Business Segmentation

6 Months Ended

Jun. 29, 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	Core Standards,				Retail
June 29, 2013	Contract Services and		Scientific and Regulatory		Dietary Supplement
	Ingredients segment		Consulting segment		Products segment		Other			Total
Net sales	$	2,504,372	$	202,524	$	—	$	—		$	2,706,896
Cost of sales		1,614,413		131,745		—		—			1,746,158
Gross profit		889,959		70,779		—		—			960,738
Operating expenses:
Sales and marketing		630,447		1,112		—		—			631,559
General and administrative		—		—		—		1,342,280			1,342,280
Operating expenses		630,447		1,112		—		1,342,280			1,973,839
Operating income (loss)	$	259,512	$	69,667	$	—	$	(1,342,280	)	$	(1,013,101	)

Three months ended	Core Standards,				Retail
June 30, 2012	Contract Services and		Scientific and Regulatory		Dietary Supplement
	Ingredients segment		Consulting segment		Products segment			Other			Total
Net sales	$	2,150,585	$	—	$	520,026		$	—		$	2,670,611
Cost of sales		1,528,203		—		377,713			—			1,905,916
Gross profit		622,382		—		142,313			—			764,695
Operating expenses:
Sales and marketing		536,572		—		1,331,846			—			1,868,418
General and administrative		—		—		—			2,883,728			2,883,728
Operating expenses		536,572		—		1,331,846			2,883,728			4,752,146
Operating income (loss)	$	85,810	$	—	$	(1,189,533	)	$	(2,883,728	)	$	(3,987,451	)

Six months ended June 29, 2013	Core Standards,				Retail Dietary Supplement
	Contract Services and		Scientific and Regulatory		Products segment						Total
	Ingredients segment		Consulting segment		(Restated, Note 2)			Other			(Restated, Note 2)
Net sales	$	4,655,885	$	445,862	$	(60,285	)	$	—		$	5,041,462
Cost of sales		3,128,396		278,533		955			—			3,407,884
Gross profit (loss)		1,527,489		167,329		(61,240	)		—			1,633,578
Operating expenses:
Sales and marketing		1,227,224		2,600		131,159			—			1,360,983
General and administrative		—		—		—			2,702,181			2,702,181
Operating expenses		1,227,224		2,600		131,159			2,702,181			4,063,164
Operating income (loss)	$	300,265	$	164,729	$	(192,399	)	$	(2,702,181	)	$	(2,429,586	)

Six months ended	Core Standards,				Retail
June 30, 2012	Contract Services and		Scientific and Regulatory		Dietary Supplement
	Ingredients segment		Consulting segment		Products segment			Other			Total
Net sales	$	4,005,333	$	—	$	450,284		$	—		$	4,455,617
Cost of sales		2,874,825		—		1,420,311			—			4,295,136
Gross profit (loss)		1,130,508		—		(970,027	)		—			160,481
Operating expenses:
Sales and marketing		1,011,516		—		2,715,564			—			3,727,080
General and administrative		—		—		—			4,845,639			4,845,639
Operating expenses		1,011,516		—		2,715,564			4,845,639			8,572,719
Operating income (loss)	$	118,992	$	—	$	(3,685,591	)	$	(4,845,639	)	$	(8,412,238	)

At June 29, 2013	Core Standards,		Retail
	Contract Services and	Scientific and Regulatory	Dietary Supplement	Other		Total
	Ingredients segment	Consulting segment	Products segment	(Restated, Note 2)		(Restated, Note 2)
Total assets	$3,924,625	$95,584	$-	$	4,001,523	$	8,021,732

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