter.

Thank you, Jeff.

I guess, one thing we're looking at and trying to get a better sense of is do have new marketing talent with you for a few months now. I'm just wondering if there's any more you can tell us on some of the marketing plans you're working on. Maybe it's too early for some of those, but anything you care to share there. Maybe how go after the healthcare providers and now that you do have events of certification. I'm just thinking about how you might go after the sports segment?

Right. In the past, TRU NIAGEN has singularly pursued the demographic of – I would say women over a certain age. But we have discovered that the audience or the potential market for TRU NIAGEN is actually quite broader than that. So we have been exploring other segments, younger males, the sports market and the healthcare practitioner market as you mentioned. Now when one explores a new market, there are always some costs involved in testing that market and throwing the wide net out to see who responds. But we have seen in our experiments, in our marketing experimentation that there is indeed quite a bit of interest in TRU NIAGEN beyond what has been the traditional TRU NIAGEN demo. Sports, in particular, seems to be a very big opportunity for us and we know that there are quite a few notable athletes that are already taking TRU NIAGEN and we have – we are pursuing this particular area very aggressively. As you mentioned, we have a new Chief Marketing Officer, Lisa Bratkovich began in June. In the last few months, Lisa has been assembling a team of very impressive marketers. They have also been working hard on our systems and platforms to ensure that they are sufficiently scalable for the type of growth that we expect. They've also been developing some interesting new creative campaigns and new channels for communicating our message. We are not rushing campaigns into the market, we are not rushing new channels into the market, but we are very encouraged by what we are seeing and we are hopeful and indeed expect that in the coming months with these efforts will bear fruit.

Okay, good. And then I know – I think you mentioned NIAGEN PRO or TRU NIAGEN PRO and so wondering maybe if you can update us on a kind of the plans are happening, is around new products, derivative products, maybe some of the status of those efforts that are in the works there?

So we do see that there is a demand for other delivery methods of NIAGEN and we have been aggressively developing those. In fact, we've announced in the past, deal with a two companies, Bulletproof Coffee and Pressed Juicery and we will be shortly announcing a new product in conjunction with those two entities that we hope – we see as a test market that we think has a lot of potential beyond the capsules that we're selling presently. There are other product types that we have been exploring, other forms of delivery that are very promising and we hope to be able to announce those as being available in the marketplace also in the coming months.

Okay, good. Thanks for taking my questions and continued success.

Thank you.

Our next question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.

Hi. This is Julian on for Ram Selvaraju. Thanks for taking my question. First, I was just wondering, if you could elaborate more on the status of the TRU NIAGEN roll out via the Watsons’ relationship, specifically total number of stores, countries in which it has been launched and evolution of pricing, would all be very helpful?

Do you want to do that?

I believe it's in 360 stores.

It's 230 stores in Hong Kong and about 100 stores in Singapore.

We expect to expand into other countries, particularly, Taiwan and then Turkey. First Taiwan, when the regulatory approval comes in, we are eagerly hopeful that will come in the coming months. It's difficult to control these things. We don't know. We've made a couple of submissions. They've given us some responses. We've addressed their responses. As of today, we do not have that regulatory approval, but we are hopeful that we will soon get it. It's important to note that in most countries there are three stages to the regulatory process. There's the ingredients stage, there's the product stage, and then there are the claims stage. And those claims need to be sufficient that one can successfully market the product. In Singapore, we have two – we have the first two and we have some health claims approved. But not enough for Watsons or us to feel that we can aggressively market the product in the country. Notwithstanding that sale seem to continue to grow in Singapore even without marketing. The number of stores in Taiwan is approximately equal to the number of stores in Hong Kong and Singapore, Singapore combined. Watsons themselves are extremely interested in expanding TRU NIAGEN into other countries and we are working with them to identify the countries for which we are aggressively seeking approval, so that we can roll out in those individual countries. Watsons has also expressed a strong interest in our developing additional products for them to distribute in their existing Watsons stores and that is something we are exploring.

Okay. Got it. Thanks for that. For my second question, are there any – I guess clinical indications you expect to generate proof of concept efficacy data over the next couple of years on an internal basis. And if so, are you able to talk about those at this time?

Yes, but Frank is on, I’ll defer to you Frank.

I’m on, sorry I was on mute. Could you repeat the question again?

Yes, sure. So, I was wondering if there are any clinical indications that you expect to generate proof of concept data on over the next couple of years on an internal basis. And if so, can you talk about those at this time?

Well, I mean most of the – our own studies going to be publishing coming up and we don’t have a timeline for that yet. And that’s just another study or data that’s going to further confirm the ability nicotinamide riboside successfully raises NAD and we’ve only released the top line on that so far. But this should provide further data regarding nicotinamide ribosides ability to raise NAD. The other studies are all the ones that are really posted on clinical trials.gov. And as we stated in the call, there’s sort of a wide range of areas but the ones that are probably the most prominent lately have been surrounding cardiovascular health and cognition or neurodegenerative – associated with neurodegenerative diseases.

Yes. There are a series of studies being done on neuroprotection, which we’re very excited about and encouraged about. I think that they will have a significant impact. It seems as though neurological-related conditions is where the industry seems to be pursuing us the most aggressively. But there are also studies on sleep and there’s also studies on as Frank said, cardiovascular as well as muscle related indications.

Okay, great. Thanks. That’s helpful. And for my last question regarding the ongoing Elysium Health. When should we expect the next court action. Are you able to talk about that?

There is a scheduled trial for March. For the California case and we hope that Elysium sticks to it and that the trial begins at that time.

Okay, great. Thanks very much.

Thank you. Our next question comes from Barry Kitt with Pinnacle Fund. Your line is open.

Hi, guys. My questions were asked and answered already. I did have one question. I’ve heard that there are two different, ex-pro football players who came down with CTE, what is it chronic traumatic encephalopathy. And I’ve heard that they were taking TRU NIAGEN and that it was basically stopping the symptoms that they were experiencing. Have you had any experience with that?

Well, we’ve had numerous football teams and players contact us. And we have many anecdotal communications with people who have not just from CTE but other neurological issues. But we have no scientific studies published such that we could make a health claim to that effect.

Are there any studies ongoing, third-party studies that would go in that direction?

Yes, there are several. There’s one in San Antonio, there’s one at the Mayo Clinic, Harvard Medical School has proposed one to us, their head of neurology is eager to do a study on NIAGEN specifically on CTE and also on Alzheimer’s. And I believe there’s one or two others, but perhaps Frank you know.

Of course there are numerous preclinical mice studies that had been published on neurological disorders, traumatic brain injury and Alzheimer’s, all of which have shown a very positive effect.

And there’s also studies related to – several studies that have shown impact on hearing loss. And there’s a correlation between hearing loss in neuronal damage, axonal neuronal damage and it’s also sort of a proxy for the potential impact it’ll have on those same area. So in hearing loss there’s one of them that you can actually measure. So I think you’re going to see focus on hearing loss and other areas like TBI concussion or other areas associated with neuronal or axonal damage.

And we have time for Barry to ask one more question.

Thank you. That was the end of my questions. I appreciate it guys. Thank you.

Thank you, Barry.

Thank you. That is all the time we have for questions. I would like to turn the call back to Brianna Gerber for closing remarks.

Thank you, Shannon, and thank you all for joining us today. There will be a replay of this call available beginning at 7:30 PM Eastern time tonight. The number to call for the replay is (855) 859-2056 and the pass code is 7066529. Thanks again.

Ladies and gentleman, this concludes today’s conference. Thank you for your participation and have a wonderful day.