Item 8.01. Other Events.
Completion of BioZone Sale
As previously
disclosed, on April 21, 2016, MusclePharm Corporation (the “Company”) entered into an Agreement for Purchase and
Sale of Stock (the “Acquisition Agreement”), by and among the Company, its wholly-owned subsidiary, BioZone
Laboratories, Inc. (“BioZone”), BioZone Holdings, Inc. (the “Buyer”) and Flavor Producers, Inc.,
pursuant to which the Company sold 100% of the common stock of BioZone to the Buyer.
On May 16, 2016,
the Company issued a press release announcing the completion of its sale of BioZone (the “Closing”). In
accordance with the terms of the Acquisition Agreement, the Company received $8.3 million at Closing (with a potential
additional $1.5 million being paid if certain financial targets are met), subject to certain post-closing adjustments including
adjustments based on BioZone’s working capital as of the closing date. In connection with the Closing, the Company
issued and pre-paid for purchase orders to BioZone under the Manufacturing and Supply Agreement described below of $2
million. In addition, the Company paid down $350,000 of BioZone’s accounts payables, which was deducted from the
purchase price. As a result, the Company received $5.9 million net of the various adjustments detailed above. As part of the
transaction, the Company also sold 200,000 shares of its common stock for $50,000.
This description of the
Acquisition Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the
Acquisition Agreement, a copy of which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission (the “SEC”) on April 27, 2016, and the terms of which are incorporated herein by
reference.
Simultaneous with the
Closing, the Company and BioZone entered into a Manufacturing and Supply Agreement (the “Manufacturing and Supply Agreement”)
pursuant to which BioZone will continue to supply products which MusclePharm currently purchases from BioZone. MusclePharm is required
to purchase a minimum of $3 million of products from BioZone annually. The Manufacturing and Supply agreement has an initial term
of three (3) years.
Simultaneous with the
Closing, the Company and Flavor Producers, Inc. (“FPI”), the parent company of the Buyer, entered into a Product Development
and Supply Agreement (the “Development and Supply Agreement”) pursuant to which FPI will develop certain products to
be sold by the Company. If the product development effort is successful, the Company has agreed to certain minimum purchases during
the term of the Development and Supply Agreement.
In connection with the
Closing, the Company and BioZone also entered into a Transition Services Agreement to provide administrative support, and a sub-lease
for certain premises.
A copy of the Company’s
press release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K, and is incorporated herein by reference.