UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report: November 6, 2015
MusclePharm Corp.
(Exact name of registrant as specified
in its charter)
NEVADA |
|
000-53166 |
|
77-0664193 |
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
4721 Ironton Street, Building A
Denver, Colorado |
|
80239 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (303) 396-6100 |
|
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 |
Entry into Material Definitive Agreement.
|
On November 6, 2015,
MusclePharm Corporation, a Nevada corporation (the “Company”) entered into a Separation Agreement
(the “Agreement”) with Cory Gregory, Executive Vice President of the Company for his amicable separation from
the Company. Under the Agreement, Mr. Gregory will receive six months of his base salary for the year 2015 and other
standard benefits. All unvested shares of restricted common stock held by Mr. Gregory were accelerated and are now vested in
accordance with the original grant terms. In consideration, the Company is entitled to use Mr. Gregory’s likeness and his
contribution to the Company in perpetuity. The Agreement also contains other standard provisions such as non-compete
and non-solicitation.
The foregoing description of the principal
terms of the Agreement is a general description only, does not purport to be complete, and is qualified in its entirety by reference
to the terms of the Agreement, which will be attached as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal
year ending December 31, 2015 and, when filed, such exhibits shall be incorporated by reference herein.
| Item 2.02 | Results of Operations and Financial Condition. |
On November 9, 2015, the Company issued
a press release announcing its results of operations for the fiscal quarter ended September 30, 2015. A copy of the press release
is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 5.02 |
Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
See Item 1.01.
| Item 7.01 | Regulation FD Disclosure. |
In relation to the Company’s previously
announced restructuring activities, the Company is withdrawing prior revenue and earning guidance it has issued for 2015 and future
periods. The Company also will not be providing updated guidance. The Company’s prior guidance should no longer be relied
upon.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibit is furnished as part
of this report:
| 99.1 | Press Release of MusclePharm Corp. dated November 9,
2015 |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
|
MUSCLEPHARM CORPORATION |
|
|
Date: November 9, 2015 |
By: |
/s/ Brad Pyatt |
|
|
Brad Pyatt |
Exhibit 99.1
MusclePharm Reports 2015 Third
Quarter Financial Results
Net revenue of $34 million
Gross profit margin, excluding
a restructuring inventory write-down, increased to 35% from Q3’ 2015
DENVER, CO -- (PRESS RELEASE DISTRIBUTION NAME) -- 11/9/15
-- MusclePharm Corporation (OTCQB: MSLP) ("MusclePharm" or the "Company"), a scientifically driven,
performance-lifestyle sports nutrition company, today announced financial results for the third quarter ended September 30, 2015.
Operating and Financial Highlights for Third Quarter 2015
| • | Announced restructuring effort to better align the
Company’s resources toward profitable growth; |
| • | Gross profit margin, excluding a restructuring charge related to inventory write-down,
increased to
35%; |
| • | Advertising and promotion expenses decreased 8% to
$7.1 million; |
| • | Salaries and benefits decreased 6% to $5.7 million; |
“MusclePharm recently launched a major restructuring that
involved closing facilities and realigning our organization with our needs,” said Ryan Drexler, MusclePharm’s executive
chairman.
“While the company’s near-term results will be impacted,
we are positioning the company for a much stronger future. This is a long-term project, however. These issues cannot be fixed in
a day and will require time and patience. The good news is that we believe that Brad Pyatt and his team have built a unique
business with enormous scale that is unusual in this space, and very hard to replicate. Few brands have grown this big, this fast,
and it is not by accident.”
Recent Highlights
| • | Initiated a restructuring that incurred total restructuring
and other charges of $17.9 million, of which $16.6 million was recorded in operating expenses and $1.3 million was included in
cost of goods. |
| • | Announced approval of the final settlement with the
United States Securities and Exchange Commission regarding disclosure and internal control deficiencies dating from 2010-2013
which have since been revised. |
| • | Entered into loan modification agreements with banking
institution in exchange for guaranty by Company’s executive chairman. |
Financial Results for Third Quarter 2015
Net revenue decreased to $34.0 million, or
29%, year-over-year. The net revenue decline is due primarily to the limited inventory on hand of certain products compared
to customer demand, and a reduction in international sales related to the strength of the US dollar. The Company continues to take
significant steps to improve and globalize its supply chain to address this issue.
