Business Segmentation

9 Months Ended

Sep. 28, 2013

Business Segmentation

Note 9. Business Segmentation

Since the year ended December 29, 2012, the Company began segregating its financial results for Spherix Consulting, Inc. (“Spherix”), which the Company acquired on December 3, 2012.  Spherix provides scientific and regulatory consulting.  The Company has following three reportable segments.

·   Core standards, contract services and ingredients segment includes supply of phytochemical reference standards, which are small quantities of plant-based compounds typically used to research an array of potential attributes, and reference materials, related contract services, and proprietary ingredients.

·   Scientific and regulatory consulting segment which consist of providing scientific and regulatory consulting to the clients in the food, supplement and pharmaceutical industries to manage potential health and regulatory risks.

·   Retail dietary supplement products segment which consist of the supply of the BluScience line of dietary supplement products containing the Company’s proprietary ingredients to various retail distribution channels.  On March 28, 2013, the Company entered into an asset purchase and sale agreement with NeutriSci and consummated the sale of BluScience consumer product line to NeutriSci.

The “Other” classification includes corporate items not allocated by the Company to each reportable segment. Further, there are no intersegment sales that require elimination.  The Company evaluates performance and allocates resources based on reviewing gross margin by reportable segment. 

Three months ended September 28, 2013
	Core Standards, Contract Services and		Scientific and Regulatory		Retail Dietary Supplement
	Ingredients segment		Consulting segment		Products segment		Other			Total
Net sales	$	2,355,458	$	362,749	$	—	$	—		$	2,718,207
Cost of sales		1,794,073		173,947		—		—			1,968,020
Gross profit		561,385		188,802		—		—			750,187
Operating expenses:
Sales and marketing		493,068		12,000		—		—			505,068
General and administrative		—		—		—		1,453,611			1,453,611
Loss from equity investment		—		—		—		33,281			33,281
Operating expenses		493,068		12,000		—		1,486,892			1,991,960
Operating income (loss)	$	68,317	$	176,802	$	—	$	(1,486,892	)	$	(1,241,773	)

Three months ended September 29, 2012
	Core Standards, Contract Services and Ingredients segment			Scientific and Regulatory Consulting segment		Retail Dietary Supplement Products segment		Other			Total
Net sales	$	1,989,910		$	-	$	1,642,334	$	-		$	3,632,244
Cost of sales		1,539,118			-		838,873		-			2,377,991
Gross profit		450,792			-		803,461		-			1,254,253
Operating expenses:
Sales and marketing		514,029			-		288,142		-			802,171
General and administrative		-			-		-		1,983,720			1,983,720
Operating expenses		514,029			-		288,142		1,983,720			2,785,891
Operating income (loss)	$	(63,237	)	$	-	$	515,319	$	(1,983,720	)	$	(1,531,638	)

Nine months ended September 28, 2013
	Core Standards,Contract Services and Ingredients segment		Scientific and Regulatory Consulting segment		Retail Dietary Supplement Products segment			Other			Total
Net sales	$	7,011,343	$	808,610	$	(60,285	)	$	-		$	7,759,668
Cost of sales		4,922,469		452,479		955			-			5,375,903
Gross profit (loss)		2,088,874		356,131		(61,240	)		-			2,383,765
Operating expenses:
Sales and marketing		1,720,292		14,600		131,159			-			1,866,051
General and administrative		-		-		-			4,155,792			4,155,792
Loss from investment in affiliate		-		-		-			33,281			33,281
Operating expenses		1,720,292		14,600		131,159			4,189,073			6,055,124
Operating income (loss)	$	368,582	$	341,531	$	(192,399	)	$	(4,189,073	)	$	(3,671,359	)

Nine months ended September 29, 2012
	Core Standards,
	Contract Services and		Scientific and Regulatory		Retail Dietary Supplement
	Ingredients segment		Consulting segment		Products segment			Other			Total
Net sales	$	5,995,243	$	—	$	2,092,617		$	—		$	8,087,860
Cost of sales		4,413,943		—		2,259,184			—			6,673,127
Gross profit (loss)		1,581,300		—		(166,567	)		—			1,414,733
Operating expenses:
Sales and marketing		1,525,545		—		3,003,706			—			4,529,251
General and administrative		—		—		—			6,829,359			6,829,359
Operating expenses		1,525,545		—		3,003,706			6,829,359			11,358,610
Operating income (loss)	$	55,755	$	—	$	(3,170,273	)	$	(6,829,359	)	$	(9,943,877	)

At September 28, 2013
	Core Standards,		Scientific		Retail
	Contract Services and		and Regulatory		Dietary Supplement
	Ingredients segment		Consulting segment		Products segment		Other		Total
Total assets	$	3,922,531	$	206,032	$	-	$	3,650,124	$	7,778,687

At December 29, 2012	Contract Services and Ingredients		Regulatory Consulting		Dietary Supplement Products
	segment		segment		segment		Other		Total
Total assets	$	3,542,355	$	72,573	$	4,331,866	$	1,087,727	$	9,034,521