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MusclePharm 3Q gross sales increased by 51% to a record 31.1Mil$

DENVER, CO  11/14/13 MusclePharm Corp (MSLP) a leading international, award-winning sports nutrition company, announced today itsfinancial results for the third quarter ended September 30, 2013("Q32013").
 
For Q3 2013, the Company reported record grosssales prior to accounting for discounts and sales allowances of$31,080,225, an increase of51% as compared to $20,627,691 for the third quarterof 2012 ("Q32012"). Q3 2013 gross sales grew sequentially by 9% ascompared to Q22013. For Q3 2013, the Company reported net sales of $25,343,968,an increase of 36% as compared to $18,573,726 for Q3 2012. Discounts and salesallowances in Q3 2013 increased to approximately $5.7 million, or 18% of grosssales as compared to approximately $2.1 million, or 10% of gross sales in Q32012. The increase in discounts and sales allowances was largely attributableto the impact of an aggressive campaign to close-out inventory of the Company'sAssault™ pre-work product in advance of the launch of its new Assault™ productformulation as well as promotional discounts on opening orders for theCompany's recently launched Arnold Schwarzenegger Series™ as well aspromotional discounts related to the Company's activities at the 2013 OlympiaFitness and Performance show.
 
For Q3 2013, the Company recorded a loss from operationsof($4,872,780) as compared to a loss from operations of ($3,810,813) in Q32012.Included in the Q3 2103 expenses was $4,241,339 million in non-cashexpenses including non-cash, stock-based compensation expenses of $2,036,301associated with the amortization of both certain employee RSUs and RSAagreements and the Company's endorsement licensing and co-branding agreementwith Arnold Schwarzenegger.
 
Commenting on the results, Brad Pyatt, MusclePharm's Founder&CEO, stated, "We continue to add important building blocks in order toachieve our strategic mission of becoming one of the world's foremost sportsnutrition companies. Highlighted by our recent agreements with ArnoldSchwarzenegger for a new line of branded products; with Costco, Walgreens, GNCand Europa for new sales and distribution channels, and with theaddition of marketing veteran Sydney Rollock as CMO; I believe we are extremelywell positioned to continue growing MusclePharm and our line of branded sports nutritionproducts."
 
Recent Company highlights include:
 
  • In September, the Company announced a partnership with Europa Sports Products, the nation's largest distributor of nutritional supplements, sports drinks and accessories, to exclusively distribute MusclePharm's new Arnold Schwarzenegger Series™ across North America. The new product line is a result of a first-of-its-kind partnership with the Mr. Universe, Mr. World and Mr. Olympia title holder, actor, entrepreneur and former Governor of California, Arnold Schwarzenegger. The product line launched both domestically and internationally at health and nutrition stores, including GNC stores, as well as online retailers in late September 2013.
 
  • In October, the Company announced it officially began shipping its Combat Protein Powder® to all 430 Costco Wholesale U.S. locations This new distribution channel expands MusclePharm's reach beyond specialty health, nutrition and sports stores and online retailers to mass consumer channels. Costco will begin rolling out Combat® in its international locations in the later part of 2014 and early 2015.
 
  • In October, the Company announced it received seven Bodybuilding.com  Supplement Awards. The Awards recognize superior products and brands in the fitness and supplement industry. Nominations are based on sales among the 9,900+ products carried by the site. In the past four years, MusclePharm has won 14 Bodybuilding.com Awards, including 2012 Brand of the Year.
 
  • In October, the Company named former GlaxoSmithKline® and Campbell's® Soup executive, Sydney Rollock, as its Chief Marketing Officer. Rollock has over 20 years of experience in marketing and management within the Pharma, Pharma OTC, Health & Wellness and Nutritional Supplements categories. 
 
  • In November, the Company announced an agreement with Walgreens to distribute FitMiss™, the Company's innovative brand of supplements formulated specifically for women. FitMiss Delight™ will be available nationwide in all 7,000 Walgreens stores beginning January 2014. FitMiss Burn™, FitMiss Tone™ and Ready-to-Drink FitMiss Delight™ will be available at Walgreens starting June 2014.
 
  • In November, the Company announced it had signed a definitive asset purchase agreement with BioZone Pharmaceuticals, Inc. ("BioZone") to acquire substantially all of the assets of BioZone and its subsidiaries, including BioZone's  QuSomes® technology as well as its manufacturing facility in Richmond, California. The closing of the transaction is subject to the satisfaction of various conditions.
 
For Q3 2013, gross profit margin expanded to approximately29% of net sales as compared to a gross profit margin of 22% of netsales in Q3 2012. The gross profit margin decreased sequentially fromapproximately 31% in Q2 2013 primarily due to the impact of an aggressivecampaign to close-out inventory of the Company's Assault™ pre-work product inadvance of the launch of its new Assault™ product formulation.
 
For Q3 2013, operating expenses increased to approximately$12.3 million, or 48% of net sales as compared to approximately $7.9 million,or 42% of net sales in Q3 2012. The increase in operating expenses percentageof net sales was in part due to the non-cash expenses related to theamortization of stock compensation expense of approximately $2 million aswellas an increase in salary and wage expenses and advertising expenses.
 
For Q3 2013, the Company recorded other income ofapproximately $927,000 as compared to other income of ($2.3 million) in Q32012. Q3 2013 other income included a positive change in the fair value ofderivatives liabilities associated with the Series D Preferred Shares issued inFebruary 2013 of $305,421 as well as a gain in marketable securities of$444,059. Q3 2012 other income included a positive change in fair value of derivativeliabilities of $4,403,875 as well as interest expense of $3,265,053 and a losson settlement of accounts payable and debt of $1,510,613.
 
Income available to common stockholders for Q3 2013 was($3,946,000) or ($0.47) per diluted share as compared to income available tocommon stockholders of ($6,074,000) or ($3.21) per diluted share in Q3 2012.The weighted average number of fully diluted shares outstanding for Q3 2013 was8,475,084.
 
At the end of Q3 2013, the Company had approximately$5.7million of cash and cash equivalents, approximately $9.6 million ofinventory, approximately $34.4 million in current assets, and no long-termdebt. Shareholders' equity at September 30, 2013 increased to $22.7 million ascompared to ($9.8million) at December 31, 2012. As of November 14, 2013, therewere 8,865,990 shares of common stock outstanding and 144,000 shares of SeriesD Convertible Preferred stock outstanding which are convertible into a total of288,000 shares of common stock.
 
Management currently intends to release in Januarycomprehensive financial guidance for the full 2014 year.
 
MusclePharm management will discuss its Q3 2013 resultsduring a conference call to be broadcast live over the Internet Friday,November 15th at 11:00 am EST.
 
Conference call particulars are as follows:
 
  • Date - Friday, November 15, 2013 
 
  • Time - 11 am EST / 8:00 am PST 
 
  • Dial in number - (877) 407-9126 or (201) 493-6751 for international callers