Item
2.04 Triggering Events That Accelerate or Increase a
Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
As
previously disclosed by MusclePharm Corporation (the “Company”) in a Current Report on Form 8-K filed with the U.S. Securities
and Exchange Commission (the “SEC”) on August 22, 2022, the Board of Directors of the Company determined that the Company’s
financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2021 and its Quarterly Report on Form
10-Q for the quarter ended March 31, 2022 should no longer be relied upon due to errors in such financial statements, and that a restatement
of such financial statements is required.
On
August 26, 2022, the Company received a letter (the “August Letter”) from Empery Tax Efficient, LP (“Collateral Agent”),
pursuant to which Collateral Agent advised the Company of its position that such public disclosure about the non-reliance on, and restatement
of, the above referenced financial statements demonstrates a breach of certain representations under Section 3.1(h) of the Amended and
Restated Securities Purchase Agreement, dated June 3, 2022 (the “Purchase Agreement”), by and among the Company and the purchasers
thereto, including Collateral Agent, Empery Master Onshore, LLC, Empery Debt Opportunity Fund, LP, Empery Tax Efficient, LP and Empery
Tax Efficient III, LP (collectively, the “Noteholders”). In the August Letter, Collateral Agent advised further that an event
of default under the Original Issue Discount Senior Secured Notes, dated October 13, 2021 (the “October Notes”), and the
Original Issue Discount Senior Secured Notes, dated June 10, 2022 (the “June Notes,” and together with the October Notes,
the “Notes”), issued by the Company to the Noteholders includes a breach of the representations under the Purchase Agreement
referenced above. Collateral Agent further advised the Company in the August Letter that any event of default in one Note would result
in a cross-default of the other Notes. In the August Letter, Collateral Agent further notified the Company that the Noteholders reserve
their rights under the Notes.
On
September 8, 2022, the Company received a separate letter (the “September Letter”) from Collateral Agent, pursuant to which
Collateral Agent advised the Company of its position that an event of default under the Notes includes Sabina Rizvi no longer serving
as the Company’s Chief Financial Officer and as a member of the Company’s Board of Directors, unless Ms. Rizvi resigns without
Good Reason (as defined in the Notes) and the Company replaces Ms. Rizvi with another Chief Financial Officer and member of the Board
of Directors, in each case that is not objectionable to Collateral Agent, within forty five (45) days. In the September Letter, Collateral
Agent advised further that such forty five (45) day period has expired and Ms. Rizvi has not been replaced with another Chief Financial
Officer and member of the Board of Directors that is not objectionable to Collateral Agent. In the September Letter, Collateral Agent
further notified the Company that the Noteholders reserve their rights under the Notes, and requested information and documentation to
confirm the Company’s compliance with the terms and conditions of the Notes, with a request that the Company provide such information
no later than the close of business on September 15, 2022. Collateral Agent further advised the Company of their position that the Company’s
failure to respond with the requested information by such date shall constitute an event of default under the Notes.
Section
5(b) under the Notes provides that if any event of default occurs, the outstanding principal amount of the Notes, plus accrued but unpaid
interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder’s
election, immediately due and payable in cash at the Mandatory Default Amount (as defined in the Notes) and further that commencing five
(5) days after the occurrence of any event of default and that results in the right or automatic acceleration of the Notes, the Notes
shall accrue interest at an interest rate equal to the lesser of eighteen percent (18%) per annum or the maximum rate permitted under
applicable law. The October Notes were amended pursuant to a Waiver and Amendment, dated June 3, 2022 (the “Waiver and Amendment”).
As
of the filing of this Current Report on Form 8-K, the Noteholders have not accelerated payment of the outstanding balances under the
Notes and have not informed the Company that the Noteholders intend to accelerate payment of the outstanding balances under the Notes.
However, there can be no assurance that the Noteholders will not exercise their rights to accelerate payment of outstanding balances
under the Notes.
The
foregoing description of the October Notes is not complete and is qualified in its entirety by reference to the full text of the form
of the October Notes, a copy of which is filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on
October 19, 2021. The foregoing description of the Purchase Agreement, the June Notes and the Waiver and Amendment is not complete and
is qualified in its entirety by reference to the full text of the forms of Purchase Agreement, June Notes and Waiver and Amendment, copies
of which are filed as Exhibits 10.1, 10.3 and 10.4, respectively, to the Company’s Current Report on Form 8-K filed with the SEC
on June 9, 2022.