These forward-looking statements are identified by the use of words such as grow, expand, anticipate, intend, estimate, believe, expect, plan, should, hypothetical, potential, forecast and project, continue, could, may, predict and will and variations of such words and similar expressions are intended to identify such forward-looking statements.

All statements other than the statements of historical fact that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. Those statements are based on certain assumptions made based on experience, expected future developments and other factors that the company believes are appropriate under the circumstances.

Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements.

Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. The contents of this call should be considered in conjunction with the company's recent filings with the Securities and Exchange Commission, including its annual report on Form 10-K and the quarterly reports on Form 10-Q and current reports on Form 8-K, including any warnings, risk factors and cautionary statements contained therein.

Furthermore, the company expressly disclaims any current intention to update publicly any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions or otherwise. In order to aid in the understanding of the company's business performance, the company is also presenting certain non-GAAP measures, including adjusted EBITDA, which are reconciled in a table in today's press release announcing our fourth quarter and full year 2021 results to the most comparable GAAP measures.

Management believes that adjusted EBITDA provides useful information to the investor because management uses adjusted EBITDA as a supplement to GAAP measures to further evaluate period-to-period operating performance as well as the company's ability to meet future working capital requirements. The exclusion of noncash charges, including stock-based compensation, depreciation and amortization is useful in measuring the company's cash available for operations and performance of the company.

Now I will turn the call over to the CEO of MusclePharm, Ryan Drexler. Please go ahead.

Thank you. Good afternoon.

On the call today, I will provide a brief overview of our business highlights to include accomplishments from 2021 and year-to-date 2022. And then Sabina will review our financial results for the fourth quarter and full year 2021.

After that, we will open up the call and take your questions.

Our MP Beverage team formed in 2021 has had tremendous success over the past year, leveraging their industry contacts and expertise to build out our national distribution network in sales and marketing for our venture into the energy business.

We recognize there's a huge opportunity to MusclePharm to leverage its established name and strong brand recognition to the energy beverage category. And we're not wrong.

The team launched our functional energy drink line, MP Performance Energy, in September 2021 in 3 incredible flavors and have plans to launch a female-focused line, FitMiss Energy, in the second quarter of 2022.

In 2021, we delivered more than $0.5 million in sales to date. We have sold more than 1.4 million cans of MP Performance Energy.

Our team has been relentless in expanding distribution. We first signed 8 distribution partners before even launching and then early this year, our largest distribution, Amazon.com, and expanded distribution into Costco locations across Southern California and Hawaii.

The initial rollout with Costco will occur this summer, and we expect to move to full rollout in 2023. The partnership with Costco is even more noteworthy as it marks the first partnership for MP Combat Energy with a food wholesaler in the United States.

And lastly, before I move on from our beverage business, I want to discuss our latest announcement, our entry into the ready-to-drink protein category. We have announced last month we have teamed up with a first-in-class production company to bring a whey protein drink line to the market in 2022 under the leading MusclePharm name.

This new high-protein beverage line will contain over 20 grams of protein, 0 sugar and will be available in multiple flavors.

Ready-to-drink protein is the fastest-growing category that we've been looking to enter for some time and believe our product is like nothing else on the market and will stand apart from the competition in terms of taste and likability. We are incredibly excited about the opportunity, and we'll have more to share as we get closer to launch date.

As you can see, while still early innings for us within the beverage business, we have already had tremendous wins and believe we have good line of sight info and being able to ramp the business up to $30 million in annual sales by 2023.

Outside the beverage category, we have continued to innovate with our base business. We are a company committed to innovation, and we're continually looking at -- have reviews and feedbacks of our product to receive from consumers to see if there's a way to make them even better.

And this is exactly what we did with 2 of our top-selling products. The third quarter, we reformulated Combat 100% Whey and Combat Protein in order to improve taste and mixability and rolled them out to our e-commerce customers in November.