Gross margin was 31% in both the third quarter of 2015 and 2014
and down 4% sequentially. During the quarter, the company initiated a restructuring, discontinued a number of products and recognized
an inventory write down of $1.3 million, which is included as a component of costs of revenue. When excluding the restructuring
charge, gross margin was 35% in both the third and the second quarter of 2015.
Operating expenses for the quarter excluding restructuring charges
were $20.8 million down from $24.2 million in the previous quarter, a reduction of $3.4 million or 14% sequentially.
Adjusted EBITDA, a non-GAAP financial measure, was negative
$3.0 million. EBITDA eliminates depreciation, amortization, interest, taxes, stock-based compensation, restructuring charges and
other expenses.
Withdrawal of Guidance
In relation to the Company’s previously
announced restructuring activities, the Company is withdrawing prior revenue and earning guidance it has issued for 2015 and future
periods. The Company also will not be providing updated guidance. The Company’s prior guidance should no longer be relied
upon.
2015 Third Quarter Conference Call Information
When: Tuesday, November 10, 2015
Time: 8:00 a.m. Eastern Time
Phone: (800) 860-2442 (domestic)
(412) 858-4600 (international)
A live webcast will be available online on MusclePharm's website
at http://ir.musclepharmcorp.com/, where it will be archived for one year.
An audio replay of the conference call will be available through
midnight November 17, 2015 by dialing (877) 344-7529 from the U.S. or Canada, or (412) 317-0088 from international locations, passcode
10076071.
About MusclePharm Corporation
MusclePharm® is a scientifically-driven, performance lifestyle
company that currently develops, manufactures, markets and distributes branded nutritional supplements. The company offers a complete
range of powders, capsules, tablets and gels. Its portfolio of recognized brands, including MusclePharm® Hybrid and Core Series,
Arnold Schwarzenegger Series™ and FitMiss™, are marketed and sold in more than 120 countries and available in over
45,000 retail outlets globally. These clinically-proven and scientific nutritional supplements are developed through a six-stage
research process utilizing the expertise of leading nutritional scientists, doctors and universities. MusclePharm is the innovator
of the sports nutrition industry. For more information, visit http://www.musclepharm.com. Follow MusclePharm Corporation
on Facebook, Twitter, and Instagram.
To sign up to receive MusclePharm news via email, please visit
http://ir.musclepharmcorp.com/email-alerts
Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance
with U.S. Generally Accepted Accounting Principles (GAAP), the earnings release contains non-GAAP financial measures adjusted for
income taxes, depreciation and amortization of property and equipment, amortization of intangible assets, provision for doubtful
accounts, amortization of prepaid stock compensation, amortization of prepaid sponsorship fees, stock based compensation, issuance
of common stock warrants, restructuring and other charges. Management believes that the non-GAAP measures used in this release
provide investors with important perspectives into the Company's ongoing business performance. The non-GAAP financial measures
disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance
with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should
be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may
not be comparable to, similarly titled measures used by other companies. All financial data is presented on a GAAP basis except
where the Company indicates its presentation is on a non-GAAP basis. Set forth below are reconciliations of non-GAAP net income
(loss) to the Company's reported GAAP net income (loss).
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934,
as amended. Statements that are not a description of historical facts constitute forward-looking statements and may often, but
not always, be identified by the use of such words as "expects", "anticipates", "intends", "estimates",
"plans", "potential", "possible", "probable", "believes", "seeks",
"may", "will", "should", "could" or the negative of such terms or other similar expressions.
Actual results may differ materially from those set forth in this release due to the risks and uncertainties inherent in the Company's
business. More detailed information about the Company and the risk factors that may affect the realization of forward-looking
statements is set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, the Company's
Quarter Reports on Form 10-Q and other filings submitted by the Company to the SEC, copies of which may be obtained from the SEC's
website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and the
Company undertakes no obligation to revise or update this release to reflect events or circumstances after the date hereof.
