Business Segments

9 Months Ended

Oct. 01, 2016

Business Segments

Business Segments

The Company has the following three reportable segments:

●  Ingredients segment develops and commercializes proprietary-based ingredient technologies and supplies these ingredients to the manufacturers of consumer products in various industries including the nutritional supplement, food and beverage and animal health industries.

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

●  Scientific and regulatory consulting segment which provides scientific and regulatory consulting to the clients in the food, supplement and pharmaceutical industries to manage potential health and regulatory risks.

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 October 1, 2016			Core Standards and		Scientific and
	Ingredients		Contract Services		Regulatory Consulting
	segment		segment		segment		Other			Total
Net sales	$	2,663,095	$	2,052,135	$	292,220	$	—		$	5,007,450
Cost of sales		1,287,421		1,548,268		129,291		—			2,964,980
Gross profit		1,375,674		503,867		162,929		—			2,042,470
Operating expenses:
Sales and marketing		199,130		245,255		3,600		—			447,985
Research and development		760,299		12,500		—		—			772,799
General and administrative		—		—		—		1,768,402			1,768,402
Operating expenses		959,429		257,755		3,600		1,768,402			2,989,186
Operating income (loss)	$	416,245	$	246,112	$	159,329	$	(1,768,402	)	$	(946,716	)

Three months ended October 3, 2015			Core Standards and		Scientific and
	Ingredients		Contract Services		Regulatory Consulting
	segment		segment		segment		Other			Total
Net sales	$	4,146,597	$	1,875,296	$	265,416	$	—		$	6,287,309
Cost of sales		2,157,183		1,533,402		115,094		—			3,805,679
Gross profit		1,989,414		341,894		150,322		—			2,481,630
Operating expenses:
Sales and marketing		259,874		287,901		3,103		—			550,878
Research and development		188,690		—		—		—			188,690
General and administrative		—		—		—		1,564,932			1,564,932
Operating expenses		448,564		287,901		3,103		1,564,932			2,304,500
Operating income (loss)	$	1,540,850	$	53,993	$	147,219	$	(1,564,932	)	$	177,130

Nine months ended October 1, 2016			Core Standards and		Scientific and
	Ingredients		Contract Services		Regulatory Consulting
	segment		segment		segment		Other			Total
Net sales	$	13,505,470	$	7,110,783	$	552,721	$	—		$	21,168,974
Cost of sales		6,420,972		4,781,539		345,127		—			11,547,638
Gross profit		7,084,498		2,329,244		207,594		—			9,621,336
Operating expenses:
Sales and marketing		930,573		749,165		11,000		—			1,690,738
Research and development		1,961,097		27,500		—		—			1,988,597
General and administrative		—		—		—		6,063,520			6,063,520
Operating expenses		2,891,670		776,665		11,000		6,063,520			9,742,855
Operating income (loss)	$	4,192,828	$	1,552,579	$	196,594	$	(6,063,520	)	$	(121,519	)

Nine months ended October 3, 2015			Core Standards and		Scientific and
	Ingredients		Contract Services		Regulatory Consulting
	segment		segment		segment		Other			Total
Net sales	$	10,238,574	$	6,546,816	$	864,270	$	—		$	17,649,660
Cost of sales		5,629,564		4,742,480		397,670		—			10,769,714
Gross profit		4,609,010		1,804,336		466,600		—			6,879,946
Operating expenses:
Sales and marketing		832,779		935,237		8,387		—			1,776,403
Research and development		485,195		—		—		—			485,195
General and administrative		—		—		—		5,531,362			5,531,362
Operating expenses		1,317,974		935,237		8,387		5,531,362			7,792,960
Operating income (loss)	$	3,291,036	$	869,099	$	458,213	$	(5,531,362	)	$	(913,014	)

			Core Standards and		Scientific and
At October 1, 2016	Ingredients		Contract Services		Regulatory Consulting
	segment		segment		segment		Other		Total
Total assets	$	12,051,865	$	3,645,554	$	166,027	$	2,900,244	$	18,763,690

			Core Standards and		Scientific and
At January 2, 2016	Ingredients		Contract Services		Regulatory Consulting
	segment		segment		segment		Other		Total
Total assets	$	9,105,502	$	3,306,624	$	111,765	$	6,225,318	$	18,749,209

Disclosure of major customers

Major customers who accounted for more than 10% of the Company’s total sales were as follows:

Percentage of the Company's Total Sales

Three Months Ended

Nine Months Ended

Major Customers

Oct. 1, 2016

Oct. 3, 2015

Oct. 1, 2016

Oct. 3, 2015

Customer D (Ingredients and Core segment)

12.3

%

*

*

*

Customer C (Ingredients segment)

*

*

24.5

%

*

Customer B (Ingredients segment)

*

19.1

%

*

13.8

%

* Represents less than 10%.

Major customers who accounted for more than 10% of the Company’s total trade receivables were as follows:

	Percentage of the Company's Total Trade Receivables
Major Customers		At October 1, 2016		At January 2, 2016
Customer D (Ingredients and Core segment)		*		22.8	%
Customer C (Ingredients segment)		48.8	%	*
Customer A (Ingredients segment)		*		14.7	%
* Represents less than 10%.