The feedback on the reformulated products from the online community has been incredible, and we made the decision in February 2022 to roll out the reformulated Combat Protein powder to retail, starting with Costco U.S. The product is now being sold to Costco customers in a new recyclable 6.2-liter tub.

Both of these products have been brought in record sales since they've been shipping to consumers in November, and the powder has performed extremely well in Costco stores over the past 2 months. We are in the process of evaluating other lines and looking to see if there's other opportunities to reformulate and roll out updated offerings.

Our entire team has worked extremely hard over the past year to position our company for a long-term growth by improving our infrastructure, expanding our management team, leveraging our brands for the energy drink category, reformulating select existing offerings and dramatically expanding our distribution channels with our leading omnichannel retailers. I'm grateful to have such a strong team behind me and look forward to what we can accomplish in 2022.

I will turn the call over to Sabina.

Thank you, Ryan. Good afternoon, everyone, and thank you for joining the call.

Let's now discuss results for our fourth quarter and full year ended December 31, 2021.

Net revenue for the fourth quarter was $10 million and $50 million for the full year 2021. Sales in the fourth quarter and full year 2021 were impacted by industry-wide supply chain shortages, which we expect to continue in 2022.

However, we have put plans in place to mitigate this and therefore expect to deliver sequential sales growth as we enter 2022 despite the challenging external environment. With the reformulation of our top-selling SKUs, packaging changes and diversifying and broadening our co-manufacturing partners, we are well positioned to deliver sequential growth in Q1 2022.

Our gross margins in the quarter were negative 5.2% and positive 10.7% for the full year 2021. While the supply chain environment continued to be challenging in the quarter with increased protein costs and freight costs, we would have had sequential improvement in the fourth quarter were it not for onetime adjustments.

Delay in sales and continued runoff of discount accruals were a 10-point hit to our margins. And without these, we would have delivered gross margins of 5% in the fourth quarter, up from 0.2% in the third quarter of 2021.

Additionally, margin for our MP Performance Energy line are very strong with segment delivering 35% gross margin for the fourth quarter and 45% gross margin for the full year 2021. We expect continued sales growth of our MP Performance Energy line in 2022, which will only help but improve our gross margins going forward.

Operating expenses were $3.5 million for the fourth quarter and declined $2.7 million or 16% to $14.3 million for the full year 2021. The main drivers of the full year operating expense decline were reduced compensation expense due to restructure of MusclePharm, reduced office expenses associated with the closure of our headquarters and warehouses in addition to a reduction in professional fees.

Adjusted EBITDA was a loss of $4 million and a loss of $7.5 million for the fourth quarter and full year 2021, respectively. The loss is primarily due to significant increases in freight and protein costs, as mentioned earlier, currently impacting the entire industry.

With the reformulated products, expected increases in sales and margins and continued focus on operating expenses, we expect to drive adjusted EBITDA improvement in the first quarter of 2022.

I will now turn it over to the operator for questions.

Great. Thank you, operator.

Our first question comes from an institutional investor. And I think it's targeted towards Sabina.

Sabina, can you give us more color on your fourth quarter gross margins and how they're coming along in the first quarter?

John, yes, I'll take that question. So as I mentioned in my remarks, margins have been negatively impacted by both significant increases in both protein and freight costs and this has been affecting the entire industry, and we've talked about this in the last few quarters that affected our quarter margins.

But I am pleased to say that we've taken a very proactive approach to find cost savings wherever possible to mitigate these increases in protein costs. And with the combination of packaging, savings and other nonprotein ingredients and diversifying our co-manufacturing base as well as taking some price with customers, this has allowed us to gradually improve our margins by 5 points for Q4, eliminating the onetime adjustments, and we will see further improvement in our margins as we enter Q1 2022.

Very good. Thank you, Sabina.

The next question is, how are the reformulated products performing?

I'll take that, John. Thanks.

