Musclepharm – loses almost $3 million (again)
by Anthony Roberts




Again, I’d like to preface this by saying that I’m not a finance-guy. I really don’t know the inner workings of the financial world. This fact was pointed out to me by one of the guy’s running MusclePharm, when I contacted them for a statement, regarding their financial difficulties.


And I’m in total agreement…I’m not a finance guy. I don’t know the first thing about finance. What I do know is that no matter how many press releases a company puts out, they still need to turn a profit at some point, in order to continue existing. At this point, Musclepharm has (once again) not only failed to show a profit on their quarterly statement, they’ve also managed to post several million dollars in losses (again).


Again, although I’m not an accountant of any sort, I can do the math and figure out that a quarter of a year is three months, and if Musclepharm lost almost $3m this quarter, then they’re losing money at the rate of $1m per month. If we skip to page 17 of their quarterly report, we find this little gem:


Yes, I’ve read all of their slick press releases, the ones that tell us how many deals they’ve inked, how many stores carry their product, and how many T-Shirts they’re going to sell, but none of that has translated to a f*cking profit, has it?
Net Loss for the nine months ended September 30, 2010 was $8.7 million or loss per share of $.28 as compared to the net loss of $1.0 million or loss per share of $.04 for the nine months ended September 30, 2009.

If you’re not familiar with some of the guys running the show over at MusclePharm, the CEO is Brad Pyatt, the guy who started the wildly successful “HARD Nutrition” back in 2006. Yes, that’s right, the nutritional company that took the entire industry by storm, HARD Nutrition! [Also known as the nutritional company that nobody noticed or cared about, and nobody remembers, which quietly sunk into mediocrity. ]

Speaking on the condition of anonymity, a vendor who provided goods and/or services to MusclePharm has informed me that they are a little slow to pay their debts, and when they eventually pay, it’s not in full, and they try to renegotiate the terms of the arrangement. I find this information to be highly credible, as a quick glance at their quarterly report shows us a pattern of this happening, as well as telling us that not only are they in debt, but their Original Issue Discount (OID) notes are in default, as are their promissory notes, and they’re trying to renegotiate terms with the note-holders:






….and they are also in debt to the US Government over their delinquent payroll taxes:





And although their “notes payable” went down, that wasn’t the result of actually paying the debt (ha ha), it was through conversion to stock. I realize that MusclePharm’s company reps are all over the message boards, telling everyone that the company is healthy, and doing fine…but they’re doing this in the face of their creditors, who are owed money that is already late, and which MusclePharm has no way of paying back. It’s amazing, because their press releases all talk about the financial health of the company and all of the great strides they’re making, but when you read their financial reports, it’s all about how they can’t pay their debts, and they can’t turn a profit. Stop telling me your company is fine, when you can’t pay your debts and you’re losing almost a million dollars per month; it’s f*cking insulting to me, and to my friends reading this blog.


Most concerning is MusclePharm’s non-payment of debts, and I’ll tell you why: If MP goes to a manufacturer and says, “hey, we need you to make 10,000 bottles of our mediocre test booster, and we’ll pay you $6/bottle, 30 days after the bottles are received” – the manufacturer is going to be pissed off when MP comes back and says they can’t pay within 30 days, and furthermore, they can’t pay the full price either. But that’s exactly what MP is doing …and eventually, manufacturers aren’t going to produce their crappy test booster, they’re going to tell them to take a hike. And that’s a bad thing, because MusclePharm is low on cash and inventory (probably enough to bring in $250-300k, based on their margins):





So where is MusclePharm’s money going? Well, to be perfectly honest, their product line is extremely unimpressive. There’s nothing in any of their products that we haven’t seen a million times before, in previously existing nutritional supplements. I’m not saying that their products are bad, but they’re the definition of average. MusclePharm is, by my estimation, not a company that should be considered worthwhile by serious athletes and bodybuilders, but rather, they are a company that wants to earn money from marketing, not research and development. And their own financial statements lend credence to my opinion, because while they spent over $4m in advertising, they spent less than $130k on Research and Development.





That means, for every dollar they spend on advertising, then spend…umm…something…like, a lot less on research. There’s nothing wrong with being a slick marketing company, and spending a boatload on getting your products recognized…but when your R/D is virtually non-existant, then I can’t really look at you as a legitimate nutritional company. This is why MusclePharm has failed to really formulate anything unique, even though they’ve got a bunch of PhDs on their staff.


Like I said, I’m not much of a finance guy, but their advertising budget is about 30x their budget for research and development, which speaks volumes about the company. And the fact that they’re telling everyone that they’re fine, when their financial statements reveal the opposite, is another fact that I find enlightening, as is the fact that the CEO and President issued themselves 10 million shares as a bonus (I wonder what they’d have given themselves if they were actually turning a profit?).

But hey, what do I know…I’m not a finance guy.