MusclePharm Corporation
Consolidated Balance Sheets
(In thousands, except share and per
share data)
| |
September 30,
2015 | | |
December 31,
2014 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 3,457 | | |
$ | 1,020 | |
Accounts receivable, net of allowance for doubtful accounts of $297 and $159 as of September 30, 2015 and December 31, 2014 | |
| 15,586 | | |
| 16,644 | |
Inventory | |
| 19,320 | | |
| 21,069 | |
Prepaid giveaways | |
| 501 | | |
| 1,228 | |
Prepaid stock compensation, current portion | |
| 2,344 | | |
| 4,476 | |
Prepaid sponsorship and endorsement fees | |
| 541 | | |
| 238 | |
Prepaid expenses and other current assets | |
| 3,420 | | |
| 1,742 | |
| |
| | | |
| | |
Total current assets | |
| 45,169 | | |
| 46,417 | |
Property and equipment, net | |
| 7,008 | | |
| 7,805 | |
Long-term investments | |
| 977 | | |
| — | |
Intangible assets, net | |
| 8,904 | | |
| 7,074 | |
Prepaid stock compensation, noncurrent portion | |
| — | | |
| 4,952 | |
Other assets | |
| 185 | | |
| 108 | |
TOTAL ASSETS | |
$ | 62,243 | | |
$ | 66,356 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 40,442 | | |
$ | 27,761 | |
Accrued liabilities | |
| 10,986 | | |
| 7,023 | |
Accrued restructuring charges | |
| 10,097 | | |
| — | |
Line of credit | |
| 2,635 | | |
| 8,000 | |
Term loan | |
| 3,269 | | |
| — | |
Other debt obligations | |
| 21 | | |
| 46 | |
Total current liabilities | |
| 67,450 | | |
| 42,830 | |
Other long-term liabilities | |
| 342 | | |
| 146 | |
TOTAL LIABILITIES | |
| 67,792 | | |
| 42,976 | |
| |
| | | |
| | |
Commitments and contingencies | |
| | | |
| | |
Stockholders’ (deficit) equity: | |
| | | |
| | |
Common stock, par value of $0.001 per share; 100,000,000 shares authorized as of September 30, 2015 and December 31, 2014; 14,607,550 and 13,996,007 shares issued as of September 30, 2015 and December 31, 2014; 13,731,929 and 13,120,386 shares outstanding as of September 30, 2015 and December 31, 2014 | |
| 14 | | |
| 14 | |
Additional paid-in capital | |
| 142,458 | | |
| 129,130 | |
Treasury stock, at cost; 875,621 shares as of September 30, 2015 and December 31, 2014 | |
| (10,039 | ) | |
| (10,039 | ) |
Accumulated other comprehensive loss | |
| (171 | ) | |
| (66 | ) |
Accumulated deficit | |
| (137,811 | ) | |
| (95,659 | ) |
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY | |
| (5,549 | ) | |
| 23,380 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | |
$ | 62,243 | | |
$ | 66,356 | |
The accompanying notes are an integral
part of these consolidated financial statements.