They've been doing really, really well. Costco -- we launched the product in Costco and reformulation, the reviews have been very good so far.

Everyone thinks the product tastes really, really good and the mixability.

So, so far, the -- we've had very good reviews and very good feedback.

Very good. Thank you, Ryan.

The next question has to do with a note that we have. I noticed your $7 million note expires on April 13.

Has that been extended at this particular time?

Yes, I'll take that, John. So yes, as a note did have an expiry date on April 13, we did have an extension clause in the note that if we met 2 criteria, no default and cash flow positive from operating activities for the month of March, there have been extensions in the note to May 28.

And I'm very pleased to say that the note has officially been extended to May 28, as we did meet these 2 [ reqs ] to extend the note, and this is all coming down to the margin improvement initiatives that I talked about earlier. In Q4, it was a very challenging quarter, and it still continues to be challenging with protein increases.

But all the initiatives that we've put in place to mitigate this with cost savings in other areas of the P&L have allowed us to deliver cash flow positive month for March, which is very good news for us and very good news for the quarter as we continue to go through 2022.

Thank you, Sabina. The next question is from an individual investor and it has to do with our upcoming launch of FitMiss.

When do we plan to roll out FitMiss Energy?

I'll take this, John. Thank you.

We plan to roll out FitnMiss Energy in late summer. We're very excited for the launch.

We've done a lot of testing on the product, and we're very excited. The early findings are people really like the product and doing some focus groups, so it will be late summer.

Very good. Thank you, Ryan.

The next question comes from an individual. Is prior guidance calling for '22 first quarter revenue of $13 million to $15 million still appropriate?

John, yes, I'll take that. So while we are still finalizing and closing our quarter for the first quarter of 2022, we are pleased to say that we will be in line with our first quarter guidance, and we'll be reporting our first quarter in about 30 days from now.

The next question has to come and Ryan did discuss this a little bit on your prepared remarks, but any additional color on the rollout of your ready-to-drink line?

Yes. The ready-to-drink line will be rolled out late summer -- the protein, the ready-to-drink protein we're very excited to launch.

We feel it's a very good market to MusclePharm. We're very excited to extend the beverage line to this ready-to-drink protein, and we're already talking to a customer -- a lot of customer base and retail partners that are also very excited about it.

Next question comes from an institution. Where can -- where will our FitMiss be found and our also MP Energy drink?

MP Energy is sold right now through Muscle & Strength. There's some in military.

Right now, also Amazon and this summer will be in Costco. Our FitMiss Energy, we plan to launch on Amazon late summer.

We'll pause for just a moment to see if there are any additional questions.

Next question comes from an institution. Can you provide an update on the Combat Protein bars?

Yes, I can take that, John. So our Combat Protein bars has been historically a very strong SKU for us.

We have it in multiple flavors in various different retailers.

We are -- it has been out of stock in some areas, and we are in the middle of relaunching those protein bars. So look out for that later in 2022.

This is -- the on-the-go bar is a big opportunity for us, and we're looking at building back up that business.

Thank you, Sabina. We'll pause for one more moment to see if there are any additional questions.

Can you talk about the marketing plans around the energy drink rollouts, influencers or any events that we should look forward to?

Yes, absolutely. I can take that.

So right now, we're building out our space in Las Vegas. It's going to be a fully private gym.

We're very excited to interact with the community and people that come in and out of Las Vegas. So we're going to start grabbing a lot of content.

We're going to be doing some really cool events there, but we're also going to tap in -- very lucky to have our marketing and business development person, T.J. Dillashaw, as T.J.

is bringing a lot of influencers and people in there are going to be associated with the brand and build a really strong community. And that launch is going to happen in the next month or 2.

Thank you, Ryan. And Ryan, at this point, we do not have any additional questions.

I will turn the call over to you for closing comments.

Great. I want to thank everyone for their continued support during this time, and we're very excited to update everyone on the future of beverage and the reformulation of our products.

Thank you.