MusclePharm Corporation
Consolidated Statements of Operations
(In thousands, except share and per
share data)
(Unaudited)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Revenue, net | |
$ | 33,982 | | |
$ | 47,768 | | |
$ | 125,780 | | |
$ | 144,718 | |
Cost of revenue (including restructuring charges of $1,262 related to write-down of inventory for the three and nine months ended September 30, 2015) | |
| 23,512 | | |
| 32,812 | | |
| 83,428 | | |
| 96,242 | |
Gross profit | |
| 10,470 | | |
| 14,956 | | |
| 42,352 | | |
| 48,476 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Advertising and promotion | |
| 7,093 | | |
| 7,749 | | |
| 22,603 | | |
| 19,997 | |
Salaries and benefits | |
| 5,681 | | |
| 6,041 | | |
| 20,505 | | |
| 17,185 | |
Selling, general and administrative | |
| 4,647 | | |
| 3,652 | | |
| 14,730 | | |
| 7,881 | |
Research and development | |
| 1,437 | | |
| 735 | | |
| 3,323 | | |
| 2,996 | |
Professional fees | |
| 1,980 | | |
| 1,316 | | |
| 5,499 | | |
| 3,393 | |
Restructuring and other charges | |
| 16,650 | | |
| — | | |
| 16,650 | | |
| — | |
Total operating expenses | |
| 37,488 | | |
| 19,493 | | |
| 83,310 | | |
| 51,452 | |
Loss from operations | |
| (27,018 | ) | |
| (4,537 | ) | |
| (40,958 | ) | |
| (2,976 | ) |
Other (expense) income, net | |
| (559 | ) | |
| 5,234 | | |
| (1,090 | ) | |
| 5,551 | |
(Loss) income before provision for income taxes | |
| (27,577 | ) | |
| 697 | | |
| (42,048 | ) | |
| 2,575 | |
Provision for income taxes | |
| 71 | | |
| 94 | | |
| 104 | | |
| 171 | |
Net (loss) income | |
$ | (27,648 | ) | |
$ | 603 | | |
$ | (42,152 | ) | |
$ | 2,404 | |
Net (loss) income per share, basic | |
$ | (2.01 | ) | |
$ | 0.05 | | |
$ | (3.12 | ) | |
$ | 0.23 | |
Net (loss) income per share, diluted | |
$ | (2.01 | ) | |
$ | 0.05 | | |
$ | (3.12 | ) | |
$ | 0.20 | |
Weighted-average shares used in computing net (loss) income per share, basic | |
| 13,723,213 | | |
| 11,032,996 | | |
| 13,504,455 | | |
| 10,652,781 | |
Weighted-average shares used in computing net (loss) income per share, diluted | |
| 13,723,213 | | |
| 12,612,896 | | |
| 13,504,455 | | |
| 12,112,017 | |
MusclePharm Corporation
Reconciliation
to Non-GAAP Income (Loss) to GAAP Income
In Thousands
(Unaudited)
| |
Three Months Ended
September 30, | | |
Nine Months Ended
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
(in thousands) | |
Adjusted EBITDA: | |
| | | |
| | | |
| | | |
| | |
Net (loss) income | |
$ | (27,648 | ) | |
$ | 603 | | |
$ | (42,152 | ) | |
$ | 2,404 | |
Non-GAAP adjustments: | |
| | | |
| | | |
| | | |
| | |
Provision for income taxes | |
| 71 | | |
| 94 | | |
| 104 | | |
| 171 | |
Depreciation and amortization of property and equipment | |
| 492 | | |
| 303 | | |
| 1,330 | | |
| 950 | |
Amortization of intangible assets | |
| 278 | | |
| (156 | ) | |
| 776 | | |
| 422 | |
Provision for doubtful accounts | |
| 70 | | |
| 24 | | |
| 168 | | |
| 164 | |
Amortization of prepaid stock compensation | |
| 962 | | |
| 1,004 | | |
| 3,198 | | |
| 2,582 | |
Amortization of prepaid sponsorship fees | |
| 2,111 | | |
| 1,548 | | |
| 5,363 | | |
| 5,016 | |
Stock-based compensation | |
| 2,154 | | |
| 2,405 | | |
| 8,690 | | |
| 6,872 | |
Issuance of common stock warrants to third-parties for services | |
| 12 | | |
| 69 | | |
| 62 | | |
| 69 | |
Other expense (income), net | |
| 559 | | |
| (5,234 | ) | |
| 1,090 | | |
| (5,551 | ) |
Restructuring and other charges | |
| 17,912 | | |
| — | | |
| 17,912 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Adjusted EBITDA | |
$ | (3,027 | ) | |
$ | 660 | | |
$ | (3,459 | ) | |
$ | 13,099 | |
Media:
Sitrick and Company
Seth Lubove, (310) 788-2850
slubove@sitrick.com
Source: MusclePharm Corporation
Released November 9, 2015